The SEC recently revised Rule 504 of Regulation D to increase the amount of securities that can be offered in any 12-month period from $1,000,000 to $5,000,000. Among other things, Rule 504 allows companies to solicit or advertise their securities to the public in states which require registration of the securities, and require the public filing and delivery to investors of a substantive disclosure document before sale.

Revised Rule 504 appears to work well with the current Minnesota securities statute and regulations. Minnesota Statutes Section 80A.50(b) provides for an exemption if the following and other requirements are met:

  • The securities offered must be exempt from registration under the Securities Act of 1933 pursuant to Rule 504 of Regulation D.
  • The issuer is an eligible issuer (i.e., not a public company, an investment company etc.) and no bad actors as defined in the statute.
  • A small corporate offering registration statement must be filed with the Commissioner of Commerce.
  • A small corporate offering registration statement must be on Form U-7, including exhibits required by the instructions thereto, as adopted by the North American Securities Administrators Association.
  • The registration statement must include a copy of the offering document proposed to be delivered to offerees.
  • If no stop order is in effect and no proceeding is pending under section 80A.54, the registration statement becomes effective automatically at the close of business on the 20th day after filing of the registration statement or the last amendment of the registration statement or at such earlier time as the Commissioner of Commerce may designate by rule or order.
  • A copy of the offering document as filed with the administrator must be delivered to each person purchasing the securities prior to sale of the securities to such person.

Minnesota Administrative Rule 2876.3021 must also be consulted. Among other things it provides:

  • Applicants may file a small corporate offering registration statement in a format other than Form U-7 so long as the alternative registration statement contains all of the information required by all items of Form U-7 as adopted by the North American Securities Administrators Association and all of the attachments required by the instructions for Form U-7, or specifically states that any omitted information or attachments are not applicable.
  • Interim financial statements may be unaudited. All other financial statements may be unaudited if reviewed by independent certified public accountants in accordance with the Accounting and Review Service Standards promulgated by the American Institute of Certified Public Accountants and certain other requirements are met. Those requirements include not having previously sold securities in excess of $1,000.000.
  • After the small corporate offering registration statement has been declared effective, and while the offering is still in progress, the registrant must amend or supplement the small corporate offering registration statement to contain such further material information, if any, as may be necessary to make the information in the small corporate offering registration statement not misleading. A copy of the registration statement as changed, revised, or supplemented and clearly marked to show changes from the previously filed version shall be filed with the Commissioner of Commerce and distributed to all offerees.