Glossary term
Rule 147
Rule 147 is an SEC safe harbor for intrastate securities offerings under Section 3(a)(11) of the Securities Act.
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What Is Rule 147?
Rule 147 is an SEC safe harbor for intrastate securities offerings under Section 3(a)(11) of the Securities Act of 1933. It is designed for companies raising capital within a single state from investors who are residents of that state.
The rule helps issuers understand when an offering can be treated as local rather than a national securities offering. It does not remove state securities law requirements, and it is not a general exemption for selling securities anywhere.
Key Takeaways
- Rule 147 is a safe harbor for intrastate securities offerings.
- The issuer and investors generally must be tied to the same state.
- Rule 147 is connected to Section 3(a)(11), the statutory intrastate offering exemption.
- Issuers must still consider state securities laws, resale limits, disclosures, and anti-fraud rules.
How Rule 147 Works
Rule 147 is used when a company wants to raise capital locally. The offering must be structured around a single state or territory. The issuer must satisfy conditions showing that the business is genuinely local, and sales must be made only to residents of that state or territory.
The rule also includes limits on resales for a period after purchase. These limits are meant to prevent securities sold in a local exemption from quickly flowing into a broader interstate market.
Rule 147 Compared With Rule 147A
Feature | Rule 147 | Rule 147A |
|---|---|---|
Legal structure | Safe harbor under Section 3(a)(11) | Separate SEC exemption. |
Issuer organization | Issuer is more tightly tied to the state. | Issuer may be organized out of state if principal place of business is in-state. |
Offers | More restrictive because of intrastate offer concerns. | Allows offers accessible to out-of-state residents if sales are only in-state. |
State law | Still applies | Still applies. |
Issuer and Investor Considerations
Rule 147 can be useful for local businesses raising money from local investors, but compliance is detail-heavy. Issuers need to confirm investor residency, business-location requirements, resale restrictions, offering materials, state-law filings, and anti-fraud obligations.
Investors should understand that an intrastate offering may be illiquid, risky, and lightly followed compared with public-company securities. Local familiarity with a business is not the same as financial due diligence.
Because Rule 147 relies on the offering staying local, small mistakes in solicitation, residency checks, or resale controls can create serious securities-law problems.
The Bottom Line
Rule 147 is a federal safe harbor for intrastate securities offerings. It can help local companies raise local capital, but it requires careful compliance and does not eliminate state-law or anti-fraud obligations.