With Reg D, it’s technically not correct to say that there is always a lockup on new investors. Reg D securities are restricted, and restricted securities are always subject to limitations on their resale. Those limitations become easier to comply with for people (or entities) who are not affiliates after a year has passed since the securities were first acquired from the issuer (company).
Holders of restricted securities of non-reporting companies who are not affiliates, (affiliates are a type of insider) may resell in the following ways:
Privately in sales under the so-called “Section 4 (1 ½) exemption”, typically only to other accredited investors and on the basis of an opinion of counsel at any time;
- Privately under Section 4(a)(7) of the Securities Act to accredited investors at any time;
- Privately to “qualified institutional buyers” under Rule 144A at any time;
- Outside the United States in reliance on Regulation S at any time;
- Publicly under Rule 144 one year after the securities were issued.
The exemptions for private sales mentioned above all have conditions that have to be met and the securities remain restricted. There may also be contractual restrictions on such resales or requirements set forth in the bylaws and of course in all cases, state law requirements have to be complied with as well.
Once the securities are resold publicly they are no longer restricted.
Warrants are treated the same way as all other securities sold under Reg D.