• Mandatory Electronic Filing of SEC Form D Becomes Effective March 16, 2009
  • March 25, 2009 | Author: Janice Z. Davis
  • Law Firm: Bracewell & Giuliani LLP - Dallas Office
  • Effective March 16, 2009, the U.S. Securities and Exchange Commission ("SEC") will require all companies raising capital in a non-public offering that qualifies under Regulation D to file the information required on Form D electronically. Additionally, the SEC has modified the information required to be included on Form D and has adopted new rules regarding when an amendment to a Form D filing is required. Sales of securities offered by an issuer in a non-public offering qualify for an exemption from registration under the Securities Act of 1933 if they comply with a set of safe-harbor rules enacted by the SEC known as Regulation D. Since its adoption, Rule 503 of Regulation D has required the issuer to file paper versions of Form D with the SEC no later than 15 days after the first sale of securities. On February 6, 2008, the SEC adopted amendments to Regulation D that require the electronic filing of Form D through the Internet, change both the structure and requirements of the information required to be disclosed on Form D, and specify when an amendment to a Form D filing is necessary. 1

    Mandatory Electronic Filing
    Under the amended rules adopted by the SEC, issuers have had the option of filing a paper Form D or the electronic version of Form D with the SEC since September 15, 2008, but filing the electronic version of Form D becomes mandatory for new filings and amendments on March 16, 2009. In order to file Form D electronically, the issuer will need to use the CIK code and EDGAR access code that EDGAR filers use or, if the issuer does not have these codes, the issuer will need to obtain them.  Issuers who have filed paper Form D's with the SEC will have a CIK code, which they can find by searching on the SEC website, and they can use their CIK code to obtain an EDGAR access code. The SEC's Division of Corporate Finance has provided useful information for searching for and obtaining CIK codes and EDGAR access codes as well as filing Form D electronically at http://sec.gov/divisions/corpfin/formdfiling.htm.

    Modification of Information Required
    The SEC's amended rules also restructure and modify the information required to be included on Form D. These modifications include:

    • Permitting the filer to identify all of the issuers in a multiple-issuer offering in one form;
    • Removing the requirement to identify owners of 10 percent or more of a class of the issuer's equity securities as a "related person";
    • Requiring the issuer to identify its industry group from a drop-down menu rather than describe its business;
    • Requiring the issuer to indicate its revenue range or, in the case of a hedge fund or "other investment fund", its net asset value range (the issuer has the option to decline to disclose this);
    • Requiring disclosure of any exclusion claimed by the issuer from the definition of "investment company" under the Investment Company Act of 1940;
    • Requiring disclosure of the first day of sale in the offering2 and whether the offering is intended to last more than one year;
    • Requiring CRD numbers3 be disclosed for individuals receiving sales compensation and associated brokers as well as for finders (to the extent such individuals, brokers or finders have CRD numbers);
    • Limiting the disclosure of expenses to amounts paid for sales commissions and finders' fees, and the disclosure of the use of proceeds only to payments to executive officers, directors and promoters;
    • Implementing a combined federal and state signature requirement that includes an undertaking to provide offering documents to regulators on request, a consent to service of process4 and a certification that the issuer is not disqualified from relying on the claimed exemption; and
    • Removing references to the Uniform Limited Offering Exemption ("ULOE") in the prior Form D as well as removing the Appendix of the prior Form D.5

    Circumstances Requiring Form D Amendment
    Finally, the amended rules specify, for the first time, when Form D amendments must be filed. The prior Form D did not explicitly address when the filing of an amendment was required, but the SEC Staff interpreted Rule 503 and the prior Form D instructions to require amendments in ongoing offerings where there was a material change in information filed about the offering and the basic information about the issuer had changed. The amended rules require amendments to Form D to be filed in the following instances:

    • To correct a material mistake of fact or error;
    • To reflect a change in the information provided;6 or
    • Annually, on or before the anniversary of the filing of the Form D or the most recent amendment, if the offering is continuing.

    In the case of a material mistake or change in information, the issuer must file the amendment as soon as practicable after the mistake or change occurs. In filing an amendment, the issuer must provide current information to all previous responses on Form D regardless of the reason for filing the amendment. From and after March 16, 2009, ongoing offerings must comply with the annual and other amendment requirements by filing Form D electronically even if the prior Form D filing and amendments were in paper format.

    All entities that are continuing to or plan to raise capital in a non-public offering need to be aware of the mandatory electronic filing requirement for Form D as well as the new information required and the amendment rules that apply. In particular, pooled investment funds, including hedge funds, private equity funds and venture capital funds, that are engaged in continuous non-public offerings need to familiarize themselves with the annual and other amendment rules that are outlined above.


    1 See, generally, Securities Act Release No. 33-8891, "Electronic Filing and Revision of Form D" (Feb. 6, 2008), currently available at http://www.sec.gov/rules/final/2008/33-8891.pdf.

    2 The revised Form D instructions now define the date of first sale as the date on which the first investor is irrevocably contractually committed to invest.  According to the instructions, this could be the date on which the issuer receives the investor's subscription agreement or check, depending on the terms and conditions of the contract.  The SEC release confirms that in a minimum-maximum offering, where subscriptions are placed in escrow pending receipt of minimum subscriptions, the date of first sale occurs when the first subscription agreement is received and first funds are deposited in escrow.  See Securities Act Release No. 33-8891 at pp. 29-30.

    3 These are numbers issued by the Central Registration Depository, a corporate database for brokers and their representatives that is jointly owned by the state securities regulators and the NASD.

    4 This is similar to the consent to service of process incorporated into Form U-2, which is required to be filed simultaneously with Form D in many states.  However, the signature requirement does not incorporate a consent to jurisdiction or venue, which is included in Form U-2, and any state regulator in which an issuer intends to offer securities should be consulted to determine whether the filing of a completed Form U-2 will still be required.  In response to our inquiry, a representative with the Texas State Securities Board indicated that an issuer qualifying for an exemption under Regulation D should file a printout of the electronic Form D and provide the required filing fee but a Form U-2 will no longer be required to be included.

    5 The SEC release indicates that state securities regulators could still require the type of information formerly required in the Form D Appendix to be filed with them.  See Securities Act Release No. 33-8891 at pp. 28.

    6 No amendment is required if the change in information occurs after the offering has terminated or if a change occurs in the following information:

    • the address or relationship of a related person;
    • an issuer's revenues or aggregate net value;
    • the minimum investment amount, if such amount increases or does not decrease more than 10%;
    • any address of or state of solicitation for an individual, associated broker or finder receiving sales compensation;
    • the total offering amount, if such amount decreases or does not increase more than 10%;
    • the amount of securities sold or remaining to be sold in the offering;
    • the number of non-accredited investors (unless it increases to more than 35) or the total number of investors in the offering; or
    • the amount of sales commissions, finders' fees or use of proceeds for payments to related persons, if such amount decreases or does not increase more than 10%.