The most common exemptions from registration for both public companies and private companies seeking to go public are those provided by Regulation D of the Securities Act of 1933, as amended (“Securities Act”).
Many issuers who go public do not realize that the filing of a Form D with the Securities and Exchange Commission (the “SEC”) is required in Regulation D offerings.
About Form D
Form D is a notice of an exempt offering of securities in reliance upon Regulation D (or Section 4(6) of the Securities Act). Form D requires specific information about the issuer and the offering it is conducting. This information includes (i) the issuer’s identity, (ii) its principal place of business and contact information, (iii) its state of domicile, (iv) the names and addresses of its executive officers and directors, (v) the specific exemption claimed under the Securities Act, and (vi) the identity and contact information of any broker-dealer, finder or other person receiving any commission or other similar compensation relating to the sale of securities in the offering.
Filing of Form D
The Form D must be filed with the SEC if the issuer is relying on Rule 506 of Regulation D.
The SEC requires the electronic filing of Forms D through the SEC’s Electronic Data Gathering, Analysis and Retrieval System (“EDGAR”). To use EDGAR, the issuer must have its own filer identification number (called a “Central Index Key” or “CIK” number) and a set of access codes.
Forms D filed through EDGAR will be available for public viewing in an interactive and searchable format on the SEC’s website immediately upon filing.
Timeliness of Form D Filings
The Form D must be filed with the SEC no later than 15 calendar days after the “date of first sale” of securities sold based on a claim of exemption under Rule 504, 505 or 506 of Regulation D or Section 4(6) of the Securities Act. For this purpose, the “date of first sale” is the “date on which the first purchaser is irrevocably contractually committed to purchase the securities.” If the date on which the Form D is required to be filed falls on a Saturday, Sunday or holiday, then the applicable due date is the first business day following.
Form D and State Blue Sky Laws
In addition to compliance with the SEC’s filing requirements, issuers must also comply with state blue sky laws. A majority of states requires that the issuer file a Form D along with their filing fees, which range from as little as $75 to as much as $1,500.
Most Regulation D offerings are conducted in reliance upon Rule 506 of Regulation D. Securities offered in reliance upon Rule 506 are considered “covered securities” under the National Securities Markets Improvement Act (“NSMIA”), and state law requirements are preempted by federal law. However, states may require the filing of the Form D to be filed with the SEC along with a filing fee.
Failure to File Form D
Issuers relying upon Regulation D are required to file a Form D; however, it is not a condition to qualify for the Regulation D exemption. The SEC has stated that the failure to file a Form D will not result in the loss of the exemption provided by Regulation D. The SEC provides guidance on an issuer’s failure to file Form D in Question 257.07 of its Securities Act Rules: Questions and Answers of General Applicability.
Under Rule 507 of Regulation D, the SEC can take action against the issuer that fails to file a Form D, having the issuer enjoined from future use of Regulation D. In some instances, if the violation of Regulation D is willful, it could also constitute a felony.
Issuers should not ignore the requirement to file a Form D even though it is not a condition of the Regulation D exemptions. In litigation against issuers arising from Regulation D, the filing of a Form D may serve as a mitigating factor to show compliance or attempted compliance with Regulation D, particularly when there is a fraud allegation. Additionally, a Form D filing is required by most states in order to comply with their exemption from registration. As such, any company conducting an offering in reliance upon Regulation D should consult with securities counsel prior to accepting investor funds.
Additional information about Regulation D can be found at:
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