Rule 504 of Regulation D provides an exemption from SEC registration for companies raising capital through the offer and sale of securities. Originally capped at $5 million, the SEC increased the limit to $10 million within any 12-month period, making it a valuable tool for small businesses and regional offerings.

For real estate investors raising private capital through syndications or joint ventures, understanding Rule 504 is essential — not because you’ll necessarily use it, but because it defines the boundaries of what you can and cannot do without full SEC registration.

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Core Provisions and Limits

Requirement	Detail
Aggregate Offering Limit	$10,000,000 maximum within any 12-month period
SEC Filing	Form D must be filed within 15 days after the first sale of securities
State Law (Blue Sky)	Issuers must comply with individual state securities laws in every state where securities are sold

The SEC increased the limit from $1 million to $5 million in 2017, and the current threshold is $10 million. This expansion was designed to facilitate capital formation for small businesses while maintaining investor protections.

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Who Is Eligible?

Rule 504 is available to most private companies, but several categories are excluded from using this exemption:

Ineligible Entity	Reason
Exchange Act Reporting Companies	Already subject to SEC periodic reporting
Investment Companies	Funds primarily engaged in investing/trading securities
Blank Check Companies	No specific business plan or plan to merge with unidentified entity
“Bad Actors”	Companies or principals disqualified under Rule 506(d)-style provisions

For real estate investors, the “blank check company” exclusion is worth noting. If you’re raising capital without a specific property or business plan identified, you may fall into this category and lose access to Rule 504.

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Bad Actor Disqualification

Rule 504 offerings are subject to the “bad actor” disqualification provisions found in Rule 506 of Regulation D. This means the exemption is unavailable if the issuer or certain “covered persons” have experienced a disqualifying event.

Who Are “Covered Persons”?

• The issuer, including predecessors and affiliated issuers
• Directors, officers, general partners, or managing members
• Beneficial owners of 20% or more of voting equity securities
• Promoters connected with the issuer
• Persons compensated for soliciting investors

What Are Disqualifying Events?

• Certain criminal convictions
• Court injunctions and restraining orders
• Final orders from state and federal regulators
• SEC disciplinary orders
• SEC cease-and-desist orders
• Suspension or expulsion from FINRA or similar SRO
• SEC stop orders
• U.S. Postal Service false representation orders

Many events are only disqualifying if they occurred within a look-back period — typically five years for court injunctions and ten years for regulatory orders. The look-back is measured from the date of sale, not the date of the underlying conduct.

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Anti-Fraud Provisions Always Apply

A critical point for any issuer: exemption from registration does not mean exemption from anti-fraud liability. All issuers must provide truthful and non-misleading information to investors. The SEC’s anti-fraud authority under Section 10(b) of the Exchange Act and Rule 10b-5 applies regardless of whether the offering is registered or exempt.

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Restricted Securities

Generally, securities issued under Rule 504 are “restricted securities”. This means they cannot be resold for a period of time — typically six months to a year — without registration or another exemption.

There is an exception: if the offering is registered in at least one state requiring public filing and delivery of a disclosure document before sale, or offered exclusively in states permitting general solicitation but requiring sales only to accredited investors, the securities may be unrestricted. However, this exception is narrow and state-specific.

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Form D and State Compliance

SEC Filing Requirements

Issuers must file a Form D notice with the SEC within 15 days after the first sale of securities in the offering. Form D is a short notice filing — not a registration statement — and is filed electronically through EDGAR.

State “Blue Sky” Laws

Unlike Rule 506(b) offerings, which are preempted from state registration by the National Securities Markets Improvement Act of 1996 (NSMIA), Rule 504 offerings must comply with state securities laws in every state where securities are offered or sold.

This creates a significant practical burden. As SEC Commissioner Uyeda noted in 2026 remarks: “It is both impractical, costly and unrealistic to expect an issuer to register a small securities offering in dozens of states. The costs and time delays make such efforts often untenable”.

Each state has its own registration requirements, exemptions, and filing fees (typically $100–$500 per state). Issuers should contact state securities regulators or the North American Securities Administrators Association (NASAA) for guidance.

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Rule 504 vs. Rule 506

Feature	Rule 504	Rule 506(b)	Rule 506(c)
Offering Limit	$10 million/12 months	Unlimited	Unlimited
State Registration	Required	Preempted	Preempted
General Solicitation	Limited (with conditions)	Prohibited	Permitted
Non-Accredited Investors	Permitted	Up to 35 sophisticated	Must be accredited
Form D	Required	Required	Required

Rule 504 is often used for regional (multi-state) offerings where the issuer is willing to comply with state blue sky laws in exchange for flexibility on investor qualification.

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Key Takeaways for Real Estate Investors

1. Rule 504 is not preempted by NSMIA. Unlike Rule 506, you must comply with state securities laws in every state where you offer or sell.
2. The $10 million limit is aggregate. It applies to all securities sold under Rule 504 within a 12-month period.
3. Bad actor disqualification applies. Conduct due diligence on yourself, your officers, directors, and 20%+ owners before relying on Rule 504.
4. Restricted securities are the default. Plan for a holding period unless you meet the narrow exceptions.
5. Anti-fraud rules always apply. Exemption from registration is not a license to mislead investors.
6. State compliance is the biggest burden. Budget time and legal fees for multi-state filings.

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Disclaimer: This page is for educational and informational purposes only. It does not constitute legal advice. Securities laws are complex and subject to change. Always consult a licensed securities attorney before offering or selling securities.