Rule 505 Of Regulation D

Rule 505 of Regulation D allows some companies offering their securities to have those securities exempted from the registration requirements of the federal securities laws. To qualify for this exemption, a company:

• Can only offer and sell up to $5 million of its securities in any 12-month period;
• May sell to an unlimited number of "accredited investors" and up to 35 other persons who do not need to satisfy the sophistication or wealth standards associated with other exemptions;
• Must inform purchasers that they receive "restricted" securities, meaning that the securities cannot be sold for six months or longer without registering them; and
• Cannot use general solicitation or advertising to sell the securities.