An issuer that offers securities without registration under the Securities Act of 1933 in reliance on a claimed exemption under Regulation D is required to file a Form D with the Securities and Exchange Commission (SEC) within 15 days of the first sale of securities. New SEC rules amending Form D and Regulation D now mandate the electronic filing of the Form D, revise the information issuers are required to disclose in Form D, and change the requirements for when amendments to Form D must be filed.
Mandatory Electronic Filing of Form D. Beginning March 16, 2009, all Form D filings with the SEC must be made electronically using the SEC's new online filing system for Form D. The Form D will be available for public viewing on the SEC's website, and because the online filing system will automatically capture and tag data items, the data will be interactive and searchable. The issuer will be required to maintain a manually executed copy of the Form D in their files.
In order to use the SEC's online filing system, issuers must obtain a Central Index Key (CIK) code, CIK Confirmation Code (CCC) and password from the SEC. To meet the 15 days after first sale filing deadline, issuers should file a Form ID to apply for CIK and CCC numbers as early as possible in the securities offering process. The SEC recently made this process easier by allowing Form ID applicants to attach authenticating documents to the online application in PDF form as an alternative to doing so by fax. If an issuer has previously filed a Form D with the SEC, the SEC has already assigned the issuer a CIK number which can be found on the SEC's website.
Information Contained in the Form D. To facilitate electronic filing, the SEC modified the Form D to require additional information and delete information previously required. One additional piece of information required by the new Form D is the date of the first sale of securities. The SEC also clarified that date of first sale means the date on which the first investor is irrevocably and contractually committed to invest, which, depending on the language in the subscription agreement, could be the date on which the issuer receives the investor's subscription agreement or payment of funds. Before this clarification, issuers generally treated the closing date of the offering as the date of first sale. Issuers may need to revise their offering procedure and subscription documents to prevent triggering the 15 day filing window.
Additional changes to Form D require issuers to (1) disclose whether the offering is expected to last more than one year, (2) identify the issuer's industry group, (3) disclose the recipients and amounts of any compensation paid in connection with the sale of securities and (4) identify the exemption being claimed for the offering. Information no longer required to be disclosed in Form D includes (1) beneficial owners of 10% or more of a class of securities, (2) a breakdown of use of proceeds, except amounts paid to related person or as sales commissions or finders fees and (3) the state appendix.
Amendments to Form D. The SEC revised Regulation D and the instructions to Form D to require amendments to Form D in the following situations: (1) to correct a material mistake of fact or error in a previously filed Form D, (2) to reflect a change in the information provided in a previously filed Form D and (3) annually, if the offering is continuing on the anniversary date of the last Form D or amendment filed for that offering. This new annual amendment is required even if the issuer previously filed Form D in paper form.
State Filing Requirements. In addition to the SEC filing requirements, issuers must continue to comply with the applicable notice filing requirements of each state in which it sells securities. The public availability of the date of first sale in Form D may result in increased scrutiny from state regulators. Baker & Daniels LLP maintains a database of the notice filing requirements of all fifty states and will continue to monitor changes to those requirements in response to the new SEC Form D rules.