SEC Adopts Amendments to Regulation D; Mandates Electronic Filing of Form D

April 2008 Small Business Securities Newsletter

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As seen in the Small Business Securities Newsletter. Published by the Securities Practice Group to provide timely and useful information to CEOs, CFOs, and General Counsel

The September edition of this Newsletter summarized a proposal by the SEC to simplify and require the electronic filing of Form D – the notice filing required by companies that have sold securities in a private offering in reliance on the exemption from registration provided by Regulation D. On February 6, 2008, the SEC approved the amendments to Regulation D substantially as proposed. Although the final rule is effective on September 15, 2008, there will be a transition period from September 15, 2008, through March 15, 2009, during which time Form D filings may be made either in paper format or electronically. Effective March 16, 2009, all Form D filings must be made electronically by responding to discreet information requests on an electronic form.

The amendments are intended to ease the burdens of complying with Form D, facilitate electronic filing, improve and update Form D information requirements, and increase the public’s access to Form D information. In the future, the system also may facilitate “one-stop filing” of Form D with the SEC and state securities regulators in a single electronic transaction. While one-stop filing will not be available initially, the SEC and state regulators are working to implement this capability as soon as practicable.

Under the new amendments, the information requirements of Form D will be reorganized into 16 numbered categories. The material changes to the Form D information requirements include:

  • reporting the date of the first sale in the offering (which may aid the SEC in identifying late filings and thereby increase compliance)
  • replacing the description of business with identification of industry group from a pre-established list of industries
  • deleting the requirement to identify beneficial owners of 10 percent or more of an issuer’s equity securities
  • requiring all issuers to disclose revenue range information
  • replacing the current federal and state signature requirements with a combined single signature requirement that will also include a Form U-2
  • eliminating the appendix that currently provides offering information on a state-by-state basis

Regulation D has been amended to clarify that a previously filed Form D need only be amended in the following instances:

  • if a material mistake of fact is made in the prior Form D submission
  • to reflect a change in certain of the previously submitted information
  • annually, if the offering is ongoing

In proposing the amendment, the SEC and certain commentators raised concerns that the public availability of Form D filings on the SEC Web site could be used for marketing purposes and thereby run afoul of the prohibition against “general solicitation” and “general advertising” in Regulation D offerings. Regulation D has been amended to provide that information included in a Form D in good faith to comply with the Form’s requirements will not constitute a general solicitation or general advertising for purposes of the prohibition.