Every securities transaction is registered, exempt, or illegal. The most common exemption for issuing securities without registration is found in Section 4(a)(2) of the Securities Act of 1933. As discussed in another post on that topic, Section 4(a)(2) exempts any issuance of securities “not involving any public offering.”
Unfortunately the language in Section 4(a)(2) is rather vague. It is often not clear whether a sale of securities involves a public offering, or is entirely private. To add clarity, the Securities and Exchange Commission issued Regulation D as a safe harbor for compliance with Section 4(a)(2).
(Technically certain parts of Regulation D were not issued under 4(a)(2), but under Section 3(b) of the Securities Act. Section 3(b) gives the SEC additional authority to exempt from registration securities issuances under $5,000,000.)
If you follow the rules of Regulation D when selling securities, the SEC will not deem your offer and sale to be an unregistered public offering. If you don’t follow the rules, you lose the safe harbor. You can still fall back on the vague language of 4(a)(2) to argue that your sale of securities did not involve a “public offering,” but that’s not always so easy. It’s wise to conform any sale of securities–whatever type of securities you are selling–to the rules of Regulation D whenever possible.