Right now, a “requirement” for relying on the Reg D private placement exemption is to file a Form D within 15 days of the date that securities are first sold under the exemption. “Requirement” is in quotes because filing a Form D isn’t a condition to the availability of the federal exemption – but it could disqualify the company from using the exemption in the future, and some state enforcement agencies say that a delinquent Form D kills the preemption the company would otherwise enjoy from state law registration requirements.
So it’s interesting that in its recent comment letter to the SEC’s “Concept Release on Harmonization of Securities Offering Exemptions,” the North American Securities Administrators Association – otherwise known as NASAA, the organization that represents state securities regulators – is recommending an amendment to Regulation D that would require pre-issuance as well as post-closing Form D filings. An except from an Allen Matkins blog gives more details:
NASAA argues that a pre-issuance filing requirement will “alert regulators that the offering is forthcoming and to provide an opportunity for regulators to investigate the offering if any information in the Form D raises concern”. Form D was originally presented as a tool to “collect empirical data which will provide a basis for further action by the Commission either in terms of amending existing rules and regulations or proposing new ones”. It has evolved, however, into an enforcement tool for securities regulators. See “Is Form D Afflicted With Mission Creep?“
NASAA is also recommending amendments to the definition of “accredited investor” that would raise individual net worth & income requirements, and preserving Rule 504 in its current form. Our “Reg D Handbook” covers all the ins & outs of the current exemption – including the current Form D filing requirements and related “Blue Sky” impact.
-Liz Dunshee, TheCorporateCounsel.net October 29, 2019
