Regulation D and Filing Form D

by / Sunday, 07 September 2014 / Published in Blue Sky Filings, Regulation D
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The following lays out the very basics about a core blue sky notice filing in connection with a private placement offering, the federal Form D

(NOTE: As of 2014, there are significant proposed changes to the Form D, due to the Jobs Act, are detailed in this article).

One of the biggest sources of confusion when conducting a private placement offering is the level of contact necessary with the federal and state governments. Often, the mistake is made that because the offering is private, there is no need to file any paperwork with the federal government. Unfortunately, nothing could be further from the truth. However, what does need to be filed (Form D) can be handled efficiently and is one of the more direct and transparent moving parts in the entire private placement offering process.

What Information Does Form D Typically Request?

Form D is a direct and to the point notice filing with the federal government that collects primarily biographical data about the company issuer and the regulation D offering itself, including but not limited to:

  • The principals of the issuer;
  • The nature of the offering;
  • Salesperson information;
  • Offering parameters (e.g., minimum/maximum offering thresholds, minimum required purchase amount, form of issuer entity (LLC, Corp., etc.));
  • Type of security (e.g., debt, equity, etc.);
  • Date of first sale of security;
  • Details on the number and state of residence of unaccredited or accredited investors that already purchased securities in the private placement offering;
  • The safe harbor provision under regulation D that is being relied on (e.g., 504, 506, 506 (c) using general solicitation);
  • Etc.

Prior to 2008 filing a Form D could be achieved by simply filling out the printed form and sending it to the SEC, but the law now requires the filing of a separate Form ID with the SEC and then filing the Form D electronically. The Form ID is designed merely to get the issuer into the SEC database and give that issuer various passwords to access EDGAR the SEC online filing system. While electronic filing is somewhat intimidating at first, experienced practitioners know how to navigate the filing system in order to assist an issuer quickly and within deadline (typically, a Form D needs to be filed no later than 15 days of the first sale of the operative security). At the Office of Small Business Policy website there is further info on electronic filing requirements for the Form D.

In Closing, Two Compelling Reasons for Filing the Form D:

 

  • Failure to file the Form D in connection with the offering can eviscerate the safe harbor/exemption for the issuance of unregistered securities, potentially triggering liability for securities laws violations on the part of the issuer and its principals. In other words, going through the whole process of a private placement offering can be rendered moot if a Form D is not properly filed;
  • Many private investors looking to invest into a private placement offering will make reference to the issuer’s Form D filing. Understandably, the absence of that filing and/or improper filing can result in the loss of investor confidence. So from a marketing perspective, because it is the norm and the law, any issuer relying on regulation D should be cognizant of the absolute necessity of filing Form D. (Note: investors, regulators, and securities authorities, can all access the SEC database of Form D filings here: EDGAR Database; if the investor is looking for a Form D filed before September 15, 2008, they may request a written copy from the SEC here: Request a Form D Copy).

 

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