Regulation S

Regulation S is a United States safe harbor under which offers and sales of securities made outside the United States are treated as occurring outside the reach of the Securities Act's registration requirement. It is not itself a way to raise money from Americans. It is the rule that lets a company raise from non-US investors without registering that offering in the United States, and it is most often used alongside a domestic exemption such as Regulation D.

Regulation S contains an issuer safe harbor and a resale safe harbor. Both rest on two conditions:

• The sale is an offshore transaction, meaning the buyer is outside the United States, or the transaction is executed on a designated offshore securities market.
• There are no directed selling efforts in the United States.

Directed selling efforts

"Directed selling efforts" means activity that could reasonably be expected to condition the market in the United States for the securities being offered. This is the condition that constrains marketing, and it is broader than running an advertisement that says "invest now" to an American.

Advertising, press activity, mailings, and promotional material aimed at the United States can all count. In practice a Regulation S offering therefore requires deliberate geographic controls on every paid channel, on the website, and on any list being emailed, rather than the default global settings.

There is no dollar cap on a Regulation S offering.

Categories and compliance periods

Regulation S sorts offerings into categories according to how much US market interest exists in the issuer's securities and whether the issuer reports under the Exchange Act. The category determines what additional conditions apply, including a distribution compliance period during which the securities may not be offered or sold to US persons, and in many cases the securities are restricted securities in the issuer's hands and the buyer's.

Which category an offering falls into, and what it must therefore do, is a determination for the issuer's securities counsel.

Why it matters to marketing

Regulation S turns geographic targeting from an optimization setting into a compliance control. Campaign geo-targeting, lookalike and broad audience expansion, landing page access, the country a form accepts, and whether US persons living abroad can be excluded are all part of the offering's compliance posture, not just its media plan. A campaign built for a domestic raise and then pointed at other countries is not a Regulation S campaign.

This page is general information about a securities rule, not legal advice.