On March 16, 2009, issuers of securities sold in private placement transactions relying upon Rule 506 of Regulation D (“Rule 506”) under the Securities Act of 1933, as amended (the “Act”), must file Electronic Form D through the Securities and Exchange Commission's (“SEC”) Interactive Data Electronic Applications system (“IDEA”). Rule 506 offerings provide a “safe harbor” from registration of securities both federally and on the state (commonly referred to as “Blue Sky”) level, and are conditioned upon limitations as to the number and type of investors eligible to participate in private offerings as well as the manner in which such offerings are made. As part of Regulation D, Rule 503 requires the filing of Form D with the SEC. In addition to the federal Form D filed with the SEC, most states require a notice filing for Rule 506 offerings in such states consisting of (i) a copy of Form D as filed with the SEC, (ii) a Consent to Service of Process and (iii) a filing fee. The states are authorized to require such notice filings pursuant to the National Securities Markets Improvement Act of 1996. States will convert to electronic filing over the next several years. Until a state has the ability to accept

Electronic Form D electronically, paper copies of Electronic Form D will be accepted by each state requiring the manual filing of Electronic Form D as filed with the SEC. The SEC and the states require the filing of Form D within 15 days of the first sale of securities in a private placement relying upon Rule 506.

Historically, Form D was filed with the SEC and the states in paper form. As noted above, on and after March 16, 2009, the federal Form D must be filed in electronic form on IDEA. Prior to the March 16, 2009 electronic filing deadline, however, a Form D filer has the option of filing Form D with the SEC in paper form using “Temporary Form D.” “Electronic Form D” and “Temporary Form D” are discussed in more detail below.

Electronic Form D

While a Form D filed with the SEC in paper form was not readily obtainable (i.e., the actual filing was only available to people physically visiting the SEC and copying such Form upon request), Electronic Form D is and will be available to the public on IDEA immediately upon filing. Electronic Form D also requires annual renewal filings for each issuer of securities in a continuous offering (even if such issuer previously filed Form D in paper form).

Electronic Form D sets forth some different or additional information over the Form D historically filed in paper form. One key piece of additional information required by Electronic Form D is the date of first sale. As noted above, the SEC and the states require the filing of Form D within 15 days of the first sale of securities in a private placement relying upon Rule 506. Prior to the implementation of Electronic Form D, there was no specific definition of the date of first sale for Regulation D purposes. Issuers customarily treated the date of first sale as the date on which an offering (either periodic or final) closed (or the date of the initial closing). For purposes of the Electronic Form D, the SEC now interprets the date of first sale as the earliest date on which an investor becomes contractually obligated to purchase securities (i.e., the earlier of the date on which an issuer receives executed subscription documents or payment is made for the securities by the purchaser to the issuer). This new definition of the date of first sale results in the 15-day period to file with the SEC — and the states — running much earlier than issuers have previously been accustomed. Although this change may seem rather esoteric, many states have started to refuse to accept Rule 506 notice filings or have aggressively pursued monetary fines and sanctions for failure to file within the 15-day filing period described above. Although fines to issuers are typically insignificant for late filers, some states have started to impose fines as a percentage of securities sold in a particular jurisdiction.

Filing Electronic Form D

First time Electronic Form D filers must obtain an IDEA access code and “Central Index Key” (unless such issuer has previously obtained such codes for other electronic filings with the SEC). This process requires each issuer/Electronic Form D filer to complete Form ID electronically with the SEC, followed by a faxed copy of the manually executed and notarized Form ID to the SEC. Upon acceptance of Form ID, the SEC will provide an issuer with an owner identification number, confirming code, and password, all of which will be required to file Electronic Form D through IDEA. Although fairly mundane, these procedural requirements could cause delays for first time filers unless codes are obtained prior to the due date of an Electronic Form D.

Temporary Form D versus Electronic Form D

As noted above, between the date of this alert and March 16, 2009, the SEC is accepting both Temporary Form D (a paper Form D filed manually) and Electronic Form D. Temporary Form D does not contain the additional information required by Electronic Form D, including without limitation the date of first sale. In addition, by filing Temporary Form D prior to March 16, 2009, the need to file Electronic Form D goes into effect one year from the date of the last annual filing, not March 16, 2009. For example, if an issuer engaged in a continuous offering filed Temporary Form D manually on February 27, 2009, the next SEC annual update required under Regulation D (which must then be made electronically) must be made no later than February 27, 2010. There have also been many reported instances of administrative difficulties when filing Electronic Form D on IDEA. As a result, it is preferable to wait until any IDEA software problems are resolved before attempting to file Electronic Form D on IDEA.

Conclusion

On and after March 16, 2009, the SEC will require issuers relying on Rule 506 to file Form D electronically on IDEA. Electronic Form D requires information not previously required on Form D, and must be renewed annually for continuous offerings. At present there is a window of opportunity for issuers to take advantage of filing Temporary Form D, which will provide greater ease of filing as the SEC transitions to Electronic Form D. With proper preparation and planning, however, the transition of existing paper filings to the new electronic regime should pose little difficulty.