Evergreen Guide: Broker-Dealer Due Diligence Obligations in Regulation D Offerings

Private placements under Regulation D of the Securities Act of 1933 remain a critical avenue for capital formation, particularly among early-stage and smaller companies. Despite their exemption from registration, these offerings are not exempt from the antifraud provisions of the federal securities laws. Broker-dealers that recommend Regulation D securities must undertake a reasonable investigation into the offering, the issuer, and the surrounding circumstances. This obligation stems from SEC and FINRA rules and is central to satisfying suitability, antifraud, and supervisory compliance requirements. This guide summarizes the regulatory foundation and outlines best practices for broker-dealers conducting due diligence in Regulation D offerings, with particular reference to FINRA Regulatory Notice 10-22.