Articles Tagged with Form D

Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), the Securities and Exchange Commission (“SEC”) must review the definition of “accredited investor” every four years to determine whether it needs to be modified or adjusted. The SEC staff recently conducted its first review and issued a Report on the Review of the Definition of “Accredited Investor.”

The report provides an in-depth examination of the history of the “accredited investor” definition and discusses possible alternative approaches. The report also responds to comments on the existing definition received from various financial services industry participants, including the Investor Advisory Committee and the Advisory Committee on Small and Emerging Companies. Lastly, the report provides recommendations for potential updates and/or modifications to the existing definition.

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On December 15, 2014, the North American Securities Administrators Association (“NASAA”) launched an online electronic filing system to be used for issuers filling Form D, Rule 506 offerings with state securities regulators. The purposes of this new electronic filing depository (“EFD”) website, according to NASAA president William Beatty, are to provide an efficient and streamlined process for regulatory filings and to allow for increased transparency for investors.

Issuers seeking an exemption under Rule 506 must meet certain requirements in order to avoid having to register their public or private offerings with the SEC or state regulators. However, those issuers must still file a notice of exempt offering of securities, or “Form D,” with the SEC and state securities regulators. Instead of the longer and more tedious process of registering with securities regulators, Form D requires only limited information about the issuer, the investors, and the securities offered.
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On the same day that it released rule amendments allowing some Rule 506 offerings to be sold through public solicitation, the SEC proposed an additional set of rule amendments for those offerings. While the newly adopted rule primarily concerns verification of accredited investor status, the additional proposals relate more to the materials used by issuers to solicit those investors.

Currently, offerings under Regulation D require a Form D to be filed 15 days after the first sale; no prefiling is required. The proposal, however, would require that any offering to be sold using general solicitation would require that Form D be filed with the SEC 15 days prior to any solicitation. The SEC has also proposed a temporary rule, Rule 510T, which would go further and require all solicitation material to be filed with the SEC prior to its first use. Under the proposal, this temporary rule would expire in two years.

In addition, the proposed rule changes would require solicitation materials to include legends informing recipients of certain facts relating to the securities offered, such as the requirement that all investors must be accredited, that regulators have not approved the offering and that the securities have transfer restrictions. The proposal also extends to private funds the Rule 156 requirements currently relating to investment company advertising materials.
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