While the term public offering has never been defined formally by the SEC, several factors have emerged from case law and SEC rulings that set out when transactions are not deemed to involve a public offering for purposes of Section 4(a)(2):

1. Investor suitability. As one of the key factors to using Section 4(a)(2), investor suitability looks to whether an investor can "fend for itself" or needs the type of information disclosed under Section 5's registration requirement to make an informed investment decision. Offerees must be sophisticated and have knowledge and experience of financial and business matters to evaluate the risks and merits of the proposed offering. Although not defined by Section 4(a)(2), sophisticated investors would include:

• Qualified Institution Buyers;
• Accredited Investors.

2. Limited number of investors. Typically, issuers limit the number of potential investors and buyers, but a formal numerical test has never been upheld. Generally, the number of potential investors and buyers is limited to decrease the chances of an offer being made to an unsuitable investor. However, issuers can and do conduct private placements under Section 4(a)(2) to an unlimited number of institutional investors that are QIBs if the issuers do not conduct any general solicitation or advertising of the offering.

3. Prohibition on general solicitation and general advertising. Another key factor to using Section 4(a)(2) is that there can be no general solicitation or general advertising of the offering by the issuer or anyone acting on its behalf. An offering or distribution that violates this prohibition is considered to be a public offering or distribution of the securities

The Jumpstart Our Business Startups Act of 2012 (JOBS Act) did not, by its terms, change or remove the ban on general solicitation and general advertising for private placements under Section 4(a)(2), although it did require the SEC to eliminate the prohibition on general solicitation and general advertising for Rule 506(c) offerings under Regulation D.

4. Information requirement. Although Section 4(a)(2) does not require any specific information to be furnished to investors, typically potential investors receive a private placement memorandum, which is a disclosure document prepared by the issuer that provides investors with basic information about the issuer and the securities being offered.

5. Transfer restrictions on restricted securities. Buyers are generally required to buy larger blocks of unregistered securities that carry transfer restrictions to increase the likelihood these restricted securities are bought by suitably sophisticated investors

6. Investment intent. Investors must buy the unregistered securities for their own account, without a view to resell or distribute them to others immediately. Investment intent is relevant to show that the sale does not involve a public offering or a distribution of securities. This "view to distribute" prohibition does not mean investors cannot buy if they intend to resell the restricted securities under another available exemption

7. Integration with other offerings. Issuers cannot make a series of private placements to avoid Section 5's registration requirements.

These factors, while helpful, do not provide clear direction on how to conduct an issuer private placement. In response, the SEC adopted Regulation D in 1982 to give issuers certainty about conducting a Section 4(a)(2) private placement