Question: The exemption under Rule 504 is not available to an investment company. How is the term “investment company” defined for purposes of Rule 504?

Answer: The provision in Rule 504 that bars an investment company from using the exemption means an investment company as that term is defined in Section 3 of the Investment Company Act of 1940. [Jan. 26, 2009*]

Question: Is Rule 504 available to a private fund excluded from the definition of “investment company” by Section 3(c)(1) or 3(c)(7) of the Investment Company Act?

Answer: Private funds are precluded from relying on Section 3(c)(1) or 3(c)(7) of the Investment Company Act if they make a “public offering” of their securities. Offerings under Rule 504 may be public or non-public depending on the provision of the rule that is relied upon for the offering. If a private fund made a “public offering” of its securities, that private fund would no longer be able to rely on the applicable exclusion under Section 3(c)(1) or (7) and thus would be required to be registered under the Investment Company Act, unless another exclusion or exemption is available. If no other exclusion or exemption is available, the private fund would be an “investment company” as defined in Section 3 of the Investment Company Act and would therefore be precluded from using the Rule 504 exemption. See e.g., footnote 241 in Securities Act Release No. 33-10238. We note that Rule 504 offerings differ from Rule 506(c) offerings in this respect because Section 201(b)(2) of the JOBS Act deemed offers and sales under that exemption to not be “public offerings” under the federal securities laws. [Sept. 20, 2017]

[withdrawn, Sept. 20, 2017]

Question: Instruction to paragraph (b)(2) of Rule 504 contains the example as to the calculation of the aggregate offering price. Does this example contemplate integration of the offerings described?

Answer: No. The example has been provided to demonstrate the operation of the limitation on the aggregate offering price without regard to whether two or more offerings are integrated. [Sept. 20, 2017]

Question: When is an issuer required to determine whether bad actor disqualification applies?

Answer: Rule 504 is not available to any issuer that is subject to disqualification under Rule 506(d) on or after January 20, 2017. On or after this date, issuers must determine if they are subject to bad actor disqualification any time they are offering or selling securities in reliance on Rule 504. See Rule 504(b)(3), Rule 506(d) and the interpretations of Rule 506(d) below. [Sept. 20, 2017]