RIA Compliance Blog
On October 3, 2017, the South Dakota Division of Insurance- Securities Regulation published proposed rules which would establish notice filing requirements for federal regulation crowdfunding and Regulation A, Tier 2 offerings. According to the Division, these rules are being proposed “so the Division may monitor these types of offerings by receiving information about the issuer and the offering.”
The proposed rules governing notice filings for federal crowdfunding offerings would require an issuer who offers and sells securities pursuant to the federal crowdfunding registration exemption to make a notice filing in South Dakota if the following conditions are met: (1) the issuer’s principal place of business must either be in South Dakota or (2) the issuer must plan to sell 50 percent or more of the total offering to South Dakota residents. As part of the initial notice filing, the issuer would need to include either a completed Uniform Notice of Federal Crowdfunding Offering form or copies of every document filed with the Securities and Exchange Commission. If the issuer does not use the Uniform Notice of Federal Crowdfunding Offering Form, it would also need to file a consent to service of process form (“Form U-2”), along with a $250 fee. The notice filing would be effective for a period of twelve months beginning with the filing date. To renew the notice filing, the issuer would need to file with the Division a Uniform Notice of Crowdfunding Offering form marked “renewal” together with a cover letter asking for renewal, along with a $250 fee.
An issuer whose principal place of business is in South Dakota would need to make its notice filing as soon as it made its first Form C filing with the Securities and Exchange Commission. If the issuer’s principal place of business is not in South Dakota but South Dakota residents buy 50 percent or more of the offering’s total amount, the issuer would need to make the notice filing as soon as the issuer becomes aware that the purchases have met the 50 percent requirement, but in no event later than thirty days after the offering’s complete.
An issuer planning to make a Regulation A- Tier 2 offering in South Dakota would need to make a notice filing at least twenty-one days before the first sale in South Dakota. The notice filing would include either a completed Regulation A- Tier 2 notice filing form or copies of every document filed with the SEC. The issuer would also need to file a Form U-2 if the issuer does not use the Regulation A- Tier 2 notice filing form. A filing fee of $250 is required. The notice filing would be effective for a period of twelve months beginning with the filing date. In order to renew the notice filing, the issuer would need to file a Regulation A- Tier 2 notice filing form marked “renewal,” a cover letter asking for renewal, and a renewal fee of $250.
Parker MacIntyre provides legal and compliance services to investment advisers, broker-dealers, registered representatives, hedge funds, and issuers of securities, among others. Our regulatory practice group assists financial service providers with complex issues that arise in the course of their business, including compliance with federal and state laws and rules. Please visit our website for more information.