What is Regulation D?

Under the federal securities laws, a company that offers or sells its securities must register the securities with the Securities and Exchange Commission (“SEC”) or find an exemption from the registration requirements. Regulation D of the Securities Act of 1933 (“Reg D”) is a regulation promulgated by the SEC that governs the exemptions for the sale of a company’s equity or debt securities. Although companies that comply with Reg D need not register their offering of securities with the SEC, they are required to file a “Form D” with the SEC. The Form D is an electronically filed notice to the SEC that the company is claiming its offering falls under one of the Reg D exemptions.

Rule 506(b) of Reg D is the most common exemption we use when filing Form Ds on behalf of our capital-raising clients. Rule 506(b) provides an exemption for private fundraising and requires that the company raise capital without advertising the securities to the general public. Under Rule 506(b), there is no limit to the amount of capital that can be raised, and the company is permitted to sell securities to an unlimited number of “accredited investors”. An accredited investor is a person or business entity that satisfies certain requirements related to income, net worth, asset size, governance status, and/or professional experience. Typically, an investor attests to his/her/its own status as an accredited investor in an investment document called a Subscription Agreement. There is no governmental or entity that provided an accreditation. To learn more about what it means to be an accredited investor, read Much ado about Nothing: The SEC to Change the Definition of Accredited Investor.

Process of Filing a Form D

The SEC requires that a Form D be filed within 15 days of taking the first investor’s funds in a capital raise round. Hunter Business Law can assist any company raising capital with filing a Form D; however, it is a process that you can do yourself. Below is a step by step guide for filing your Form D.

1. Set up your company on the SEC’s Electronic Data Gathering, Analysis, and Retrieval (EDGAR) filer management portal. The link to EDGAR can be found HERE. Follow the prompts in the top left corner to “Apply for EDGAR Access” to create what is called a “Form ID.” The Form ID requires submission of basic company information, including company address and contact information for relevant persons/company officers.
2. Before you can fully submit the Form ID, you will need to print a hard copy of the Form ID, sign it, get it notarized, and upload the executed form to the “documents” tab of the electronic Form ID application.
3. Before submission, you will be prompted to choose a “passphrase”, which will act as a temporary password to login to the SEC’s Online Forms website (more on this in Step 4). After you choose your passphrase, submit the Form ID application.
4. Once you submit the Form ID, and thus register your company with EDGAR, the SEC will email you a Central Index Key (CIK) number. You can expect to receive this email within a few days following the submission of the Form ID. The CIK number is your company’s SEC identifier and will remain such for any submissions for future capital raises.
5. Once you are equipped with your CIK number, return to the EDGAR filer management portal HERE. Follow the prompts in the top left corner to “Generate Access Codes”. Insert your CIK number and passphrase. A window will appear with all the relevant access codes you will need to submit your electronic Form D.
6. Use the access codes you generated (including the CIK and password) to login to the SEC’s Online Forms Login HERE.
7. Follow the prompts to fill in information to your electronic Form D and submit the same. A copy of the Form D can be found HERE. You should receive an immediate confirmation email, including your “accession number.” Your accession number is your receipt. If any issues arise, you can provide this number to the SEC to show that your Form D was timely and appropriately filed.

If you need assistance with filing your Form D, or would like to further understand Regulation D, Hunter Business Law can help. To arrange a consultation, visit our contact page HERE.

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This Blog was written by Hunter Business Law Attorney Stephanie Boussias.

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