Regulation D traces its roots to section 4(2) and section 3(b) of the Securities Act of 1933. Both of these sections are designed to relieve an issuer from the pains of registration under the 1933 Act in situations where Congress deemed such registration inappropriate. Therefore, under section 4(2), no registration is required for "transactions by an issuer not involving any public offering." Section 3(b) is not a self-executing exemption but instead permits the Securities and Exchange Commission to enact rules and regulations exempting issuers from registration requirements "if it finds that ... [registration] is not necessary in the public interest and for the protection of investors by reason of the small amount involved or the limited character of the public offering..."
Section 4(2) has a long, rich and often confusing history and has played an important role in the sales of securities outside the registration process. This Article describes certain areas in which Regulation D continues to subject small issuers and, to some extent, larger issuers to indefensible standards and requirements. The Commission should address these areas and, where necessary, should petition Congress to lend its assistance.
Ruthford B Campbell, Jr., The Plight of Small Issuers (and Others) Under Regulation D: Those Nagging Problems that Need Attention, 74 Ky. L.J. 127 (1985).