Form D is a federal notice form required to be filed with the Securities and Exchange Commission (“SEC”) in connection with Regulation D private placements of securities. The SEC utilizes the data provided in Form D filings to:
- evaluate the effectiveness of Regulation D exemptions,
- analyze the private placement market in general, and
- serve as guidance for subsequent rulemaking activities. After several years of deliberation, the SEC approved a new (and improved) Form D, including a new electronic Form D filing system that went “live” in September 2008 and became mandatory on March 16, 2009. Highlights of the new Form D are summarized below.
1. Transition Period is Over. The new Form D made its debut on September 15, 2008. During a short interim period, issuers were allowed either submit Form D filings with the SEC electronically via the Electronic Data Gathering, Analysis, and Retrieval system (“EDGAR”) or file paper copies of either the new Form D or a “temporary” Form D (i.e., the old version). However, that transition period expired on March 16, 2009, when electronic filing became mandatory. Copies of the new Form D and related guidance can be found at http://www.sec.gov/info/smallbus/secg/ formdguide.htm.
2. The New Form D is More Practical and User-Friendly. The new Form D is more condensed than its predecessor. The new Form D solicits more “check the box” responses and eliminates requirements to provide estimates of multiple categories of expenses and uses of offering proceeds. Fund managers will note the elimination from the new form of the requirement to identify as “related persons” owners of 10 percent or more of a class of the issuer’s equity securities.
3. Electronic Form D Filers must use EDGAR. To file Form D electronically, issuers must utilize EDGAR, which will require issuers to obtain a filer identification number (referred to as a “Central Index Key” or “CIK” number) and a login password (“CIK Confirmation Code” or “CCC” number). Detailed instructions for electronically filing Form D can be found at http://www.sec.gov/info/edgar/edmanuals913_d.htm. Sponsors that form offering-specific issuer entities will have to navigate this process for each offering.
4. CRD Numbers of Selling Broker-Dealers and Registered Representatives must be Listed on the New Form D. This information was not required on the “old” Form D, and while this requirement will increase the time it takes to complete Form D, issuers should have easy access to this information, either from their selling group or via http://brokercheck.finra.org.
5. Industry Classification of Issuer and Investment Company Act Exemptions. New “check the box” items require issuers to classify themselves by industry from a list of industries–including a classification for “pooled investment vehicles” that will be relevant for most hedge funds and other types of fund offerings—as well as an item for issuers to indicate which Investment Company Act of 1940 exemption is being relied upon.
6. Form D Filings will be More Accessible than Ever. Electronically filed Form Ds will be searchable via EDGAR, making the information disclosed on Form Ds more readily available to the public than ever.
7. More Flexibility in Reporting Offering Amount. The new Form D modifies the requirement to report the total offering amount and total remaining to be sold to permit an issuer such as a hedge fund to specify “indefinite” with respect to these amounts in appropriate circumstances.
8. Date of First Sale Required on New Form D. Under Rule 503 of Regulation D, an issuer must file Form D no later than fifteen (15) days after the first sale of securities in the subject offering. The date of first sale is a required item of disclosure on the new Form D. The instructions to the new Form D clarify that the date of first sale is “the date on which the first investor is irrevocably contractually committed to invest, which, depending on the terms and conditions of the contract, could be the date on which the issuer receives the investor’s subscription agreement or check.”
9. NASAA Developing a One-Stop Electronic Filing Platform for Blue Sky Notice Filings. The NASAA’s “one-stop” filing platform for electronic Form D notice filings at the state level now exists. The North American Securities Administrators Association (“NASAA”) is spearheaded this effort.
10. Consequences of Noncompliance. At the federal level, the consequences of noncompliance with Form D filing requirements remain the same. Failure to timely file Form D with the SEC does not result—in and of itself—in the loss of the Regulation D exemption, but it may result in an issuer being precluded from relying on a Regulation D exemption for future offerings. As before, intentional misstatements or omissions of fact on Form D constitute federal criminal violations under 18 U.S.C. 1001.