SEC Rule 147A

Overview and Regulatory Purpose

The Commission's 2016 intrastate offering modernisation recognised that the statutory intrastate exemption of Section 3(a)(11), and the Rule 147 safe harbor that tracks its specific textual requirements, presented two distinct practical limitations for issuers seeking to use intrastate offerings as a genuine capital formation tool in the internet era. 

The first limitation was the requirement that the issuer be incorporated within the offering state — a constraint that many businesses, for entirely legitimate reasons unrelated to securities law compliance, do not satisfy, since businesses frequently incorporate in states such as Delaware to take advantage of well-developed bodies of corporate law while conducting their actual operations, employing their workforce, and deriving their revenue from an entirely different state. 

The second limitation was the restriction on general solicitation and advertising reaching any out-of-state audience whatsoever, a constraint poorly suited to internet-based marketing and communications platforms that, by their inherent technical architecture, are generally accessible nationally or globally even where the issuer's actual marketing intent and target audience are confined to a single state.

Rule 147A addresses both of these limitations directly. By deriving its exemptive authority from the Commission's general rulemaking power rather than from Section 3(a)(11)'s specific statutory text, Rule 147A is free to depart from the statute's in-state incorporation requirement, instead anchoring the issuer's intrastate character in the more functionally meaningful and verifiable principal place of business standard. 

And by permitting general solicitation and general advertising to reach out-of-state residents — so long as actual sales remain confined to verified in-state residents — Rule 147A accommodates the practical reality of internet-based marketing without compromising the fundamental intrastate character of the offering's actual purchaser base, which remains the substantive investor protection and constitutional anchor that the exemption depends upon.

Statutory Authority and Rulemaking History

Rule 147A derives its statutory authority from Section 28 of the Securities Act of 1933, which grants the Commission broad authority to exempt any person, security, or transaction, or any class of persons, securities, or transactions, from any provision of the Act or any rule or regulation issued under it, to the extent such exemption is necessary or appropriate in the public interest and consistent with the protection of investors, together with Section 19(a)'s general rulemaking authority. 

This grounding in Section 28's general exemptive authority — rather than in Section 3(a)(11)'s specific statutory text, which is the foundation for Rule 147 — is the structural feature that distinguishes Rule 147A's legal architecture and that permits the rule to depart from Section 3(a)(11)'s in-state incorporation requirement in a manner that Rule 147 itself cannot, since Rule 147 must remain faithful to the statutory exemption it implements as a safe harbor.

The Commission adopted Rule 147A on October 26, 2016, simultaneously with the comprehensive modernisation of Rule 147, in Securities Act Release No. 33-10238, published at 81 FR 83550, November 21, 2016, effective April 20, 2017. 

The adopting release explained that the new rule was specifically designed to provide issuers with a more flexible federal-only intrastate exemption, untethered from the constraints that Section 3(a)(11)'s statutory text imposes on Rule 147, while preserving the core investor protection conditions — genuine in-state business presence, sales confined to in-state residents, and a meaningful resale limitation period — that anchor both exemptions in the underlying constitutional and policy rationale for intrastate offering relief. 

Rule 147A was subsequently amended January 14, 2021, in Securities Act Release No. 33-10884, 86 FR 3594, as part of the Commission's broader Exempt Offering Framework rulemaking that harmonised exemptive provisions across Regulation D, Regulation A, and Regulation Crowdfunding alongside the intrastate exemptions.

Key Provisions and Operative Requirements

Rule 147A(a) establishes the scope of the exemption. 

Offers and sales by or on behalf of an issuer of its securities made in accordance with Rule 147A are exempt from Section 5 of the Act. As with Rule 147, this exemption is not available to an issuer that is an investment company registered or required to be registered under the Investment Company Act of 1940, reflecting the Commission's consistent determination across both intrastate exemptions that the specialised regulatory framework governing registered investment companies is incompatible with reliance on the intrastate offering exemption.

Rule 147A(b) establishes the manner of offers and sales condition — the provision that most distinctly differentiates Rule 147A from Rule 147. An issuer, or any person acting on behalf of the issuer, may rely on the exemption to make offers and sales using any form of general solicitation and general advertising, so long as the issuer complies with the nature of the issuer, residence of purchasers, and other specified conditions of the rule. 

This explicit permission for general solicitation and general advertising — without geographic restriction on the audience the solicitation reaches — represents the rule's central liberalisation relative to Rule 147's requirement that solicitation and advertising be confined to the offering state itself. 

Under Rule 147A, an issuer may market its offering through national websites, social media platforms, and other internet-based communications channels that are inherently accessible beyond the offering state's borders, provided the issuer's actual sales remain confined to verified in-state residents in compliance with the rule's other conditions.

Rule 147A(c) establishes the nature of the issuer condition, paralleling Rule 147's structure with one critical modification. The issuer of the securities must, at the time of any offers and sales, be a person resident and doing business within the state or territory in which all of the sales are made. For purposes of Rule 147A, however, the rule does not require that the issuer be incorporated or organized within that state — instead, the issuer must satisfy the principal place of business standard and the same four-part disjunctive doing-business test that Rule 147 employs: 80% of consolidated gross revenues derived in-state, 80% of consolidated assets located in-state, intended use of at least 80% of net offering proceeds in-state, or a majority of employees based in-state. 

An issuer incorporated in Delaware but headquartered, staffed, and operationally based in another state may therefore qualify for Rule 147A's exemption even though that same issuer would be categorically ineligible for Rule 147 by virtue of its out-of-state incorporation.

The Rule 147A(c) instruction addresses serial intrastate offerings, paralleling Rule 147's equivalent provision: an issuer that has previously conducted an intrastate offering pursuant to Rule 147A or Rule 147 may not conduct another intrastate offering pursuant to Rule 147A in a different state or territory until the expiration of the applicable six-month resale limitation period, calculated from the date of the last sale in the prior offering — a provision designed, as with Rule 147's parallel restriction, to prevent rapid relocation of an issuer's claimed principal place of business as a mechanism for conducting successive intrastate offerings across multiple states without genuine and sustained operational ties to each jurisdiction.

Rule 147A(d) establishes the residence of purchasers condition, structured identically to Rule 147's equivalent provision. Sales of securities pursuant to Rule 147A shall be made only to residents of the state or territory in which the issuer is resident, as determined pursuant to Rule 147A(c), or to persons whom the issuer reasonably believes, at the time of sale, are residents of that state or territory. 

The accompanying instruction confirms, as under Rule 147, that obtaining a written representation from purchasers of in-state residency status will not, without more, be sufficient to establish a reasonable belief that such purchasers are in-state residents, requiring issuers to undertake meaningful additional verification of purchaser residency beyond a bare written representation.

Rule 147A(e) establishes the limitation on resales, mirroring Rule 147's six-month resale restriction precisely. For a period of six months from the date of the sale by the issuer of a security pursuant to Rule 147A, any resale of such security shall be made only to persons resident within the state or territory in which the issuer was resident, as determined pursuant to Rule 147A(c), at the time of the sale of the security by the issuer. The required disclosure legend, addressing offeree and purchaser communications, mirrors the disclosure language required under Rule 147, requiring prominent disclosure that sales will be made only to residents of the identified state, that the offering relies on an unregistered exemption, and that resales for six months following the issuer's sale will be confined to residents of the same state or territory.

Scope of Application

Rule 147A is available to issuers whose principal place of business is located in a specific state or territory, regardless of the jurisdiction in which the issuer is incorporated or organized, and is unavailable to investment companies registered or required to be registered under the Investment Company Act of 1940. 

The rule imposes no dollar limit on the aggregate amount of securities that may be offered and sold, consistent with Rule 147's parallel absence of any offering size limitation, distinguishing both intrastate exemptions from the dollar-capped exemptive frameworks of Rule 504 and Regulation Crowdfunding.

The rule's permission for general solicitation and general advertising to reach out-of-state audiences applies specifically and only to offers — the rule's actual sales remain confined exclusively to verified in-state residents under Rule 147A(d)'s residency conditions. 

This distinction between offers, which may reach a national or global audience through internet-based communications, and sales, which must remain confined to in-state purchasers, is the operational mechanism through which Rule 147A reconciles its accommodation of modern marketing practices with the continuing constitutional and policy requirement that the offering's actual investor base be genuinely intrastate.

Relationship to Related Rules and Regulations

Rule 147A's relationship with Rule 147 is one of structural parallel and complementary availability rather than hierarchy — the two rules provide functionally similar exemptive relief through differently grounded statutory authority, with Rule 147A offering meaningfully greater flexibility on the incorporation and offer-accessibility dimensions while Rule 147 remains the necessary choice for issuers whose state law intrastate crowdfunding exemption specifically requires compliance with Section 3(a)(11) and Rule 147 themselves rather than the more general exemptive relief that Rule 147A provides. 

Many states' intrastate crowdfunding exemptions were specifically drafted to track Section 3(a)(11) and Rule 147 compliance as a condition of the state exemption's own availability, meaning that an issuer relying on Rule 147A rather than Rule 147 in such a state might inadvertently lose the benefit of the corresponding state law exemption even while satisfying Rule 147A's federal conditions — a coordination consideration that issuers and their counsel must carefully assess in selecting between the two federal intrastate frameworks.

Rule 147A's resale limitation interacts with the same restricted securities framework considerations applicable to Rule 147 — securities purchased in a Rule 147A offering are not considered restricted securities within the meaning of Rule 144, but persons reselling such securities beyond the rule's own six-month geographic resale limitation must independently identify a supporting exemption, most commonly Section 4(a)(1)'s exemption for transactions by persons other than an issuer, underwriter, or dealer.

As with Rule 147, Rule 147A's federal Section 5 exemption does not preempt state blue sky registration requirements — issuers conducting offerings under Rule 147A must independently comply with the securities laws and regulations of the specific state in which the offering is conducted, a continuing state law compliance obligation that distinguishes both intrastate exemptions from the NSMIA-preempted covered security status that attaches to offerings conducted under Rule 506(b) and Rule 506(c).

Amendment History and Regulatory Evolution

Rule 147A's substantive framework has remained stable since its original 2016 adoption, with the January 2021 amendment making harmonising technical adjustments alongside the Commission's broader Exempt Offering Framework rulemaking without altering the rule's core structural distinctions from Rule 147 — the absence of an in-state incorporation requirement, and the permission for general solicitation and general advertising to reach out-of-state audiences while confining actual sales to in-state residents.

The Commission's introduction of Rule 147A alongside the Rule 147 modernisation reflected a deliberate policy choice to provide issuers and the broader intrastate crowdfunding ecosystem with a dual-pathway structure — preserving Rule 147's continuity with the specific statutory text of Section 3(a)(11) for issuers whose state law exemptions depend on that precise compliance, while creating in Rule 147A a more flexible federal-only alternative for issuers not constrained by such state law conditioning, an approach that has been broadly viewed as successfully accommodating the diverse range of state-level intrastate crowdfunding frameworks that developed in the years following the JOBS Act's enactment.

Enforcement Context and SEC Action Patterns

Rule 147A enforcement and compliance scrutiny parallels the concerns applicable to Rule 147, with particular attention to whether an issuer's claimed satisfaction of the principal place of business and residency verification conditions genuinely reflects the rule's underlying intrastate commerce premise, as distinguished from offerings that technically satisfy the rule's conditions while functionally reaching a national investor base through marketing practices that, while permissible as offers under Rule 147A's general solicitation accommodation, may obscure inadequate verification of the in-state character of the offering's actual purchaser base.

State securities regulators play the same significant complementary enforcement role for Rule 147A offerings as for Rule 147 offerings, given the continuing applicability of state blue sky registration and antifraud provisions notwithstanding the federal Section 5 exemption that Rule 147A provides.

Examination Relevance and Key Takeaways

Rule 147A is examined at the Series 7 and Series 65 levels alongside Rule 147 as the second of the two federal intrastate offering exemptions. Candidates should understand the rule's two principal liberalisations relative to Rule 147 — the absence of an in-state incorporation requirement, replaced by a principal place of business standard, and the permission for general solicitation and general advertising to reach out-of-state audiences while confining actual sales to verified in-state residents. 

The continued application of the six-month resale limitation, the four-part 80% doing-business threshold test, and the reasonable belief standard for purchaser residency verification are identical across both rules and are consistently examined as the shared substantive core of the federal intrastate offering exemption framework.

The distinction between Rule 147A's grounding in Section 28's general exemptive authority and Rule 147's grounding in Section 3(a)(11)'s specific statutory text is relevant examination context at the Series 65 level for understanding why the two rules differ in their incorporation and offer-accessibility conditions despite their otherwise parallel structure.

The key points to retain are these. Rule 147A provides a federal-only intrastate offering exemption from Section 5 registration, available to issuers whose principal place of business — though not necessarily place of incorporation — is located in the offering state, satisfying the same four-part 80% doing-business threshold test applicable under Rule 147. 

General solicitation and general advertising may reach out-of-state residents, but actual sales must be confined to in-state residents verified under the reasonable belief standard. The same six-month in-state resale limitation and prominent disclosure legend requirements apply as under Rule 147. 

Securities purchased under Rule 147A are not restricted securities but remain subject to the rule's own resale limitation. State blue sky registration requirements continue to apply notwithstanding the federal exemption. Issuers relying on state law intrastate crowdfunding exemptions specifically conditioned on Section 3(a)(11) and Rule 147 compliance should use Rule 147 rather than Rule 147A to preserve that state law benefit. Rule 147A was adopted effective April 20, 2017 and last amended January 14, 2021, with no further amendments through June 2026.