Regulation S is a safe harbor from Securities Act registration for offers and sales that occur outside the United States. All sales must be offshore transactions, issuer safe-harbor conditions scale with how much US market interest the issuer has, and equity of US domestic issuers sold under Regulation S is treated as restricted securities. Offshore offers cannot be used to accomplish a US private placement indirectly.
Key takeaways
- Regulation S covers offers and sales outside the United States; every sale must be an offshore transaction.
- It has general conditions, an issuer safe harbor tiered by US market interest, and a resale safe harbor.
- Since 1998, equity of US domestic issuers sold offshore under Regulation S is restricted under Rule 144.
- Offshore internet offers cannot substitute for a compliant US private placement.
What Regulation S does
Regulation S provides non-exclusive safe harbors for offers, sales, and resales of securities made outside the United States, which are not subject to the Securities Act's registration requirement [1]. Each offer and sale must be an "offshore transaction," and there may be no directed selling efforts in the United States — activity that could condition the US market for the securities, such as advertising the offering in a publication with general US circulation [1].
Three categories of issuer
The issuer safe harbor sorts offerings into categories by the likelihood that securities will flow back into the US market. Foreign issuers with no substantial US market interest face only the general conditions; issuers with more US market interest, and US domestic issuers, face additional offering restrictions and a distribution compliance period. Under the SEC's summary, Category 3 restricts sales to US persons for one year for non-reporting issuers' equity, six months for reporting issuers' equity, and 40 days for debt [1].
US issuers' equity is restricted
After abuses in which US companies' equity was sold offshore and quickly flowed back into US markets, the SEC amended Regulation S in 1998 so that equity securities of US domestic issuers sold offshore are "restricted securities" within the meaning of Rule 144, with certification, legending, and hedging restrictions [2]. A US company raising from international investors should therefore plan for resale restrictions just as it would in a domestic private placement.
No backdoor placements
The SEC has warned that issuers should not attempt to accomplish indirectly, through an offshore internet offer, what is in substance a US private placement [3]. Cross-border raises often run a Regulation S tranche alongside a Regulation D tranche for US investors; each must satisfy its own conditions.
For foreign companies
Non-US companies seeking US investors face the reverse question: whether to rely on a US exemption such as Regulation D or Rule 144A, or to register. The SEC's overview for foreign private issuers summarizes the options [1].
Frequently asked questions
- Can a US startup raise from foreign investors under Regulation S?
- Yes, if the offering meets Regulation S conditions, including offshore transactions and no directed selling efforts in the US. Equity sold this way by a US domestic issuer is treated as restricted securities.
- Can I combine Regulation S and Regulation D in one raise?
- Issuers commonly run a Regulation S tranche for non-US investors alongside a Regulation D tranche for US investors. Each tranche must satisfy its own exemption's conditions.
Sources
- [1]U.S. Securities and Exchange Commission, “Accessing the U.S. Capital Markets — A Brief Overview for Foreign Private Issuers,” Accessed November 2026.
- [2]U.S. Securities and Exchange Commission, “Offshore Offers and Sales — Final Rule Amendments,” February 1998.
- [3]U.S. Securities and Exchange Commission, “Statement of the Commission Regarding Use of Internet Web Sites to Offer Securities, Solicit Securities Transactions or Advertise Investment Services Offshore,” March 1998.
How Baird Augustine helps
This article is for informational purposes only and is not legal, tax, or investment advice, or an offer to sell or a solicitation of an offer to buy any security. Regulatory proposals described here may change before adoption. Securities offered through Umergence LLC, Member FINRA/SIPC.
