The Limited Public Offer in German and U.S. Securities Law: A Comparative Analysis of Prospectus Act Section 2(2) and Rule 505 of Regulation D

This Note examines the “limited circle of persons” exception in section 2(2) of the Prospectus Act in comparison to similar provisions of U.S. federal securities law, particularly Section 3(b) of the Securities Act of 1933 (the “Securities Act”) and Rule 505 of Regulation D (“Rule 505”). Comparison of the Prospectus Act to U.S. securities law seems both warranted and useful. Certain aspects of German securities law are broadly modeled on U.S. precedents. U.S. securities laws reflect more than sixty-five years of experience defining (and re-defining) public and limited public offers and private placements. U.S. securities regulators have also displayed in recent years an increasing concern, widely shared by their German counterparts, for the needs and difficulties of small businesses in capital formation. The Prospectus Act and Regulation D are joined by common policies and provisions in this regard. A clear definition of the term “limited circle of persons” as used in Prospectus Act section 2(2) and a correspondingly clear and available small business exception to the requirements of the Prospectus Act would seem desirable.