As a reminder, on September 15, 2008, the Securities and Exchange Commission (the "SEC") began accepting electronic filings of Form D through the Internet, further to the SEC’s issuance earlier this year of rules and rule amendments to revise the content of Form D and require the electronic filing of Form D.1 These Form D changes are meant to update, clarify and simplify the form’s requirements, improve the collection of data provided in the form and make the form more accessible to regulators and the public. The full text of the SEC’s final rules release is available on the SEC website at http://www.sec.gov/rules/final/2008/33-8891.pdf.
Commencing March 16, 2009, electronic filing of the new Form D, as well as amendments to Forms D previously filed (regardless of format), will be mandatory, through an online system that will be accessible from any computer with Internet access and will make the filed information available on the SEC’s website. Because the online filing system will automatically capture and tag data items, the data will be interactive and searchable. The Form D will continue to be required to be filed with the SEC no later than 15 calendar days2 after the first sale of securities in the exempt offering, and as with most other SEC online filings, the cut-off time for electronic filing of the Form D is 5:30 p.m. Eastern time. Updated SEC guidance on the Form D filing process, including electronic filing information, is available on the SEC website at http://www.sec.gov/divisions/corpfin/formdfiling.htm.
Transition period from September 15, 2008 through March 15, 2009
The period from September 15, 2008 through March 15, 2009, is a phase-in period of the electronic Form D. During this transition period, filers can voluntarily elect to file the new Form D electronically or file either temporary Form D (which is almost identical to the current paper Form D) or new Form D as a paper filing. The new Form D is available on the SEC’s website at http://www.sec.gov/about/forms/formd.pdf. The temporary Form D is available on the SEC’s website at http://www.sec.gov/about/forms/formdtemp.pdf. The SEC will also continue to accept paper filings of the current version of Form D during this period. During the transition period, the new annual and other amendment rules will apply to all new Form D filings regardless of format but the current amendment requirements will still apply to all current Form D filings in paper format.
Private as well as public companies will need edgar codes for electronic Form D filing
When electronic filing on Form D becomes mandatory (i.e., March 16, 2009), any issuer effecting a private placement of securities in reliance upon Regulation D will need to have EDGAR filing codes in order to file the Form D with the SEC. This applies to private as well as public companies and will apply to each issuer in a multi-issuer Form D filing. Current EDGAR filers can use their previously assigned EDGAR filing codes to log on to the new system. Companies that do not have EDGAR filing codes will need to obtain them by filing a Form ID electronically at https://www.filermanagement.edgarfiling.sec.gov. This site includes instructions for completing the Form ID filing. This filing must be followed within two days by faxing to the SEC a manually executed and notarized authenticating document.
Revisions to information requirements of Form D
In conjunction with requiring electronic filing, the SEC has revised the information required to be included in Form D, simplifying certain items and deleting others that it considers either outdated or of no substantive value. Previously, Form D has required presentation of preliminary and other information in five sections. The revisions organize the information requirements around 16 numbered items, or categories, of information. Instructions at the end of the Form D explain the requirements for each item. Changes include:
- Requiring reporting the date of first sale in the offering3 and whether the offering is expected to last longer than a year;
- Permitting filers to identify all issuers in a multiple-issuer offering in one Form D filing (note that each such issuer will be required to have its own EDGAR filing codes);
- Replacing the current requirement to provide a business description with a requirement to provide industry group information from a pre-established list;
- Requiring revenue range information for operating companies and net asset value information for hedge funds (subject to an option to decline to disclose);
- Permitting a limited amount of free writing to the extent necessary to clarify responses;4
- Eliminating disclosure of certain information about the use of proceeds and expenses and about owners of 10% or more of the issuer’s equity securities;
- Combining current Form D federal and state signature requirements and incorporating the Consent to Service of Process form, which is required by the states, into the signature block; and
- Requiring a CRD (a broker/dealer Central Registration Depository) number to be listed for each person listed on Form D as receiving compensation from the sale of securities (if the listed person has a CRD number, but such persons must be listed in any case).
As to the above CRD requirement, issuers should note that the inclusion (or omission, as applicable) of CRD numbers on the new form will clearly indicate whether or not persons receiving sales compensation are registered broker-dealers. As a result, issuers paying compensation to finders and other non-registered parties in connection with private offerings under Regulation D should be all the more careful how they engage and compensate finders in capital-raising transactions. Moreover, this new disclosure requirement could well facilitate more rigorous scrutiny by the SEC and state securities regulators of payments to non-registered persons or entities.
When issuers will be required to provide amendments to Form D
The Form D was also amended to address when amendments to the Form D are required.5 Amendments must contain current information in response to all information requirements of the Form D, regardless of why the amendment is filed. Under the amended rules, amendments to Form D are required in three instances:
- To correct a material mistake of fact or error in the previously filed notice, as soon as practicable after discovery of the mistake or error;
- To reflect a change in the information provided in the previously filed notice, including additions to the issuer’s executive officers, directors and promoters, and additions to recipients of sales commissions, as soon as practicable after the change, other than a change occurring after the offering terminates, or other specified changes that would be expected to occur during the course of The offering;6 and
- To provide an annual update to the Form D for offerings lasting more than one year.
The SEC has prepared a Small Business Compliance Guide on filing and amending a Form D, highlighting the specific circumstances for when an amendment to Form D is or is not necessary, as well as providing guidance on obtaining EDGAR filing codes. This Guide can be found on the SEC website at http://www.sec.gov/info/smallbus/secg/formdguide.htm.
State filings presently continue in paper rather than electronic format
There is currently no organized electronic system to coordinate filing of Form D with the states. The SEC is working with the North American Securities Administrators Association ("NASAA"), the organization of state securities regulators, to explore the establishment of a “one-stop” filing system that would link the SEC’s Form D filing system with a system sponsored by NASAA that would accept state Form D filings. No timetable has been adopted for linking the two systems. If “one-stop” filing is not available by March 16, 2009, when electronic filing of Form D with the SEC becomes mandatory, a printed copy of the online Form D would be used for state filings, with required fees and other materials as applicable still sent directly to the states.