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Client Alert: Private Placement Update

Many companies rely on Regulation D, an exemption from registration under the Securities Act of 1933, in conducting private placement offerings of their securities. When a company sells its securities in reliance on Regulation D, it normally files a Form D, within 15 days after the initial sale of securities in the offering, with the SEC and, as applicable, the state securities authorities in those states in which the securities are being offered and sold in order to perfect that exemption and the corresponding exemptions at the state level.

The SEC recently adopted new rules which mandated the electronic filing of all Form Ds beginning after an initial phase-in period. Prior to the new rules, only paper copies of the Form D were required to be filed. During the phase-in period, which began in September 2008 and runs through mid-March 2009, companies have had the option of filing either paper copies of the Form D or filing electronically on a voluntary basis. Beginning on March 16, 2009, the phase-in period ends and all companies must begin to file their Form Ds online. Just as is the case for any other public filing made through EDGAR, the SEC's online electronic filing system, Form Ds filed online will be available to the public via the Internet and searchable at the SEC's website.

In order to file electronically, a company that is not already filing online using the EDGAR system must first obtain certain access codes, including a CIK code and a number of passcodes. The process of applying for and obtaining these required codes can take up to several days, so we strongly advise all companies to apply for their EDGAR codes well in advance of their first mandated online Form D filing.

Although the information required on the new online Form D is generally the same as the current paper form, there are some changes and some additional required disclosures. The new rules also clarify when an amendment to a previously filed Form D is required to be filed with the SEC. Some of the more significant changes include the following:

  1. the date of the first sale in the offering must be reported (notably, this is defined as the date on which the first investor is irrevocably contractually committed to invest, which could in certain circumstances be a date earlier than the closing date of the offering);
  2. in addition to continuing the requirement to disclose all persons (including broker-dealers and, separately listed, finders) receiving sales commissions and similar fees in connection with the offering and the amount of those payments, the new Form D requires that the CRD, or Central Registration Depository number, of any registered broker-dealer also be listed; and
  3. issuers must disclose whether the offering is anticipated to last more than a year, and annual updating amendments are now required for all offerings extending beyond one year, including those for which an initial Form D was filed prior to the adoption of the new rules unless the offering is completed prior to March 16, 2009. 

Amendments to a Form D are otherwise required under the new rules to correct a material mistake of fact in a previous filing and to update and reflect certain changes in the information provided in the Form D, including, among others, to report new recipients of sales commissions and changes in the issuer's executive officers, directors and promoters.

One of the SEC's stated goals in adopting the new Form D rules is to provide issuers with a coordinated electronic system for both federal and required state filings, and state regulators are working to conform state filings to the new SEC procedure. However, while it is anticipated that the states will eventually coordinate with the SEC such that all Form D filings would be made online, until that system is in place, and for the foreseeable future, issuers that submit filings online with the SEC will be required to continue to submit any necessary state filings in most states in paper format.

If you have any questions or would like additional information about the new Form D requirements, please feel free to contact Amalie Tuffin or the attorney with whom you regularly work. 

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This Hutchison Law Group Alert is intended to provide general information only and is not intended to be, nor should it be construed as, legal advice on any specific matter. This Alert does not constitute an invitation to or create an attorney-client relationship, nor should it be construed as an advertisement for legal services.