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 Securities Lawyer's Deskbook
                         published by The University of Cincinnati College of Law
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General Rules and Regulations
under the
Securities Act of 1933

Rule 504 -- Exemption for Limited Offerings and Sales of Securities Not Exceeding $1,000,000

  1. Exemption. Offers and sales of securities that satisfy the conditions in paragraph (b) of this Rule 504 by an issuer that is not:

    1. subject to the reporting requirements of section 13 or 15(d) of the Exchange Act,:

    2. an investment company; or

    3. a development stage company that either has no specific business plan or purpose or has indicated that its business plan is to engage in a merger or acquisition with an unidentified company or companies, or other entity or person, shall be exempt from the provision of section 5 of the Act under section 3(b) of the Act.

  2. Conditions to be met.

    1. General conditions. To qualify for exemption under this Rule 504, offers and sales must satisfy the terms and conditions of Rule 501 and Rule 502 (a), (c) and (d), except that the provisions of Rule 502 (c) and (d) will not apply to offers and sales of securities under this Rule 504 that are made:

      1. Exclusively in one or more states that provide for the registration of the securities, and require the public filing and delivery to investors of a substantive disclosure document before sale, and are made in accordance with those state provisions;

      2. In one or more states that have no provision for the registration of the securities or the public filing or delivery of a disclosure document before sale, if the securities have been registered in at least one state that provides for such registration, public filing and delivery before sale, offers and sales are made in that state in accordance with such provisions, and the disclosure document is delivered before sale to all purchasers (including those in the states that have no such procedure); or

      3. Exclusively according to state law exemptions from registration that permit general solicitation and general advertising so long as sales are made only to "accredited investors" as defined in Rule 501(a).

    2. The aggregate offering price for an offering of securities under this Rule 504, as defined in Rule 501(c), shall not exceed $1,000,000, less the aggregate offering price for all securities sold within the twelve months before the start of and during the offering of securities under this Rule 504, in reliance on any exemption under section 3(b), or in violation of section 5(a) of the Securities Act.

    Note 1: The calculation of the aggregate offering price is illustrated as follows:

    If an issuer sold $900,000 on June 1, 1987 under this Rule 504 and an additional $4,100,000 on December 1, 1987 under Rule 505, the issuer could not sell any of its securities under this Rule 504 until December 1, 1988. Until then the issuer must count the December 1, 1987 sale towards the $1,000,000 limit within the preceding twelve months.

    Note 2: If a transaction under Rule 504 fails to meet the limitation on the aggregate offering price, it does not affect the availability of this Rule 504 for the other transactions considered in applying such limitation. For example, if an issuer sold $1,000,000 worth of its securities on January 1, 1988 under this Rule 504 and an additional $500,000 worth on July 1, 1988, this Rule 504 would not be available for the later sale, but would still be applicable to the January 1, 1988 sale.

Regulatory History

57 FR 36473, Aug. 13, 1992; 61 FR 30397, 30402, June 14, 1996; 64 FR 11090, 11094, Mar. 8, 1999

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