BioNova Inc. wants to raise 8 million dollars by selling shares to about 20 accredited investors and a very small number of other sophisticated buyers, with no advertising or general solicitation, and without filing a full registration statement. A representative must decide which exemption from registration under the Securities Act of 1933 best fits this plan. Which exemption applies?
- ARegulation D under Rule 506(b), the private placement exemption for sales made chiefly to accredited investors without general solicitation. Correct
- BRule 147, the intrastate offering exemption, on the basis that BioNova is selling to a defined and limited group of buyers.
- CRegulation A Tier 1, which lets a company raise a limited amount publicly without a full registration statement.
- DRule 144, which provides an exemption allowing the offering to proceed without registration of the new shares.
Why A is correct: Rule 506(b) permits an unlimited raise sold mainly to accredited investors and up to 35 non-accredited sophisticated buyers, with no general solicitation, which matches BioNova's plan precisely.
Why B is wrong: Rule 147 turns on the issuer and all purchasers being residents of a single state, not on the number of buyers, so a limited investor group alone does not qualify a deal under it.
Why C is wrong: Regulation A is a public offering conducted with an offering circular and permits general solicitation, which contradicts BioNova's plan to avoid advertising and sell privately.
Why D is wrong: Rule 144 governs the resale of restricted and control securities already outstanding; it does not exempt an issuer's primary sale of new shares to raise capital.