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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 230, 232, and 239

[RELEASE NOS. 33-8891; 34-57280; 39-2453; IC-28145;

FILE NO. S7-12-07]

RIN 3235-AJ87

ELECTRONIC FILING AND REVISION OF FORM D

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

SUMMARY: The Securities and Exchange Commission is adopting rule amendments

mandating the electronic filing of information required by Securities Act of 1933 Form D through

the Internet. We also are adopting revisions to Form D and to Regulation D in connection with

the electronic filing requirement. The revisions simplify and restructure Form D and update and

revise its information requirements. The information required by Form D will be filed with us

electronically through a new online filing system that will be accessible from any computer with

Internet access. The data filed will be available on our Web site and will be interactive and

searchable.

EFFECTIVE DATE: September 15, 2008 except the amendments to § 232.101(c)(6) and §

232.201(a) are effective March 28, 2008,

§ 232.101(a)(1)(xiii) is effective March 16, 2009 and § 230.503T, § 232.101(b)(10) and §

239.500T are effective from September 15, 2008 to March 16, 2009.

FOR FURTHER INFORMATION CONTACT: Questions about this release should be

addressed to Gerald J. Laporte, Chief, or Corey A. Jennings, Attorney-Advisor, Office of Small

Business Policy, Division of Corporation Finance, or Mark W. Green, Senior Special Counsel

(Regulatory Policy), Division of Corporation Finance, Securities and Exchange Commission,

100 F Street, NE, Washington, DC 20549-3628, (202) 551-3460.

SUPPLEMENTARY INFORMATION: We are adopting revisions to Rules 100,1 101,2 104,3

201,4 and 2025 of Regulation S-T,6 Rules 5027 and 5038 of Regulation D,9 and Form D10 under

the Securities Act of 1933 (“Securities Act”).11 We also are adding temporary Rule 503T and

Temporary Form D under the Securities Act and temporary Rule 101(b)(10) of Regulation S-T.

TABLE OF CONTENTS

EXECUTIVE SUMMARY AND BACKGROUND

History and Purpose of Form D

Need to Update Form D and Require Electronic Filing

Easing Filing Burdens

Better Public Availability of Form D Information

Federal and State Uniformity and Coordination; One-Stop Filing

Improved Collection of Data for Commission Enforcement and

Rulemaking Efforts

Summary of Adopted Amendments

17 CFR 232.100.

17 CFR 232.101.

17 CFR 232.104.

17 CFR 232.201.

17 CFR 232.202.

17 CFR 232.10 et seq.

17 CFR 230.502.

17 CFR 230.503.

17 CFR 230.501-508.

17 CFR 239.500.

15 U.S.C. 77a et seq.

II.

DISCUSSION OF AMENDMENTS

Amendments to Form D Content Requirements

III.

Basic Identifying and Contact Information

Additional Information About Issuer

Identification of Claimed Exemptions and Exclusions

Indication of Type of Filing

General Requirements

Amendment of Previously Filed Form D

Information About Offering

Signature and Submission

Electronic Filing of Form D

General Solicitation and General Advertising Issues Presented by Electronic

Filing of Form D

ELECTRONIC FILING PROCEDURE

Mechanics

Database Capabilities of Electronic Form D Repository

System Implementation

IV.

PAPERWORK REDUCTION ACT ANALYSIS

COST-BENEFIT ANALYSIS

VI.

CONSIDERATION OF IMPACT ON COMPETITION AND PROMOTION OF

EFFICIENCY, COMPETITION AND CAPITAL FORMATION

VII.

FINAL REGULATORY FLEXIBILITY ACT ANALYSIS

VIII. STATUTORY BASIS AND TEXT OF AMENDMENTS

EXECUTIVE SUMMARY AND BACKGROUND

History and Purpose of Form D

On June 29, 2007, we issued a release in which we proposed for public comment rule

amendments mandating the electronic filing of Form D through the Internet and revisions to that

form.12 In this release, we are adopting the amendments substantially as proposed. As further

described below, companies will be permitted to file Form D information voluntarily through the

Internet when our new Form D electronic filing system becomes available on September 15,

2008 and will be required to file electronically through the Internet on and after March 16, 2009.

Form D serves as the official notice of an offering of securities made without registration

under the Securities Act in reliance on an exemption provided by Regulation D.13 Both public

and nonpublic companies file information using this form.

Regulation D was part of a Commission initiative in the early 1980s to provide a more

coherent pattern of exemptive relief from the registration requirements of the Securities Act, and

particularly to address the capital formation needs of small business.14 At the time, we intended

the Form D filing requirement in Rule 503 of Regulation D to serve an important data collection

objective.15 We expected that the empirical data derived from the Form D filings would enable

We proposed the amendments in Release No. 33-8814 (June 29, 2007) [72 FR 37376]. The comment

letters we received in response to the proposing release were filed in File Number S7-12-07 and are

available at http://www.sec.gov/comments/s7-12-07/s71207.shtml or from our Public Reference Room at

100 F Street, NE, Washington, DC 20549.

Regulation D contains separate exemptions for limited offerings in Rules 504, 505 and 506. Form D also is

to be used by issuers making offerings of securities without registration in reliance on the exemption

contained in Section 4(6) of the Securities Act [15 U.S.C. 77d(6)]. Although we primarily discuss

Regulation D in this release, the revised Form D also will continue to apply to Section 4(6) offerings.

Regardless of the type of offering to which revised Form D applies, it will be required to be filed

electronically after a transition period during which we will allow either paper or electronic filing.

We adopted Form D and Regulation D in 1982. Release No. 33-6389 (Mar. 8, 1982) [47 FR 11251]

(adopting Form D as a replacement for Forms 4(6), 146, 240 and 242). They had been proposed in the

previous year. Release No. 33-6339 (Aug. 7, 1981) [46 FR 41791] (proposing Regulation D and Form D).

We stated in the proposing release for the original Rule 503:

us to better evaluate the effectiveness of Regulation D as a capital raising device and eventually

to further tailor our rules to provide appropriate support for both capital formation, especially as

it relates to small business, and investor protection.16

We modified the requirements relating to Form D in 1986, making Form D a uniform

notification form that could be filed with state securities regulators.17 This effort was undertaken

with the cooperation of the North American Securities Administrators Association (NASAA),

the organization of state securities regulators, as part of the Commission’s efforts to reduce the

costs of capital formation for small business and to promote uniformity between federal and state

securities regulation. At that time, we also eliminated the requirement to amend a Form D filing

for an offering every six months during the course of the offering and the requirement to make a

final Form D filing within 30 days of the final sale in the offering. We left intact the requirement

in Rule 503 to file a Form D notification within 15 days after the first sale of securities in an

offering, leaving that as the sole current explicit requirement for a Form D filing.18

In 1989, we amended the Regulation D exemptions to eliminate the filing of Form D

information as a condition to their availability.19 At that time, we also added Rule 507 to

Regulation D to provide an incentive for issuers to make a Form D filing, even though it was no

“An important purpose of the notice . . . is 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 . . . . Further, the proposed Form would allow the Commission to elicit

information necessary in assessing the effectiveness of Regulation D as a capital raising device for

small businesses.”

Release No. 33-6339 (Aug. 7, 1981) [46 FR 41791, 41799].

Release No. 33-6339 (Aug. 7, 1981) [46 FR 41791, 471799].

Release No. 33-6663 (Oct. 2, 1986) [51 FR 36385].

17 CFR 230.503.

Release No. 33-6825 (Mar. 15, 1989) [54 FR 11369].

longer a condition to the availability of the Regulation D exemptions.20 Specifically, Rule 507

disqualifies an issuer from using a Regulation D exemption in the future if it has been enjoined

by a court for violating Rule 503 by failing to file the information required by Form D.21

Consequently, an issuer has an incentive to make a Form D filing to avoid the possibility that a

court will enjoin the issuer for violating Rule 503 and, as a result, disqualify the issuer from

using a Regulation D exemption in the future.

In 1996, we proposed to eliminate the Form D filing requirement and replace it with an

issuer obligation to complete a Form D and retain it for a period of time.22 At the time, our Task

Force on Disclosure Simplification had suggested that the Commission consider the continued

need for a Form D filing requirement.23 After reviewing comments on the proposal, we

determined that the information collected in Form D filings was still useful to us “in conducting

economic and other analyses of the private placement market” and retained the requirement.24 In

1998, we solicited public comment on, but did not propose, requiring electronic filing of the

Form D notice.25 The public comments generally favored electronic filing in principle but

Id.

On August 3, 2007, we issued a release proposing changes to Regulation D. See Release No. 33-8828

(Aug. 3, 2007) [72 FR 45116]. Among those changes were moving Regulation D’s exemption

disqualification provisions to a new subparagraph (e) of Rule 502 and adopting a new exemption that

would appear in a revised Rule 507 of Regulation D. The Regulation D release also sought additional

comment on the proposals we made in Release No. 33-8766 (Dec. 27, 2006) [72 FR 400] that concerned

accredited investors in certain private pooled investment vehicles. Since we have not adopted and are still

considering the changes proposed in the Regulation D release and the accredited investor changes proposed

in the private pooled investment vehicle release, the new Form D and its implementing rules do not reflect

those changes, as did the Form D in the Form D proposing release. We are still considering the proposed

changes to Form D that would be necessary to reflect adoption of the Regulation D and private pooled

investment vehicle changes, and may adopt the Form D changes if we adopt the Regulation D and private

pooled investment vehicle changes.

Release No. 33-7301 (May 31, 1996) [61 FR 30405].

SEC Task Force on Disclosure Simplification, Final Report 17 (Mar. 5, 1996), available at

http://www.sec.gov/news/studies/smpl.txt.

Release No. 33-7431, at 5 (July 18, 1997) [62 FR 39755, 39756].

Release No. 33-7541 (May 21, 1998) [63 FR 29168].

expressed concern about Form D filers needing to follow the same procedures as then were

required generally for filings through the Commission’s electronic filing system, called the

Electronic Data Gathering, Analysis and Retrieval or “EDGAR” system.

In summary, our previous statements on Form D have suggested that, at the federal

regulatory level, the Form D filing serves two primary purposes:

•

collection of data for use in the Commission’s rulemaking efforts; and

•

enforcement of the federal securities laws, including enforcement of the exemptions in

Regulation D.26

The information submitted in Form D filings also is useful for other purposes. The staffs

of state securities regulators and the Financial Industry Regulatory Authority (FINRA), the

successor to the member firm regulatory functions of the National Association of Securities

Dealers, Inc. and NYSE Regulation, Inc., also use Form D information to enforce securities laws

and the rules of securities self-regulatory organizations. Form D filings also have become a

source of information for investors. Our Web site advises potential investors in Regulation D

offerings to check whether the company making the offering has filed a Form D notice and

advises that “[i]f the company has not filed a Form D, this should alert you that the company

might not be in compliance with the federal securities laws.”27 In addition, the information in

Form D filings serves as a source of business intelligence for commercial information vendors,

as well as for participants in the venture capital, private equity, and other industries that rely on

Regulation D offerings and for competitors of companies that file Form D information.

Academic researchers use Form D information to conduct empirical research aimed at improving

Release No. 33-6389 (Mar. 8, 1982) [47 FR 11251] and Release No. 33-7431 (July 18, 1997) [62 FR

39755].

See http://www.sec.gov/answers/formd.htm.

the workings of these industries.28 Journalists use Form D information to report on

capital-raising in these industries.29

Need to Update Form D and Require Electronic Filing

Currently, much of the information required by Form D appears to be useful and justified

in the interests of investor protection and capital formation.30 It also appears that some useful

information that could be required by Form D is not required currently. On the other hand,

Form D currently requires some information that may no longer be useful. Our staff receives

many inquiries from market participants suggesting that Form D could be clarified and

simplified. Moreover, the absence of an electronic system for filing Form D information

prevents issuers from filing through efficient modern methods and limits the usefulness of the

information collected on Form D. The rules we adopt today address deficiencies in the Form D

data collection requirements and process.

Easing Filing Burdens

Our new Form D rules are intended to ease the costs and burdens of preparing and filing

Form D information. The informational requirements will be streamlined and updated. The

instructions will be clarified and simplified. Issuers will file Form D information electronically

through a new online filing system that will be accessible from any computer with Internet

access. Issuers will provide data by responding to discrete information requests. Appropriate

For a discussion of how academic researchers are using available data on private investments to improve

the workings of the venture capital industry, see A. Ginsberg, Truth, or Consequences: Academic

Researchers are Helping Policy Makers and Practitioners Understand the Problems Facing the Venture

Capital Industry, Innovation Review 8 (Berkley Center for Entrepreneurial Studies, Fall 2002).

See, e.g., R.J. Terry and B. Hammer, NEA Closes $2.5 Billion Fund, Baltimore Bus. Journal, July 10,

2006.

For example, information provided in response to the requirement to check the applicable specified

exemptions from registration claimed by the issuer helps the Commission monitor and better evaluate use

of the claimed exemptions in order to protect investors and facilitate the development of private and limited

markets in which to raise capital.

data entries will be reviewed automatically for proper characters and consistency with entries in

other fields. Data entry fields will be accompanied by links to instructions and other helpful

information. We believe these system features, among others, will help facilitate a relatively

easy-to-use filing process that will deliver accurate information quickly, reliably, and securely.31

The Form D filing will continue to be required within 15 days of an issuer’s first sale in an

offering without Securities Act registration in reliance on one or more of the exemptions

provided in Regulation D, and the rules will clarify when amendments are required. Paper filing

of Form D information will be eliminated after a transition period in which the information may

be filed either electronically through the Internet or in paper.32

Better Public Availability of Form D Information

Requiring the electronic filing of Form D data through the Internet will make the

information filed more readily available to regulators and members of the public.33 The

information will be available on our Web site and, because the online filing system will

automatically capture and tag data items, the data will be interactive and searchable. The

Commission’s public Web site at www.sec.gov will enable users to view the information in an

easy-to-read format, download the information into an existing application, or create an

The new online filing system is discussed in further detail in Part III of this release.

Rule 101 of Regulation S-T, Rule 503 of Regulation D and the description of Form D will mandate

electronic filing of Form D information subject to varied effective dates and temporary provisions, which

together will permit the information to be filed either electronically through the Internet or in paper during

the transition period. The transition period is discussed more fully in Part III.C below. Currently, our rules

require issuers to file five paper copies of the Form D with us by mail or physical delivery to Commission

headquarters. 17 CFR 230.503(a). The Commission received 27,843 Form D filings in its most recently

ended fiscal year, 2007.

Most filings made with us currently are filed electronically through our EDGAR system. We began to

make EDGAR electronic filing mandatory in 1993. Initially, a number of forms – including Form D –

were excluded from mandated electronic filing. Since the launch of the EDGAR system, we have

increased the number of forms that are required to be filed electronically, but Form D has remained a

paper-only filing. It will continue to remain so until the September 15, 2008 effective date of voluntary

electronic filing, when companies will be able to file Form D information either in paper or electronically

until the end of the phase-in period on March 16, 2009. Beginning on that date, Form D information will

be required to be filed electronically through the Internet.

application to use the information.

Unlike information filed with us electronically, paper filings are available from us only in

person in our Public Reference Room or by means of a mail request. We charge a nominal fee

for copies of Form D filings. Some Form D filings are available at higher cost from private

vendors through the Internet and telephone requests.

Federal and State Uniformity and Coordination; One-Stop Filing

For over 20 years, Form D has served as a means to promote federal and state uniformity

and coordination in securities regulation by providing a uniform notification form that can be

filed with the Commission and with state securities regulators.34 The contemplated electronic

filing system for Form D information will continue that tradition and can enhance the utility of

Form D as a means to promote uniformity and coordination between federal and state securities

regulation.

The availability of Form D information filed with us through a searchable electronic

database will enable both federal and state securities regulators to monitor the exempt securities

transaction markets more effectively. The system also will permit improved coordination among

federal and state regulators, which is essential to efficient and effective capital formation through

exempt transactions, especially by smaller companies, and to investor protection. State securities

regulators will be able to access the information on our Web site to learn if new Form D

information of interest to them has been filed.

The system will enhance uniformity and coordination even more if it results in “one-stop

filing,” an approach we and NASAA are exploring. One-stop filing will enable companies to file

According to a unit of the American Bar Association, 48 states, the District of Columbia, Puerto Rico, and

the U.S. Virgin Islands accept filings on Form D. New York prescribes its own Form 99. Florida does not

require any filing for the types of transactions other jurisdictions require to be reported on Form D. See

Report on Blue Sky Survey of the NSMIA Subcommittee, Committee on State Regulation of Securities,

American Bar Association Business Law Section (Feb. 2006).

Form D information both with us and with the states they designate in one electronic transaction.

While that capability will not be available when Form D electronic filing with the Commission

begins, we have been working actively with NASAA to achieve that capability as soon as

practicable. We understand that NASAA is considering establishing its own new electronic

system that would interface with our system and would receive filings and collect fees on behalf

of participating state securities regulators.35 One-stop filing will reduce significantly the costs

and burdens of preparing and filing Form D information with the Commission and with state

securities regulators. This could represent a substantial savings for small businesses and others

filing Form D information.

The commenters that responded to our Form D proposing release that addressed one-stop

filing supported it,36 but some made suggestions and some expressed concerns.37 NASAA stated

that it envisions a system that would direct issuers to a NASAA-hosted Web site that lists the

fees for states a filer selects and enables the filer to make an electronic payment to those states

that would include a modest service charge to defray costs of the site and service.38 NASAA

also stated that it envisions that the electronic payment would be made by means of an electronic

funds transfer or credit card transaction. NASAA further envisions that, after payment, the

system would allow a completed Form D to be filed with the Commission and distributed by the

NASAA-hosted site to the states selected by the filer. Finally, NASAA anticipates that the

The Commission’s electronic filing system will not collect fees on behalf of any states.

One commenter, for example, stated that if one-stop filing were implemented properly, it would reduce

significantly the costs and burdens of preparing and filing Form D with the Commission and the states. See

letter from American Bar Association, Section of Business Law, Committees on Federal Regulation of

Securities and State Regulation of Securities (ABA).

See letters from ABA, Coalition of Private Investment Companies (CPIC), Connecticut Department of

Banking (Connecticut), Managed Funds Association (MFA), Massachusetts Securities Division

(Massachusetts), NASAA and Pennsylvania Securities Commission (Pennsylvania).

See letter from NASAA.

Commission would have no direct involvement or responsibility for the state distribution and

payment system. Two commenters expressed concerns about one-stop filing, relating primarily

to the prospects for timely state adoption39 and, in one case, the use of the electronic system as it

relates to the National Securities Markets Improvement Act of 1996.40 Finally, one commenter

expressed hope that companies would continue to be able to file a Form D notice with a

particular state or states and not with the Commission where the company is comfortable relying

on the Section 4(2) exemption from registration at the federal level and no federal Form D would

be required.41 We have considered these comments and will continue to consider them as we

work with NASAA in an effort to establish one-stop filing.

Improved Collection of Data for Commission Enforcement and

Rulemaking Efforts

The conversion to electronic filing of Form D information through the Internet in an

interactive data format will result in creation of a database of Form D information and allow us

and others to better aggregate data on the private and limited offering securities markets and the

use of the various Regulation D exemptions. Further, the software we will use for the Form D

electronic filings will require that filers address each required data field in the form, thus

reducing incomplete filings. Because of these and other features, our Form D electronic filing

system should assist in our enforcement efforts and enhance our ability to use filed Form D

information. The Form D information database will allow us to better evaluate our exemptive

See letters from ABA and MFA.

See letter from ABA (“There are several aspects of ‘one-stop’ filing about which we have particular

reservations emanating . . . partly from a desire to delineate clear boundaries as a result of federal

preemption under the National Securities Markets Improvement Act of 1996 . . . .”). Section 102(a) of the

National Securities Markets Improvement Act of 1996 (“NSMIA”) [Pub. L. No. 104-290 110 Stat. 3416

(Oct. 11, 1996)] enacted new Section 18 of the Securities Act [15 U.S.C. 77r], which, in part, limits the

authority of the states to regulate offers and sales of securities exempt under “rules or regulations issued

under section 4(2)” of the Act [15 U.S.C. 77d(2)], which includes Rule 506 but not Rules 504 or 505 of

Regulation D.

See letter from ABA.

schemes on a continuing basis in order to facilitate capital formation in a manner consistent with

investor protection. The evaluation could lead to improvements that would result in significant

benefits to companies that rely on the Regulation D exemptions, especially smaller companies,

as well as benefits to investors.

Summary of Adopted Amendments

In sum, the amendments will:

•

mandate electronic filing of Form D information:

o after a phase-in period during which electronic filing will be voluntary; and

o through an online filing system that will

be accessible from any computer with Internet access; and

capture and tag data items, so that the data will be interactive and

viewable in an easy-to-read format; and

•

revise Form D’s information requirements by:

o permitting filers to identify all issuers in a multiple-issuer offering in one

Form D filing;

o deleting the current requirement to identify as “related persons” owners of 10

percent or more of a class of the issuer’s equity securities;

o replacing the current requirement to provide a business description of the

issuer with a requirement to classify the issuer by industry from a

pre-established list of industries;

o requiring revenue range information for the issuer, or net asset value range

information in the case of hedge funds (subject to an option to decline to

disclose);

o requiring more specific information on the registration exemption claimed by

the issuer in the Form D notice as well information on any exclusion claimed

from the definition of “investment company” under the Investment Company

Act of 1940 (“Investment Company Act);42

o requiring reporting of the date of first sale in the offering;

o specifying when amendments to a previously filed Form D notice are required

by reason of mistakes of fact, errors or changes to information in a previously

filed notice or the passage of a calendar year;

o requiring reporting of whether the offering is expected to last over a year;

o limiting reporting of the minimum investment amount accepted in the offering

to the amount accepted from outside investors, so as not to affect employee

stock ownership incentive plans adversely;

o requiring CRD numbers for both individual recipients of sales compensation

and associated broker-dealers;

o replacing the current requirement to disclose information on a wide variety of

expenses and applications of proceeds with a requirement to report expenses

only as to amounts paid for sales commissions and, separately stated, finders’

fees, and report use of proceeds only as to the amount of proceeds used to

make payments to executive officers, directors and promoters;

o replacing the current federal and state signature requirements with a combined

signature requirement that includes an undertaking to provide offering

documents to regulators on request (subject to applicable law), a consent to

15 U.S.C. 80a-1 et seq.

service of process and a certification that the issuer is not disqualified by rule

from relying on an exemption claimed; and

o permitting a limited amount of free writing in “clarification” fields to the

extent necessary to clarify certain information provided.

The principal changes from the proposing release include:

•

permitting free writing to clarify responses to a total of five requests for information;

•

specifying that amendments to a previously filed Form D notice are required only for

material mistakes of fact or errors, and not for any mistake of fact;

•

providing additional exceptions from changes that otherwise would require

amendments to a previously filed Form D notice;

•

requiring an annual amendment to a Form D notice only if an entire calendar year has

passed since the last filing, and not every year between January 1 and February 14;

and

•

requiring expense and use of proceeds information on amounts paid for sales

commissions, finders’ fees, and payments to executive officers, directors and

promoters, instead of eliminating those requirements.

II.

DISCUSSION OF AMENDMENTS

As noted above, we believe the revisions we adopt today will have a positive effect in

many areas of interest to the Commission, state securities regulators, investors, and companies

that rely on Regulation D exemptions. The revisions generally involve simplifying Form D,

easing the burdens of complying with the requirements of the form, and modernizing the

information capture process.

For each offering of securities that is made without Securities Act registration in reliance

on a claimed exemption under Regulation D, the issuer must file the information required by

Form D with the Commission no later than 15 days after the first sale of securities. The form

calls for issuers to provide basic identifying information and fundamental information about the

offering. Some of the requirements of Form D have become outdated with the passage of time

since the Commission adopted them. Further, some of the current form’s requirements and

instructions could be clarified and made less burdensome. The revisions we adopt today address

these issues. In addition, the move to electronic filing necessitates several modifications. We

generally are adopting the amendments substantially as proposed. Where we are not, we so note

below.

Amendments to Form D Content Requirements

Currently, Form D requires presentation of preliminary and other information required by

five sections designated “A” through “E.” The revisions organize the information requirements

around 16 numbered “items” or categories of information. Instructions at the end of the form

explain the requirements for each item. On the online form, terms and items at the front of the

form will be linked to the instructions at the back, which will be available immediately by

clicking on a particular term or item. In this regard, we are adding to the General Instructions a

sentence that provides that terms used but not defined in the form that are defined in Rule 40543

or Rule 50144 have the meanings given to them in those rules. The sentence will clarify the

application of Rule 501 and, to the extent it defines the term “promoter,” Rule 405.45

Basic Identifying and Contact Information

New Form D generally carries over the requirements from current Form D for basic

identifying and contact information and information about related persons, but modifies or omits

17 CFR 230.405.

17 CFR 230.501.

One commenter expressly supported defining the term “promoter” in the instructions. See letter from

Connecticut.

some of these types of requirements. The requirements carried over, however, are restructured to

reflect the electronic character of the filing.

Item 1, similar to current Form D, requires basic identifying information, such as the

name of the issuer of the securities, any previous names, the type of legal entity and the issuer’s

year and place of incorporation or organization.46 We are revising the form to provide

specifically for the identification of multiple issuers in multiple-issuer offerings. Form D

currently does not provide for this, sometimes raising questions as to how multiple-issuer

offerings should be reported.47 Although we proposed to add to the form a requirement to supply

the issuer’s Commission file number, if any, we have decided not to adopt that requirement. We

believe requiring the Commission file number would add a burden but would provide limited

benefits because most Form D filers are nonpublic companies and, as a result, would not have a

Commission file number. Furthermore, it is possible to use other required information to aid in

identifying issuers.

With regard to identifying issuers, two commenters responded to our solicitation of

comment on whether Form D should require CUSIP numbers and trading symbols. One

commenter favored adding such a requirement in order to help parse information and facilitate

automating filing notices.48 The other commenter, however, opposed adding the requirement as

burdensome to issuers and resulting in information that is not useful.49 We believe that the

Issuers will specify their legal entity type (e.g., corporation or limited partnership).

Currently, the Form D instructions do not specify whether all issuers in a multiple-issuer offering can be

listed in the same Form D notice or whether each issuer must submit essentially the same notice. In this

situation, the staff currently advises each issuer to submit a separate Form D notice because the filings are

retrievable in our filing system only by reference to the name of one issuer. The changes clarify the

requirements of this item and eliminate the burden on issuers to file what are essentially duplicate notices in

order to comply with the requirement to file Form D information. The new online filing system will

support multiple-issuer filings. As a result, all issuers easily can be identified in a single filing.

See letter from Pink Sheets LLC.

See letter from ABA.

system’s data tagging features will facilitate parsing information and obtaining filing notices to

such an extent that the burden of requiring CUSIP numbers and trading symbols would not be

justified by the benefits to be gained.

In response to a comment letter,50 we have provided a place to identify an issuer as “yet

to be formed” instead of providing a year of organization. The current Form D provides this

alternative.

Two commenters expressed concern as to whether a filer would be able to specify its

particular foreign place of incorporation or organization rather than just be able to indicate that

the location is foreign.51 We confirm that the online filing system will enable issuers to specify

particular foreign jurisdictions.

Item 2, similar to current Form D, requires filers to provide place of business and

telephone contact information.52

The revised form will include instructions to clarify that post office box numbers and

“care of” addresses are not acceptable as place of business information. One commenter asked

that an issuer be permitted to provide a “care of” address because mail might not otherwise be

delivered to the issuer where, for example, the issuer operates out of another entity’s office and a

separate address listing is precluded by lease restrictions or practical concerns.53 We

acknowledge the concern, but reiterate our statement in the proposing release that this

information is not collected for mailing purposes. The purpose of this information is to allow

See id.

See letters from ABA and Connecticut.

Some information of the type that Items 2 and 3 require will automatically appear in appropriate places

when the filer accesses the new online filing system. The system will replicate information provided by the

filer in the course of obtaining the identifying information needed to access the new online filing system or

in updating such information. The filer will be able to make changes to such information.

See letter from ABA.

securities enforcement authorities to determine the location of the issuer’s operations and

personnel responsible for the offering. Post office box numbers and “care of” addresses do not

provide this information. In instances in which lease restrictions or other practical concerns

arise, the issuer must make arrangements to provide acceptable place of business and contact

information.

The revised form will differ from the proposed form as to place of business and telephone

contact information. The proposed version would have required place of business and telephone

contact information in a multiple-issuer offering only for the primary issuer and would not have

permitted such information for the other issuers. In the proposing release, we reasoned that

issuers in multiple-issuer transactions typically have the same place of business, and we

generally do not need more than one address to contact the responsible personnel for

enforcement purposes. In this regard and upon further consideration after reviewing the public

comment letters, we have decided that the revised form will differ in one respect – it will permit,

but not require, such information for issuers other than the primary issuer in a multiple-issuer

offering. In so revising the form, we believe we address the concerns expressed by two

commenters. One commenter asked that we require such information for all the issuers in

multiple-issuer offerings to accommodate states that currently require a separate Form D from

every issuer in a multi-issuer offering, or alternatively, that we require a separate Form D from

each of the issuers.54 The other commenter asked that we permit multiple issuers to provide

separate addresses to avoid the implication that issuers are affiliated when they are not.55 We

believe these concerns are adequately addressed by permitting all issuers to provide the

information because that enables issuers that are filing with states that otherwise would require

See letter from Pennsylvania.

See letter from ABA.

separate Forms D to include the information if they wish to avoid filing the separate forms, if

permitted by state law.

One commenter asked that Form D require the name of a contact person for the primary

issuer and any other issuers in a multiple-issuer offering.56 The commenter stated that contact

might be necessary in connection with the filing itself or in regard to litigation or enforcement or

for other purposes. We believe, however, that address and telephone number information would

be sufficient to make an initial contact and that it should be possible to proceed from that point to

locate the most appropriate person based on the nature of the contact.

Item 3, similar to current Form D, requires information about related persons (executive

officers, directors, and promoters).57 As proposed, however, we are deleting the current

requirement that issuers identify as “related persons” owners of 10 percent or more of a class of

their equity securities.58 In so proposing, we reasoned that

•

investors should continue to have access to this information, if it is material, in the

private placement memorandum customarily supplied to them or in other information

made available through the issuer;59

See letter from NASAA.

The instructions to Item 3 clarify that disclosure will be required of each person who has functioned as a

promoter of the issuer within the past five years of the later of the first sale of securities or the date upon

which the Form D filing was required to be made.

We also are revising Item 3 to enable an issuer to clarify its response. This change is discussed more fully

in Part II.C below.

Under some circumstances, an issuer must provide, rather than merely make available, beneficial holder

information. For example, an issuer that offers securities to non-accredited investors without registration

under the Securities Act in reliance on an exemption provided by Rule 505 [17 CFR 230.505] or 506 [17

CFR 230.506] must provide beneficial holder information under the circumstances specified by Rule

502(b) [17 CFR 230.502(b)].

•

we believe we can collect sufficient information to satisfy the regulatory objectives of

Form D by requiring only the identification of executive officers, directors, and

promoters; and

•

issuers that are not reporting companies have raised privacy concerns with respect to

the requirement to identify 10 percent equity owners who are not executive officers,

directors, or promoters because they do not already have to disclose this information,

and the widespread availability of the information on our Web site may raise

additional privacy concerns for these companies as they seek to raise capital through

a private offering.60

Two commenters explicitly supported the proposal to delete the requirement to report

publicly the names and addresses of 10 percent or greater equity holders.61 Both commenters

cited privacy concerns. One of the commenters also stated that individual investors would have

access to the information to the extent relevant and omitting the information would save time and

eliminate filing burdens.62

Four commenters objected to the proposal to delete the requirement to disclose 10

percent or greater holders, citing the usefulness of the information and, in some cases,

questioning the validity of privacy concerns.63 These commenters asserted, in essence, that the

information is useful to:

As we stated in the proposing release, from time to time issuers have asked us to grant confidential

treatment to this information under Securities Act Rule 406 [17 CFR 230.406], but we have denied such

requests consistently because the information currently is required by Form D. We estimated in the

proposing release that about 95% of the companies filing Form D notices in 2006 were private companies,

which frequently are not required to make public the names of their equity owners in accordance with the

laws of the state or other jurisdiction of their organization.

See letters from ABA and MFA.

See letter from ABA.

See letters from Chris Evans (claiming to represent the views of the vast majority of news organizations),

Massachusetts, NASAA and Pennsylvania.

•

state regulators because, for example, it enables them to determine whether the

specified persons are disqualified from conducting an offering or have an

enforcement history that warrants additional information and disclosure;64

•

the general public because it reveals the investment activity of public sector entities;65

and

•

investors because this degree of ownership control is material and it cannot be

assumed this information will be provided even if material, especially where

disclosure or fraud may be an issue.66

We have considered the differing views on whether to retain the requirement to report

publicly the names and addresses of 10 percent or greater equity holders. We still believe it is

appropriate to delete the requirement for the reasons discussed above and in the proposing

release. In this regard, we note that Item 3 will continue the current Form D requirement to

report executive officers and directors based on the functions people perform rather than their

titles. Issuers are required to report the names and addresses of promoters whether they act

directly or indirectly.67 We have modified the instructions to Item 3 slightly from the language

proposed to clarify these requirements. As a result, the requirements should result in public

reporting of all of a company’s principal policymakers.

As proposed, we are deleting the requirement that issuers provide the name of the

offering in Form D if the offering has a name. In so proposing, we stated that naming offerings

See letters citing one or more of these examples from Massachusetts, NASAA and Pennsylvania.

See letter from Chris Evans.

See letters from Massachusetts and NASAA.

The words “directly or indirectly” are used in the applicable definition of the term “promoter” in Rule 405.

reported on Form D is not as common today as it was before the 1986 tax reforms,68 when the

current Form D requirement was adopted. We understand that some issuers have found this

requirement to be unclear. For these reasons, we are deleting the requirement.

Additional Information About Issuer

Item 4 of the new Form D requires issuers to identify their industry group from a

specified list. The requirement to provide industry group information replaces the current

requirement in Form D to provide a description of the issuer’s business.69 We believe simply

selecting an industry group classification from a pre-established list is less burdensome for

issuers and more useful for the regulatory purposes underlying the Form D filing requirement.

The industry group classifications will provide us better, and more easily retrievable, information

about industries and offerings where we may have identified policy issues.70 As proposed, if a

company selects the “Pooled Investment Fund” option, pop-up or other data fields will require

the issuer also to select from among lower level options designating a specific type of pooled

investment fund and to select between “yes” and “no” as to whether the issuer is registered as an

investment company under the Investment Company Act.

We proposed that Item 5 would require all issuers, regardless of industry group, to either

include revenue range information in the Form D filing or choose the “Decline to Disclose”

option, which might be used if a private company considered its revenue range to be confidential

Tax Reform Act of 1986, Pub. L. 99-514, 100 Stat. 2085 (Oct. 22, 1986).

The industry group list in the new form differs from the one in the proposing release primarily in two ways.

First, the new form’s list provides for additional choices under the heading “Energy” in order to reduce the

number of issuers that would need to choose the less helpful alternative of “Other Energy.” Second, the

new form’s list omits the specific choices that had been under the heading “Business Services” because we

believe greater specificity is not necessary for issuers in that industry group.

The instruction to Item 4 provides that an issuer or issuers that can be categorized in more than one

industry group should be categorized based on the industry group that most accurately reflects the use of

the bulk of the offering proceeds. The instruction also provides that, for purposes of responding to Item 4,

the issuer should “use the ordinary dictionary and commonly understood meanings of the terms identifying

the industry groups.”

information.71 We further proposed that, if the business were not intended to produce revenue,

such as a fund that seeks asset appreciation, it could select the “Not Applicable” option. We

continue to believe that this information will help us to determine the types and sizes of most

issuers that rely on the Regulation D and Section 4(6) exemptions. For instance, as noted in the

proposing release, this information will increase significantly the effectiveness of the data

collected as a tool for assessing the use of the Regulation D exemptions for small businesses and

other different sizes of issuers.

We are adopting Item 5, as proposed, except as it will apply to issuers that classify

themselves in Item 4 in the industry group “hedge funds” or as pooled investment funds other

than venture capital and private equity funds. In order to obtain information on the size of these

issuers, Item 5 will request them to provide aggregate net asset value range information.72

Consistent with the revenue range requirement applicable to other issuers, however, these issuers

will be given the option to “Decline to Disclose” that information or to specify that such

information is “Not Applicable.” This addition responds to a comment letter stating that “assets

under management” is a more meaningful measure of the size of such issuers than revenues.73

We believe we can obtain adequate size information about venture capital and private equity

funds from the information on the total offering amount supplied in response to Item 13, because

these types of funds typically do not engage in continuous offerings of indefinite amount, unlike

hedge funds and some other types of pooled investment funds.

The revenue range will be for the most recently completed fiscal year. Where an issuer has been in

existence for less than a year, it will identify its revenues to date.

The aggregate net asset value will be requested as of the most recent practicable date.

See letter from MFA. Similarly, in commenting on Rel. No. 33-8766 (Dec. 27, 2006) [72 FR 399], another

commenter stated that it believed it would be useful to the Commission and investors if Form D would

require information on pooled investment funds’ assets under management. See letter from CPIC.

One commenter suggested that we eliminate the “Decline to Disclose” option from the

proposed revenue range requirement74 and another suggested that we eliminate the revenue range

requirement entirely.75 The commenter that suggested we eliminate the “Decline to Disclose”

option reasoned that elimination would be necessary to make the requirement effective as an

information collection tool. The commenter that suggested that we eliminate the requirement

entirely reasoned that many companies will opt out, reducing the integrity of the information

collected and possibly causing people to draw negative inferences about the company. The

commenter went on to state that revenue information is not necessary for a notice filing, and

requiring it is inconsistent with the prohibition on general solicitation and general advertising

that applies to many offerings required to be reported on Form D.76 We recognize that adopting

the “Decline to Disclose” option will reduce the amount of information that we receive. We also

recognize, however, that some companies may regard this type of information as confidential.

Weighing these countervailing considerations in light of the importance of the information, we

believe that, on balance, it is best to provide filing companies the option to decline to disclose

their revenue range. Commenters did not specify any negative consequences that a company

may suffer if it chooses to decline to disclose its revenue range. We believe the information will

be useful for the reasons described above. Finally, we believe that revenue information in range

form would not likely itself, or in combination with the other information the new form requires,

raise general solicitation or general advertising issues.

See letter from NASAA.

See letter from ABA.

See id. The ABA also stated that the form should not require asset value information for essentially the

same reasons. A third commenter asked whether most private companies would decline to disclose, “thus

calling into question the purpose of [the item].” The commenter did not suggest deleting the option to

decline or deleting the entire requirement. See letter from Connecticut.

Identification of Claimed Exemptions and Exclusions

Item 6 requires the issuer to identify the exemption or exemptions being claimed for the

offering, from among Rule 504’s77 paragraphs and subparagraphs, Rule 505, Rule 506, and

Section 4(6), as applicable. This requirement, in general, is carried over from the current

Form D requirement with added specificity, requiring the issuer to identify the specific paragraph

or subparagraph of any Rule 504 exemption being claimed as well as any specific paragraph of

Investment Company Act Section 3(c)78 that the issuer claims for an exclusion from the

definition of “investment company” under the Investment Company Act.79 We are requiring this

increased level of specificity and additional type of information in order to assist our

policymaking and rulemaking efforts in various areas. Identification of a claimed exemption or

exclusion often is key to analysis of the appropriateness of the claim. State securities regulators

also use this information to determine the extent of their jurisdiction over the offering under

NSMIA. Unlike the requirement in current Form D, however, Item 6 does not enable the issuer

to check a box to indicate a claim to the Uniform Limited Offering Exemption (ULOE) from

state securities law requirements. We believe that the ULOE box causes confusion and burdens

for companies completing Form Ds without resulting in a significant amount of useful

information. Most, if not all, companies claiming a ULOE exemption also will check the Rule

505 box, because Rule 505 is the Commission’s companion exemption to the ULOE

exemption.80 Similarly, revised Form D omits all other references to ULOE and the provisions

17 CFR 230.504.

15 U.S.C. 80a-3(c).

The issuer will be able to select all the exclusions on which it relies. Regulation D provides an exemption

from the Securities Act and not an exclusion from the definition of the term “investment company” under

the Investment Company Act. Some companies that use a Regulation D exemption, however, also are

excluded from the definition of investment company under the Investment Company Act.

See Release No. 33-7644 (Feb. 25, 1999) [64 FR 11090].

that, in general, require specified information on a state-by-state basis in an appendix to the form

and require specified representations and undertakings. We believe that this information is

burdensome to provide without sufficient benefits in terms of furthering the purposes of Form

D.81

One commenter supported our proposal to delete the appendix portion of current Form D,

asserting that it is burdensome and without sufficient benefits, but two other commenters

objected.82 Another commenter, without expressly addressing the appendix, suggested that the

form require related information.83 One commenter objected to deleting any part of the

appendix, claiming that the information required provides macro-level ownership information

valuable to the Commission and other regulators in analyzing fund flows and capital sources in

an otherwise opaque area.84 One commenter stated that it did not advocate retaining the

appendix in its current form but that the appendix requires information such as the amount of

securities sold by state and the number and type of investors (accredited/non-accredited) that is

useful to state regulators for enforcement purposes.85 Finally, one commenter offered the related

suggestion that the form should require issuers to specify the states in which they propose to

offer or sell securities because that would provide useful information to state regulators in their

efforts to uncover notice filing violations and other problems.86

We believe the burden that would be imposed by a requirement to provide all information

called for by the appendix or similar information is not justified by the value of the information

One commenter expressed general agreement with our views regarding ULOE. See letter from ABA.

See letters from ABA, Chris Evans and Connecticut, respectively.

See letter from Massachusetts.

See letters from Chris Evans.

See letter from Connecticut.

See letter from Massachusetts.

in furthering the purposes of Form D. In this regard, under appropriate circumstances, state

regulators still would be able to require this type of information.87 At present, the Commission

does not require filing of information called for by the appendix, and most Form D filers do not

file the appendix with us. They file appendix information only with those states that require it.

We assume that states that require filing of appendix information that they are entitled to require

may continue to do so. We also assume that the one-stop filing system that we are exploring

with NASAA may facilitate the filing of this information with state regulators.

Indication of Type of Filing

General Requirements

New Item 7 carries over the current Form D requirement to indicate whether the filing is

a new filing or an amendment. Including identification of a filing as new or an amendment is

appropriate because the form permits amendments and issuers may have valid reasons to wish to

update or correct information previously provided in a Form D filing. In addition, as discussed

in the section immediately below, we intend to clarify the circumstances where amendments are

required. As proposed, Item 7 requires that a new filing specify the date of first sale or indicate

that the first sale has yet to occur. We believe that this information will be useful to regulators

because it relates to the timeliness of the filing and helps to establish a context in which to

evaluate other information provided.

Item 7 will differ from what we proposed in that it will not permit an issuer to designate

the states to which the Form D is directed. As more fully discussed above, our system will not

We note that, even where NSMIA applies, Section 18(c)(2)(A) of the Securities Act [15 U.S.C.

77r(c)(2)(A)] generally provides as to the offer and sale of non-exchange-listed securities that nothing

under Section 18 prohibits “any State from requiring the filing of any document filed with the Commission

[under the Securities Act], together with annual or periodic reports of the value of securities sold or offered

to be sold to persons located in the State (if such sales data is not included in documents filed with the

Commission), solely for notice purposes and the assessment of any fee, together with a consent to service

of process and any required fee.”

be capable of receiving filings directed to specific states when new Form D becomes effective

for federal purposes, although we have been working actively with NASAA in an effort to

achieve that capability.88 In the interim, we expect that filers will direct filings to the states by

mail, overnight delivery, fax or whatever means are permitted or required by the respective

states. We expect that some states may permit issuers to file a printed copy of a new Form D

filed with us.

One commenter objected to adding the requirement to report date of first sale

information.89 The commenter asserted that the definition of “first sale” is unclear and a failure

to file in the timeframe Form D requires may be used by states to extract late filing penalties or

attempt to circumvent the limits NSMIA imposes by claiming that an exemption under Rule 506

is unavailable due to non-compliance with the filing requirement of Rule 503(a), even though

filing a Form D is not a condition to an exemption under Regulation D. We believe, however,

that providing the date of first sale involves little burden and that it is not the reporting of the

date that underlies the state-related concerns but rather the date itself in relation to the date of

filing.

Two commenters objected to using the date of first sale as the trigger for the Form D

filing deadline.90 Both commenters based their objection on the Commission staff’s previously

stated view that, solely for purposes of triggering the Form D filing requirement, in a

minimum-maximum offering where the subscription funds are held in escrow pending receipt of

We had proposed to permit issuers to designate the states to which the Form D is directed, on the

assumption that some states would adopt one-stop filing and allow filings that specify that they are directed

to those states to constitute filings with those states.

See letter from ABA.

See letters from ABA and Society of Corporate Secretaries and Governance Professionals (SCSGP).

minimum subscriptions, the date of first sale occurs when the first subscription agreement is

received and first funds are deposited into escrow.91

We believe that the cited interpretation of the date of first sale is correct for purposes of

triggering the Form D filing requirement. We believe the interpretation appropriately focuses on

when the purchaser makes an investment decision and commits to purchase the securities

offered. We also believe that it can be useful for regulatory purposes if an issuer files a Form D

before an offering closes to enable regulators to consider the information provided before the

offering process ends. If regulatory action is appropriate, earlier consideration potentially could

cause it to be more timely and effective.92 We have added language to the instructions to Form

D clarifying this meaning of date of first sale in accordance with this interpretation. Specifically,

the instructions will state that the date of first sale is the date on which the first investor is

irrevocably contractually committed to invest, which, depending on the terms and conditions of

the contract, could be the date on which the issuer receives the investor’s subscription agreement

or check.

Amendment of Previously Filed Form D

As proposed, we are clarifying Form D to address when, how, and why an amendment to

a Form D may or must be filed. Those issues are not addressed expressly in the current form.

While both Rule 503 and the instructions to the current Form D discuss the information that is

required when an amendment is filed,93 neither explicitly requires the filing of an amendment. In

See Release No. 33-6455, at Question 82 (Mar. 4, 1983) [48 FR 10045].

For example, one commenter noted that state regulators use Form D information for screening purposes to

help prevent offerings by those subject to disqualification and aid enforcement efforts. See letter from

NASAA.

Current Rule 503(d) states that amendments to Form D “need only report the issuer’s name and the

information required by Part C and any material change in the facts from those set forth in Parts A and B.”

The current instructions to Form D set forth the information required in an amendment as only “the name

of the issuer and offering, any changes thereto, the information requested in Part C, and any material

changes from the information previously supplied in Parts A and B.”

certain offerings and situations, however, an issuer may have made a material mistake of fact or

committed another material error in the filed Form D. Situations also arise where changes occur

and the initially filed Form D may not be an accurate expression of the current facts in an

ongoing offering. Our staff currently interprets Rule 503 and the Form D instructions to require

amendments in ongoing offerings where there has been a material change in information filed

about the offering and where basic information previously submitted about the issuer has

materially changed.

The staff has received questions regarding offerings of extended duration, and how to

determine whether and how to file Form D amendments. For example, when offerings are

expected to continue for an extended period, the Commission’s staff often is asked to assist

issuers in determining how to calculate an offering’s aggregate offering price and when an

amendment to the Form D should be filed. The staff’s practice in this regard has been to advise

issuers to use a good faith and reasonable belief standard to calculate the aggregate offering price

and to amend the Form D annually.

We are revising Rule 503 and the instructions to and description of Form D to require

amendments to the Form D notice in the following three instances only:

•

to correct a material mistake of fact or error in the previously filed notice (as soon as

practicable after discovery of the mistake or error);

•

to reflect a change in the information provided in a previously filed notice (as soon as

practicable after the change), except that no amendment is required to reflect a change

that occurs after the offering terminates or a change that occurs solely in the

following information:94

o the address or relationship to the issuer of a related person identified in

response to Item 3 of Form D;

o an issuer’s revenues or aggregate net asset value;

o the minimum investment amount, if the change is an increase, or if the

change, together with all other changes in that amount since the previously

filed notice, does not result in a decrease of more than 10%;

o any address or state(s) of solicitation shown in response to Item 12 of Form D;

o the total offering amount, if the change is a decrease, or if the change, together

with all other changes in that amount since the previously filed notice, does

not result in an increase of more than 10%;

o the amount of securities sold in the offering or the amount remaining to be

sold;

o the number of non-accredited investors who have invested in the offering, as

long as the change does not increase the number to more than 35;

o the total number of investors who have invested in the offering;

o the amount of sales commissions, finders’ fees or use of proceeds for

payments to executive officers, directors or promoters, if the change is a

decrease, or if the change, together with all other changes in that amount since

the previously filed notice, does not result in an increase of more than 10%;

and

We believe the specified changes should not require an amendment because the burden would not justify

the resulting benefits in terms of furthering the purposes of the form. Consequently, it is not necessary to

report them for Form D to serve its primary function as a notice of an exempt offering.

•

annually, on or before the first anniversary of the filing of the Form D or the filing of

the most recent amendment, if the offering is continuing at that time.

Rule 503 also will require an issuer that files an amendment to provide current

information in response to all requirements of Form D regardless of why the amendment is filed.

We believe it will be relatively easy to provide such current information in most instances due to

the form’s streamlined information requirements, the likelihood that much of the information

would not require change, and the fact that the new online filing system will make available to

the issuer the version of the Form D to be amended to enable the issuer to respond only to the

changed items.

The amendment requirements differ from what we proposed in that they will

•

provide expressly that a mistake of fact or error in the information provided in a

previously filed notice only requires an amendment when material;

•

provide exceptions for changes in

o the address or relationship to the issuer of a related person identified in

response to Item 3 of Form D;

o an issuer’s aggregate net asset value;95

o the minimum investment amount, if the change is an increase, or if the

change, together with all other changes in that amount since the previously

filed notice, does not result in a decrease of more than 10%;

o any address or state(s) of solicitation shown in response to Item 12 of Form D;

o the total offering amount, if the change is a decrease; 96

We had proposed an exception for changes in issuer size as measured by revenue consistent with proposed

Item 5’s requesting that issuers provide their revenue range. We are adopting an exception for changes in

issuer size that relates to both revenue and aggregate net asset value to conform the exception to new Item

5. As previously discussed, new Item 5, as adopted, requests that issuers provide either their revenue range

or aggregate net asset value, depending on their industry group.

o the amount of securities in the offering that remain to be sold;97

o the total number of investors who have invested in the offering;98

o the amount of sales commissions, finders’ fees or use of proceeds for

payments to executive officers, directors or promoters, if the change is a

decrease, or if the change, together with all other changes in that amount since

the previously filed notice, does not result in an increase of more than 10%;99

•

require amendments to report the addition of executive officers, directors and

promoters in all offerings, and not provide an exception from this requirement for

offerings that last more than a year in some circumstances; and

•

prescribe that annual amendments are due on or before the first anniversary of the

most recently filed Form D filing or amendment, if the offering is continuing at that

time, rather than each year between January 1 and February 14.

We have expressly subjected the mistake of fact or error in information amendment

requirements to a materiality standard in response to comments received to make explicit what

We had proposed an exception for a change in the total offering amount, if the change, together with all

other changes in that amount since the previously filed notice of sales on Form D, would not result in an

increase of more than 10%. We believe that decreases in the total offering amount need not trigger an

amendment requirement.

We had proposed an exception for a change in the amount of securities sold in the offering. An exception

is similarly appropriate for the amount of securities that remain to be sold because that amount varies

inversely with changes in the amount of securities sold.

We had proposed an exception for changes in the number of accredited investors who have invested in the

offering consistent with proposed Item 14’s requiring a report of the number of accredited investors who

have invested in the offering. We are adopting the exception relating to the total number of investors rather

than the number of accredited investors to conform the exception to new Item 14. New Item 14, as

adopted, requires disclosure of the total number of investors rather than the number of accredited investors

who have invested in the offering.

We believe that the additional specified exceptions should not require an amendment because,

similar to the other exceptions proposed and adopted, the burden would not justify the resulting benefits in

terms of furthering the purposes of the form. Consequently, it is not necessary to report them for Form D

to serve its primary function as a notice of an exempt offering.

we intended.100 We have required amendments upon the addition of related persons (executive

officers, directors and promoters) without exception in order to limit the ability to circumvent the

purpose of the Form D notice. We have adopted the one calendar year amendment requirement

to clarify the due date in response to a comment101 and provide flexibility.102

One commenter supported the amendment provisions as proposed,103 one commenter

objected to the requirement that every amendment contain current information,104 one

commenter both objected to the annual amendment requirement and suggested changes in the

other amendment requirements105 and one commenter said that it would be helpful to state

regulators to add a requirement to file an amendment to report termination of offerings that last

over a year.106

The commenter that objected to the requirement to provide current information in every

amendment stated that the requirement seems unnecessary, might cause inadvertent errors in

re-entering unchanged information and make it difficult to determine what had changed.107 The

100

Three commenters suggested that we clarify that only a material mistake of fact or change can trigger an

amendment requirement. See letters from ABA, MFA and SCSGP. We did not add a materiality reference

to the amendment provision regarding changes in the information reported. We believe that such a

reference would be inappropriate because any changes other than those specified as not requiring an

amendment would be information regulators need to perform their regulatory functions.

101

One commenter stated that the due date for the proposed annual amendment was unclear. See letter from

ABA.

102

The omission of a January/February filing window from the adopted annual amendment requirement will

provide flexibility by, for example, permitting a series of issuers to be placed on the same administratively

convenient annual amendment schedule in which they file outside of the January/February window

proposed to be mandated.

103

The commenter stated that the amendment requirements would ensure that available information would be

relatively current and enable state regulators to screen, and provide responses to the public regarding,

offerings conducted in their states more effectively. See letter from NASAA.

104

See letter from SCSGP.

105

See letter from ABA.

106

See letter from Connecticut.

107

See letter from ABA.

commenter suggested that, instead, amendments only should require information that has

changed materially. As discussed above, we believe it will be relatively easy to provide such

current information in most instances due to the form’s streamlined information requirements,

the likelihood that much of the information would not require change, and the fact that the new

online filing system will make available to the issuer the version of the Form D to be amended to

enable the issuer to respond only to the changed items. We also believe that it will be relatively

easy to determine what has changed due to the limited amount of information required by the

form and the ability to use the data tagging features to help determine changes. We believe that

presentation only of those items that have changed materially would result in information being

presented out of context and might transform a relatively light burden on the issuer to a relatively

heavier burden on each user who accesses the information.

The commenter that objected to the annual amendment requirement did so primarily

based on the commenter’s assertions that it would be inconsistent with efforts to ease burdens

and simplify. We believe the annual amendment requirement viewed in the context of the online

filing system generally is consistent with efforts to ease burdens and simplify. We believe it will

be relatively easy to file annual amendments in most instances for the reasons discussed above.

We also believe that the express annual amendment requirement is clear and, to that extent, will

serve to simplify the form.

The commenter that objected to the annual amendment requirement also stated that

amendments should not be required when an issuer adds recipients of sales compensation or

related persons.108 Consistent with the requirements of the current form, we believe that

requiring the names of additional recipients of sales compensation and related persons is

108

See letter from ABA.

appropriate for a notice form and provides important information about the offering for

regulatory purposes.

The same commenter essentially asked that that the proposed exception from the

amendment requirements for additions of related persons be broadened.109 As proposed, in

offerings that last more than a year, a change in information on related persons would not trigger

an amendment, if the change was due solely to the filling of a vacant position upon the death or

departure in the ordinary course of business of the previous occupant of the position.110 Upon

further consideration, we believe the exception for offerings that last more than a year may

permit easy circumvention of the intent of the requirement. As adopted, the rule amendments

will require a Form D amendment upon the addition of any related person, but will not require

amendments to report changes of addresses of related persons.

The same commenter stated that an amendment should not be needed for an issuer to file

with an additional state or states during an ongoing offering.111 The amendment provisions

would not require an amendment solely because an issuer wished to file with an additional state

or states.

Finally, one commenter suggested that the new annual and other amendment rules not

apply to paper Form D filings, asserting that, as to such filings, filing amendments would be

overly burdensome because there would be no existing electronic version on the system to use as

a starting point.112 As further discussed below, there will be a period during which the

amendments we adopt in this release would be effective except that electronic filing would be

109

See letter from ABA.

110

For example, a change in information regarding related persons that occurs in connection with a change a

change in control would not be in the ordinary course of business.

111

See letter from ABA.

112

Id.

optional rather than mandatory for a period of time after the electronic system becomes

available. During that time, in general, an issuer will be able to file new Form D in either paper

or electronic format or file current Form D in paper format. Also during that time, the new

annual and other amendment rules will apply to all new Form D filings regardless of format and

the current amendment requirements will apply to all current Form D filings in paper format.

We believe that during the transition period this approach will provide adequate flexibility to

issuers and consistency between the current and new versions of Form D and their respective

amendment requirements. Once the transition period ends, all federal filings will be required to

be on new Form D in electronic format and, accordingly, the new amendment rules will apply.

We believe that applying the new amendment rules at that time even as to prior filings of current

Form D in paper format would not create a significant additional burden due to the lack of a

previous electronic version on the system and that confusion likely would result from the lack of

a uniform approach to post-transition period amendments that itself could impose a burden.

Information About Offering

Items 8 through 16 will require factual information about the offering itself. Most of the

information sought currently is required by Sections B and C of Form D.

Duration of Offering. Item 8 will require the issuer to indicate whether it intends that the

offering will last over a year. Such information currently is not specifically required by Form D.

The absence of an information requirement of this type has presented compliance questions

because regulators may not know whether an offering may span an extended period of time

based on the information currently required by Form D.

Type of Securities Offered. Item 9 will carry over the current requirement to specify the

type of securities being offered, such as debt or equity, with additional categories of securities

added. Some of the additional categories will provide more clarity. The rest of the additional

categories will identify types of securities, the specification of which we believe will help

facilitate our rulemaking efforts.113 The issuer will be required to specify all categories that

apply to the securities that are the subject of the exemption(s) specified in response to Item 6.

Business Combination Transaction. Form D currently requires that the issuer indicate

only whether the offering is an exchange offer. New Item 10 will require the issuer to indicate

whether the offering is being made in connection with a business combination such as an

exchange (tender) offer, a merger or acquisition, regardless of the type of offering.114 We

believe that, for purposes of Form D, it is important to identify whether an offering is being

made in connection with a business combination transaction, whether structured as an exchange

or in some other manner, because such transactions sometimes give rise to policy concerns.115

Minimum Investment Amount. Item 11 will, as proposed, carry over the requirement in

Form D to specify the minimum investment amount per investor. We are maintaining this

requirement because offerings that have low minimum investment amounts have presented

particular enforcement challenges in the past. We have changed Item 11 from what we proposed

to require specification of the minimum investment for outside investors only, so as not to affect

employee stock ownership incentive plans adversely. Investors will be considered outside

investors if they are not employees, officers, directors, general partners, trustees (where the

issuer is a business trust), consultants, advisors or vendors of the issuer, its parents, its

113

The new categories would be “Security to be Acquired Upon Exercise of Option, Warrant or Other Right to

Acquire Security,” “Pooled Investment Fund Interests,” “Tenant-in-Common Securities,” and “Mineral

Property Securities.”

114

We also are revising Item 10 to enable an issuer to clarify its response. We discuss this change more fully

in Part II.C below.

115

For example, business combination transactions may raise some of the types of policy concerns we

intended to address in adopting rules and rule amendments relating to filings by reporting shell companies.

Release No. 33-8587 (July 15, 2005) [70 FR 42234].

majority-owned subsidiaries, or majority-owned subsidiaries of the issuer’s parent.116 We

believe that low investment amounts are more likely to present enforcement challenges when

offered to outside investors, and have changed the requirement as a result.

Sales Compensation. Item 12 generally will carry over but simplify the response to the

requirements in Form D related to information on sales compensation, as we proposed. In

addition, also as proposed, it will add a requirement to provide the CRD number of each person

that is a compensation recipient named in response to Item 12, provided the person has a CRD

number.117 In addition and as a complement to what we proposed, Item 12 also will require that

when both a person that receives sales compensation and the person’s associated broker-dealer

are reported, the issuer must provide the CRD number, if any, for both. Also in addition to what

we proposed, the instruction to Item 12 will clarify that the compensation that can result in a

reporting requirement can be cash or other consideration; a finder or other person that does not

have a CRD number need not obtain one in order to be listed; and, conversely, a finder or other

person is required to be listed where called for, regardless whether the finder or other person has

a CRD number.118 A CRD number corresponds to a broker or broker-dealer’s record located in

the Central Registration Depository, a computer database of brokers and broker-dealers that

FINRA maintains. It should be relatively easy for an issuer to obtain the CRD numbers from the

116

The standard for determining who is an “outside investor” is similar to the standard in Securities Act Rule

701 [17 CFR 230.701] and Securities Act Form S-8 [17 CFR 239.16b] for determining who is an eligible

investor, except that for Form D purposes vendors are included and certain family members are excluded.

117

The instruction to new Item 12 uses the term “person” rather than the proposed term “individual” to

describe the sales compensation recipients that an issuer must list. The term “person” is used in order to

clarify that, as intended in the proposed instruction, new Item 12 carries over the requirement in current

Form D that references the term “person” to identify recipients of sales compensation regardless of whether

the recipient is a natural person.

118

We believe this clarification generally would be responsive to several comments related to Item 12. One

commenter suggested that the form clarify that cash and non-cash compensation could trigger a reporting

requirement and not every person has a CRD number. See letter from Connecticut. Another commenter

suggested that the form clarify that issuers must report the names of persons regardless whether they have

CRD numbers. See letter from NASAA.

brokers and broker-dealers it retains. We have added instructions to Form D informing filers

where to obtain CRD numbers on the Internet.119 Requiring reporting of the CRD numbers will

facilitate checking a broker’s or broker-dealer’s records. Requiring reporting of the CRD

numbers of listed persons as well as any associated broker-dealers will enhance the informational

value of the item.

Two commenters supported requiring CRD numbers in particular,120 while one

commenter objected to Item 12 as proposed, stating that the item could discourage users from

using Regulation D, should not require the names of individual recipients of sales compensation

and, if it did require their names, it should not require their CRD numbers.121 Consistent with

current Form D’s requirement to name up to five persons associated with a particular

broker-dealer that receive compensation in connection with sales of securities in an offering and

any associated broker-dealer, we continue to believe that such information is important. Also

consistent with current Form D’s requirements, we continue to believe that it is useful to have

the names of individuals regardless of whether they are associated with a broker-dealer. Once

more than five individuals associated with the same broker-dealer otherwise would be named,

however, the burden of listing additional names does not justify the benefit and it is sufficient in

that case to have the name of the associated broker-dealer alone.

We believe that the new sales compensation disclosure requirements will not discourage

issuers from using Regulation D any more than the current sales compensation reporting

requirements do. The concern about discouraging issuers from using Regulation D appears to be

119

Anyone with access to the Internet can check a broker’s CRD number and record by visiting

http://brokercheck.finra.org. CRD numbers also can be obtained by calling a state regulator or FINRA’s

public disclosure hotline at 800-289-9999. See

http://www.nasaa.org/Investor_Education/Investor_Alerts___Tips/292.cfm.

120

See letters from Massachusetts and NASAA.

121

See letter from ABA.

rooted in a concern about regulator background checks on named persons. In this regard, we

note that background checks are possible under the requirements of current Form D, and the only

additional sales compensation requirement under the new form, CRD numbers, merely would

facilitate that check.

Finally, one commenter asked us to clarify the extent to which new Item 12’s sales

compensation recipient disclosure requirement will apply to foreign sales.122 Consistent with

Preliminary Note 7 to Regulation D, Regulation D’s requirements and, as a result, Form D’s

requirements, including new Item 12, will apply to foreign sales to the extent the issuer seeks to

rely on an exemption under Regulation D for such foreign sales.123

Offering and Sales Amounts. Item 13 will carry over the current requirements to provide

the amount of total sales and the total offering amount, but in a restructured, simplified format.

Instructions have been added to clarify interpretive issues that have arisen in completing the

form, such as how to respond to this requirement if the amount of an offering is undetermined

when the Form D filing is made.124 One commenter suggested that the form require a final

report of actual sales results and be due not later than 15 business days after the close of the

offering.125 The commenter asserted that this would better meet the practical needs of issuers in

terms of determining the trigger date for the Form D filing requirement, coordinating the filing of

122

See letter from ABA.

123

Preliminary Note 7 to Regulation D provides as follows: “Securities offered and sold outside the United

States in accordance with Regulation S need not be registered under the [Securities] Act. See Release No.

33-6863. Regulation S may be relied upon for such offers and sales even if coincident offers and sales are

made in accordance with Regulation D inside the United States. Thus, for example, persons who are

offered and sold securities in accordance with Regulation S would not be counted in the calculation of the

number of purchasers under Regulation D. Similarly, proceeds from such sales would not be included in

the aggregate offering price. The provisions of this note, however, do not apply if the issuer elects to rely

solely on Regulation D for offers or sales to persons made outside the United States.”

124

We also are revising Item 13 to enable an issuer to clarify its response. We discuss this change more fully

in Part II.C below.

125

See letter from Stephen A. Marcus.

Form D with the Commission with state filing and fee calculation requirements, and determining

the need for amendments as the sales process proceeds. As previously noted, we believe that it

can be useful for regulatory purposes if an issuer files a Form D before an offering closes to

enable regulators to consider the information provided before the offering process ends. If

regulatory action is appropriate, earlier consideration potentially could cause it to be more timely

and effective. We also believe that issuers have been and will continue to be able to coordinate

their federal Form D and state filings without requiring Form D to contain final sale information

rather than offering information as of an earlier time.

Finally, we believe that any uncertainties

as to when to amend will be substantially resolved by the provisions we are adding to the form

requirements.

Investors. Item 14 will elicit information on whether the issuer intends to sell securities

to persons who do not qualify as accredited investors and the number of such persons who

already have invested. It will elicit information on the total number of investors who already

have purchased securities in the offering. The form currently requires this information because it

affects how we and state securities regulators evaluate claimed exemptions and allocate

enforcement resources. We have modified Item 14 slightly from the proposed version by

requiring the issuer to specify the total number of investors in the offering, rather than the

number of accredited investors, so that examiners can readily see that number, rather than being

required to add the numbers of accredited and non-accredited investors, as was the case in the

proposed version.

Expenses and Use of Proceeds of Offering. We proposed to eliminate the items requiring

information on expenses and use of proceeds of the offering. The current requirements

frequently do not yield information necessary for an evaluation of the claimed exemption or for

enforcement or rulemaking efforts. Many, if not most, Form D filings do not provide use of

proceeds information that serves the form’s purposes, because they specify only that the majority

of proceeds will be used for “working capital” or “general corporate purposes.” In addition,

because of the diversity in use of proceeds in Regulation D offerings, attempting to standardize

responses to provide searchable data may be challenging and not worthwhile.

Commenters expressed mixed views on eliminating the requirements for information on

expenses and use of proceeds of the offering. One commenter agreed with the Commission’s

view that the information is not necessary and stated that providing the information is

problematic because of issuer burden, lack of applicable accounting standards and category

definitions, and estimated amounts.126 Commenters that objected to deleting the requirements

essentially stated that the information helps to enable state regulators to screen offerings for

potential problems.127 One of these commenters addressed the issues of burden and lack of

specificity as to use of proceeds information by suggesting that the form provide more

checkboxes but exclude from those checkboxes one that provides for general corporate

purposes.128

We have considered the comments and, as a result, rather than deleting the current

expenses and use of proceeds requirements in their entirety, we are deleting most of them and

adopting the rest of them in new Items 15 and 16. New Item 15 will require the issuer to provide

only the amounts paid for sales commissions and, separately stated, finders’ fees in connection

with the offering. New Item 16 will require reporting of the amount of the gross proceeds the

issuer used or proposes to use for payments to related persons.129 New Items 15 and 16 will

126

See letter from ABA.

127

See letters from Connecticut, Massachusetts, NASAA and Pennsylvania.

128

See letter from NASAA.

129

For purposes of new Item 15, “Related Persons” are those persons new Item 3 requires the issuer to report

in the Form D notice.

permit clarification where necessary to prevent the information supplied from being

misleading.130 Both items will require substantially less information relating to offering

expenses and use of proceeds and, thereby, result in a substantially reduced burden. The

information new Items 15 and 16 will require is limited to expenses in connection with the

offering process and payments to related persons. We believe that these types of expenses and

payments are most likely to be of regulatory interest. Consequently, we believe the benefits

from providing this information will justify the burdens in relation to information necessary for

regulatory purposes.

Signature and Submission

We are combining the federal and state signature requirements currently in Sections D

and E of Form D into one signature requirement. This will simplify the filing and make it

consistent with other signature requirements of Commission forms. We are incorporating into

the signature block a consent to service of process similar to the one currently in Form U-2,

which is required to be filed separately but simultaneously with a Form D by many states. Our

intention in making these changes is to maintain the usefulness of the signature block to

regulators in a manner that is consistent with easing burdens on filers.

The combined signature requirement, in general, provides that each issuer signing the

revised Form D131 has read the Form D, knows the contents to be true, has duly caused the Form

D to be signed on its behalf by the undersigned duly authorized person, and is132

130

We discuss the ability to clarify items in Part II.C below.

131

Each issuer in a multiple-issuer offering will be required to sign the Form D. If all issuers authorize the

same person to sign on their behalf, however, only that person will need to sign.

132

Both the current federal and state signature requirements expressly provide that the issuer has duly caused

the Form D to be signed on its behalf by the undersigned duly authorized person. Only the current state

signature requirement, however, expressly provides that the issuer has read the Form D and knows the

contents to be true.

•

notifying the Commission and the states in which the Form D is filed of the offering

and undertaking to furnish to them, on written request, the information provided by

each issuer to offerees in accordance with applicable law;

•

consenting to service of process on individuals holding specified positions; and

•

certifying that, if the issuer is claiming a Rule 505 exemption, it is not disqualified

from relying on Rule 505 for one of the reasons stated in Rule 505(b)(2)(iii).

In undertaking to furnish to the states in which the Form D is filed, on written request, the

information provided to offerees, the issuer will not be affecting any legal limits on the ability of

these states to require information.133

The signature requirement will be more extensive than the current federal signature

requirement and will differ in various ways from the current state signature requirement. The

proposed signature requirement will be more extensive than the current state signature

requirement, for example, by including a consent to service of process. The signature

requirement also will be less extensive than the current state signature requirement in several

ways.134

The signature requirement also will differ in several ways from the Form U-2 signature

requirement. The principal difference between the signature requirement and the Form U-2

signature requirement is that Form U-2 requires the notarized signature of a corporate officer (or

133

See Section 18 under the Securities Act as discussed in Part I.B.3.

134

The new signature requirement, unlike the current state signature requirement, will omit both an

undertaking to provide a Form D to specified state administrators and a representation regarding ULOE.

As noted above, however, under the new signature requirement, issuers will undertake to furnish to the

states in which the Form D filing is made, on written request, the information provided by each issuer to

offerees. Also as noted above, revised Form D will omit all references to ULOE and the provisions that, in

general, require specified information on a state-by-state basis in an appendix to the form and require

specified representations and undertakings.

that person’s equivalent in the case of other entities) and requires a consent to jurisdiction and

venue as well as a consent to service of process.135

Some commenters expressly supported a combined signature requirement,136 but they and

other commenters expressed concerns. Two commenters expressed the concern that the

undertaking to provide offering materials could be read in a manner inconsistent with NSMIA,137

one commenter asked for clarification regarding the application of NSMIA,138 and two

commenters expressed the concern that the combined signature requirement was too narrow

because it did not contain all that is contained in the current state signature requirement and

Form U-2.139

The commenters that expressed the concern that the undertaking to provide offering

materials could be read in a manner inconsistent with NSMIA stated that the undertaking could

be misunderstood to mean that, as a result of the undertaking, states could require the offering

materials in all instances regardless of the limits NSMIA otherwise would impose on their ability

to do so.140 Both of these commenters suggested that Commission could resolve the concern by

omitting the undertaking, and one of these commenters141 suggested that, in the alternative, the

Commission could clarify that the undertaking would be inapplicable to offerings under Rule

506. In response to these concerns, the new form will clarify in the context of the offering

135

The new signature requirement’s addressing consent to service but not consent to jurisdiction or venue is

consistent with the signature requirement in Form ADV [17 CFR 279.1], which can satisfy both federal and

state filing requirements for investment adviser registration.

136

See letters from ABA and NASAA.

137

See letters from ABA and MFA.

138

See letter from ABA.

139

See letters from Connecticut and NASAA.

140

See letters from ABA and MFA.

141

See letter from ABA.

materials undertaking that where securities that are the subject of the Form D are covered

securities under NSMIA, whether in all instances or due to the nature of the offering that is the

subject of the Form D, the states cannot routinely require the offering materials under the

undertaking or otherwise and can require the offering materials only to the extent Section

18(c)(1) permits them to do so under its preservation of their anti-fraud authority. Also, we have

added language to the undertaking specifying that it only applies to written requests made “in

accordance with applicable law.”

The commenter that requested the NSMIA-related clarification asked that we clarify the

relationship between Section 18(c)(2)(A) and the new signature requirement’s consent to service

provision in particular and between Section 18(b)(4)(D) and new Form D in general. Section

18(c)(2)(A) generally provides, in relevant part, that the states retain the right under NSMIA to

obtain a consent to service of process from an issuer engaged in an offering under Rule 506 of

Regulation D. Section 18(b)(4)(D) generally provides that the states retain the right under

NSMIA to impose on an issuer engaged in an offering under Rule 506 “notice filing

requirements that are substantially similar to those required by rule or regulation under section

4(2) that are in effect on September 1, 1996.” Similarly to what we noted above in regard to the

undertaking to provide offering materials, neither the consent to service provision nor anything

else related to new Form D affects any legal limits on the ability of the states to require

information.

Both commenters that expressed the narrowness concern addressed the consent to service

provision. One commenter stated that the consent to service should be broadened to include

consents to jurisdiction and venue as are contained in Form U-2 to eliminate fully the need to file

Form U-2 and enable investors to avoid needing to plead and prove jurisdiction as an issuer

should that wants to offer or sell in a state.142 The other commenter stated that the consent to

service provision should be broadened to apply to a broader array of acts, as does Form U-2, and

to include the Rule 262 disqualification provision we proposed to delete.143 The commenter

reasoned that the form should include the Rule 262 disqualification provision because state bad

actor provisions might apply to offerings under Rule 504 or 505.

We believe that the consent to service provision as proposed and adopted strikes the right

balance between regulatory benefit and issuer burden. We acknowledge that the consent to

service will not be as broad in effect as Form U-2 because that form’s consent to service applies

to a somewhat broader array of acts and that form also contains consents to jurisdiction and

venue. We believe, however, that the Form D consent provision’s application to a somewhat

narrower array of facts is appropriate because the facts it applies to are tailored to the subject

matter of Form D. The Form D consent to service provision generally applies to “any activity in

connection with the offering of securities that is the subject of this [Form D].” In contrast, the

Form U-2 consent to service provision generally applies to actions relating to “the sale of

securities.” Finally, although Form D will not require consents to jurisdiction and venue, we

note that under appropriate circumstances, state regulators still would be able to require this type

of information.

Electronic Filing of Form D

We are amending Regulation S-T,144 Rule 503 of Regulation D, and Form D to

implement the requirement for issuers to file the information required by Form D with us

142

See letter from NASAA.

143

See letter from Connecticut.

144

Regulation S-T is the Commission’s general regulation governing electronic filing.

electronically through an online filing system.145 A large majority of commenters supported

electronic filing, but some expressed concern about whether electronic filing would impose more

burdens on issuers146 or raise general solicitation issues.147 The concerns regarding burdens

generally related to the operation of the online system, and we address those concerns below

where we discuss the operation of the system in more detail.148

One commenter expressed the concern that, even though Forms D currently are publicly

accessible, their increased public accessibility as a result of mandated electronic filing would

encourage third parties to use Form D for purposes beyond its original intent or current use and

might result in issuers making less use of Form D than they do now and, thereby, deprive them

of the benefits of the use of Regulation D and cause the Commission to receive less information

than it does now.149 The commenter suggested that, as an alternative, the Commission permit

Form D filings to be confidential for a specified amount of time, such as a year, if the issuer has

made no public disclosure of the offering. The Form D would, however, be available to the

Commission and states with which it was filed during that time. We acknowledge the

commenter’s concerns. As we discussed in the proposing release and above, however, public

availability of Form D provides a measure of investor disclosure and serves other useful

purposes. In addition, as a practical matter, even if we were to permit confidential filing, Forms

D would be subject to requests under the Freedom of Information Act (“FOIA”).150

145

The online filing system will automatically capture and tag data items and is discussed in further detail in

Part III of this release.

146

See letters from ABA, Stephen A. Marcus and SCSGP.

147

See letters from Connecticut, Massachusetts and NASAA.

148

We address the concerns relating to general solicitation issues in Part II.C below.

149

See letter from ABA.

150

5 U.S.C. 552 et seq. The Commission’s regulations that implement that statute are at 17 CFR 200.80 et seq.

Rule 101(c)(6) of Regulation S-T151 currently requires the information required by Form

D to be filed in paper format. The amendments will delete the reference to Form D from Rule

101(c)(6) and will revise subparagraph (a)(1) of Rule 101152 to add a new subparagraph (xiii)

that will add Form D to the rule’s list of documents required to be filed electronically.

Rule 100 of Regulation S-T,153 which specifies the persons or entities subject to the

electronic filing requirements of Regulation S-T, expressly includes, among others, Exchange

Act reporting companies whose filings (such as Form D) are subject to review by the Division of

Corporation Finance. In order to assure that Rule 100 also will apply to non-reporting

companies that file Form D, the amendments revise paragraph (a) of Rule 100 of Regulation

S-T154 to add a reference to entities that are not Exchange Act reporting companies but whose

filings are subject to review by the Division of Corporation Finance.

We also are amending Regulation S-T, as proposed, to make hardship exemptions

unavailable for Form D filings.155 The amendments revise subparagraph (a) of Rules 201156 and

202157 to exclude Form D from the filings for which hardship exemptions are available. We

believe hardship exemptions should not be available for Form D filings because of the relative

ease of electronic filing, the limited value of paper filings and the utility of a uniform,

151

17 CFR 232.101(c)(6).

152

17 CFR 232.101(a)(1).

153

17 CFR 232.100.

154

17 CFR 232.100(a).

155

We note, however, that a filer may request a filing date adjustment under Rule 13(b) of Regulation S-T [17

CFR 232.13(b)]. This rule addresses circumstances where an electronic filer attempts in good faith to file a

document with the Commission in a timely manner but the filing is delayed due to technical difficulties

beyond the filer’s control. In those instances, the filer may request an adjustment of the document’s filing

date. The staff may grant the request if it appears that the adjustment is appropriate and consistent with the

public interest and the protection of investors.

156

17 CFR 232.201(a).

157

17 CFR 232.202(a).

comprehensive database. In adopting the conversion of the Form D filing from a paper system to

an electronic system, we assume that issuers will have access to a computer and the Internet. In

the absence of an issuer’s having a personal or office computer and Internet access, public

libraries around the country often have computer and Internet access that an issuer could use.

We therefore do not envision the need for a hardship exemption to permit paper filing.158

The amendments revise Rule 503 of Regulation D and Form D in several ways related to

electronic filing. The amendments delete from Rule 503 references to the paper-based concept

of copies in subparagraphs (a) and (b) and a manual signature in subparagraph (b).

Subparagraph (a) will continue to specify when a notice on Form D initially must be filed and

will be revised to specify also when an amendment to a Form D filing must or could be filed.159

One commenter160 suggested that we ease burdens by extending the filing deadline to at

least 30 days from the date of first sale,161 defining the date of first sale as the consummation of

the first closing of a sale of securities in the offering, extending the cut-off time for electronic

filing from 5:30 to 10:00 p.m. Eastern time162 and providing that when a Form D otherwise

158

We also are adopting an amendment to Rule 104(a) of Regulation S-T [17 CFR 232.104(a)] to make it clear

that unofficial PDF copy submissions are unavailable for Form D notices. The new online filing system,

further described below, will make filed Form D information available on our Web site in what we believe

will be an easy-to-read format similar to that which could be provided through an unofficial PDF copy.

159

Subparagraph (a) will continue to provide that an issuer must file the Form D no later than 15 calendar days

after the first sale of securities in the offering. As currently, an issuer could file the Form D at any time

before that if it has determined to make the offering. Also as currently, a mandatory capital commitment

call would not constitute a new offering, but would be made under the original offering, so no new Form D

filing would be required solely as a result. See Part II.A.4.b of this release for a discussion of when an

amendment must or could be filed.

160

See letter from ABA.

161

As discussed above in connection with Item 13 in Part II.A.5, another commenter suggested that the

form require a final report of actual sales results and be due not later than 15 business days after the close

of the offering.

162

Rule 13 of Regulation S-T [17 CFR 232.13] generally provides that a filing by direct transmission

beginning on or before 5:30 p.m. Eastern time on a business day is deemed filed that day and, if such a

filing were to begin after that time, it would be deemed filed on the next business day. Rule 13 also

provides, however, that a 10:00 p.m. deadline applies for registration statements and post-effective

amendments filed under Rule 462(b) [17 CFR 230.462(b)] and beneficial ownership reports filed

would be due on a weekend or holiday it be deemed due on the next business day. We are not

aware of the current deadline’s having been difficult to meet in the past and believe that carrying

it forward is not likely to cause problems in the future. For the same reasons, we believe that it is

not necessary to extend the cut-off time from 5:30 to 10:00 p.m. In this regard, we note that

filings under Rule 462(b) and Section 16(a) to which the extended cut-off time applies typically

must be made much more quickly than a filing on Form D.163 We are, however, further revising

Rule 503(a)(1) to provide that when a Form D filing otherwise would be due on a weekend or

holiday it will be deemed due on the next business day. This approach is consistent with the way

Exchange Act Rule 0-3(a)164 generally treats filing deadlines under the Exchange Act.165

Subparagraph (b) of Rule 503 will continue to require a signature. Rule 302 of

Regulation S-T,166 which governs the manner of signature for electronic filings, will apply to

Form D.167 The amendments also add to subparagraph (b) a statement that electronic Form D

filing through our new online filing system is mandatory. In addition, the amendments delete

subparagraphs (c), (d), and (e). Subparagraph (c) requires an issuer that makes sales under Rule

under Section 16(a) [15 U.S.C. 78p(a)], in general, by officers, directors and principal security holders of

reporting companies that have a class of equity securities registered under Section 12 [15 U.S.C. 78l] of the

Exchange Act.

163

For example, Section 16(a)(2)(C) [15 U.S.C. 78p(a)(2)(C)] generally requires that insiders file reports of

changes in beneficial ownership within two business days of the change.

164

17 CFR 240.0-3(a).

165

As the commenter that raised the weekend/holiday issue pointed out, current Rule 503(e)(2) addresses the

issue by providing that a Form D we do not physically receive by the end of the 15-day period is deemed

filed on the date it is sent by certified or registered U.S. mail. Consequently, an issuer currently may send a

Form D as late as the end of the 15-day period. In proposing to delete Rule 503(e)(2), it was not our

intention to shorten the Form D filing deadline.

166

17 CFR 232.302.

167

Rule 302 requires, in general, that electronic filings contain typed signatures, that each signer manually

sign a signature page or other document confirming the typed signature by the time the filing is made, and

that the issuer maintain the manually signed document for five years and make it available to the

Commission and its staff upon their request. We also are adding to Form D’s signature instruction a

summary of Rule 302’s requirements as a convenience.

505 to provide an undertaking on its Form D to provide specified information to the Commission

upon the staff’s written request. This paragraph no longer will be necessary because, as noted

above, the revised signature requirement will provide that each issuer signing the Form D will be

undertaking to furnish to the Commission and the states with which the Form D is filed, on

written request, the information provided by each issuer to offerees. Subparagraph (d), regarding

amendments, no longer will be necessary because subparagraph (a) will address when to file

amendments and the new online filing system will make available to the issuer the version of the

Form D to be amended to enable the issuer to key in only the changes. Subparagraph (e),

regarding the date a Form D filing is considered filed, no longer will be necessary because Rule

13 of Regulation S-T will specify the way to determine the filing date for a Form D filing as it

does for electronic filings generally and new Rule 503(a)(1) will provide that when a Form D

otherwise would be due on a weekend or holiday it will be deemed due on the next business

day.168 Finally, the amendments similarly will revise the General Instructions of Form D

regarding copies required, manual signatures, amendments, mandatory electronic filing and

filing date.

General Solicitation and General Advertising Issues Presented by Electronic

Filing of Form D

Rule 502(c) of Regulation D169 sets forth the prohibition on general solicitation and

general advertising applicable to most Regulation D offerings. Specifically, issuers and persons

acting on the issuer’s behalf are prohibited from offering or selling securities by any form of

general solicitation or general advertising. Information filed using Form D has up to now been

available to the general public. The electronic filing and availability of Form D information,

168

The description of Form D at 17 CFR 239.500 is similar to Rule 503 and is being amended similarly.

169

17 CFR 230.502(c).

however, may present the concern that the filing could be used as a marketing document to

generate interest in offerings because the information would be easily and broadly available.

This, in turn, may raise concerns regarding compliance with Regulation D’s prohibition on the

use of general solicitation and general advertising. To address these compliance concerns, we

are revising Rule 502(c) to include a safe harbor from the prohibition on “general solicitation”

and “general advertising” for information provided in a Form D filed with the Commission if the

information is provided in good faith and the issuer makes reasonable efforts to comply with the

requirements of Form D. An issuer that complies with the terms of the safe harbor is assured

that the electronic availability of its Form D filing would not, in and of itself, cause the issuer to

have violated this prohibition.

Such a safe harbor would not be warranted if it merely shielded activity that is, in fact,

intended to generate interest in the offering in violation of law. Accordingly, we are limiting the

amount of information submitted on the form and limiting the application of the safe harbor to

where the information is provided with a good faith and reasonable effort to comply with the

requirements of Form D.170 Limiting the safe harbor to information provided with a good faith

and reasonable effort to comply with the requirements of Form D would be consistent with

Preliminary Note 6171 to Regulation D, Rule 508,172 and the “notification” nature of Form D’s

requirements.

170

Similarly, current Rule 502(c) includes a safe harbor from the prohibition on general solicitation and

general advertising for a notification in compliance with Rule 135c of an unregistered offering by an issuer

required to file reports under Section 13 or 15(d) of the Exchange Act. The information allowed to be

included in a Rule 135c notification is limited to very basic identifying information about the issuer and the

offering.

171

Preliminary Note 6 to Regulation D provides, in part, that “Regulation D is not available to any issuer for

any transaction or chain of transactions that, although in technical compliance with the these rules, is part

of a plan or scheme to evade the registration provisions of the [Securities] Act.”

172

17 CFR 230.508. Rule 508 provides, in part, that “A failure to comply with a term, condition or

requirement of [specified rules under Regulation D] will not result in the loss of [an] exemption . . . if the

As proposed, electronic Form D would not have contained any place where “free writing”

could occur.173 When submitting a paper filing, filers may insert information that is not required

by the form, but that could be a vehicle for soliciting investors illegally. Prohibiting free writing

in the electronic form would prevent such misuse. One commenter favored the total bar against

free writing as necessary to safeguard against this misuse.174 Another commenter, however,

favored allowing issuers to clarify responses, asserting that permitting issuers to do so would

avoid a disincentive to filing by enabling issuers to present more accurate information that would

be more useful.175 The commenter also asserted that permitting clarification to ensure accuracy

would not transform the Form D into a marketing document and would be consistent with the

proposed safe harbor because the information would be provided with a good faith and

reasonable effort to comply with the requirements of Form D.

We are persuaded that, on balance, it is appropriate to permit issuers to engage in a

limited amount of free writing to the extent necessary to clarify responses as consistent with the

safe harbor. In order to limit the amount of free writing, however, we are reducing the need for it

by offering additional response choices for some items176 and permitting free writing to clarify

responses in separate fields using a limited number of characters only for those items for which it

seems appropriate. Accordingly, and as noted above in the context of discussing particular items

of new Form D, we will permit free writing to clarify responses to the following items:

person relying on the exemption shows . . . [a] good faith and reasonable attempt was made to comply with

all applicable terms, conditions and requirements of [such rules].”

173

As proposed and adopted, however, Form D will require an issuer to provide further detail in a textual

response if the issuer must choose “Other” in response to Item 1 regarding legal entity type or Item 9

regarding security type.

174

See letter from NASAA.

175

See letter from ABA.

176

For example, we have modified the proposed version of Item 1 to permit an issuer to choose “yet to be

formed” instead of providing a year of organization in response to that item.

•

Item 3 – Related Persons;

•

Item 10 – Business Combination Transactions;

•

Item 13 – Offering and Sales Amounts;

•

Item 15 – Sales Commissions and Finders’ Fee Expenses; and

•

Item 16 – Use of Proceeds.177

Two commenters urged that we provide additional safeguards to support the ban on

general solicitation and general advertising.178 Both commenters suggested prominent warnings

in connection with the display of Form D information. One of them also favored limiting public

access to some types of information, clarifying in connection with adopting the amendments that

electronic filing does not eliminate the ban and amending Regulation D to require companies to

return any unsolicited payments submitted to purchase securities.179 We believe that limiting the

types and amount of information in Form D filings and providing a carefully tailored safe harbor

should prevent the electronic availability of Form D filings from undermining the ban.

III.

ELECTRONIC FILING PROCEDURE

We are mandating electronic filing of the Form D notice through an online filing system

in development that will be accessible from any computer with Internet access. The information

filed will be available on our Web site and, because the online filing system will automatically

capture and tag data items, the data will be interactive and searchable. Our Web site will enable

users to view the information in an easy-to-read format, download the information into an

177

The commenter that suggested that we permit free writing cited Items 1, 3, 9, 10 and 13 as examples of

items for which it may be appropriate to permit free writing. See letter from ABA. As noted, we have

added an additional response choice to the proposed version of Item 1 and Items 3, 10 and 13 all will

permit free writing to clarify responses. In that regard, we choose not to revise further Item 9, regarding

security type, because it already requires an issuer to provide further detail in a textual response if the issuer

must choose “Other” as its initial response.

178

See letters from Connecticut and NASAA.

179

See letter from NASAA.

existing application, or create an application to use the information. As discussed above, our

objectives in converting Form D filings to an electronic format include lessening the burden on

issuers of filing the Form D notice, enhancing federal and state coordination, increasing the

information available regarding the effectiveness of our Securities Act exemptions and

increasing the information available to researchers using Form D data to conduct empirical

research aimed at improving the efficiency and effectiveness of our private markets.

We believe our approach to filing and dissemination formats will make it relatively easy

to file, access and analyze Form D information. As discussed in the proposing release, using this

system will result in the Form D information being filed in the standard format of eXtensible

Markup Language (XML) and we would disseminate the information in a format that provides

normal text for reading and XML-tagged data for analysis. Three commenters suggested that the

system tag the Form D information with the eXtensible Business Reporting Language (XBRL)

system rather than the standard format of XML.180 XBRL is an XML-based language that is

intended to tag a wide range of business data. Because Form D information consists of

relatively simple facts, XML is a sufficient technological solution, and we expect the information

tagged in XML will be compatible with systems designed for more sophisticated XBRL

reporting. The Commission can also take advantage of its experience in developing data tags for

information filed under Section 16, which is currently filed with the Commission using XML

technology.

Mechanics

The new online filing system for Form D information will be accessible from any

computer with Internet access. An issuer will be able to both submit and amend its Form D

180

See letters from Center for Audit Quality, EDGAR Online, Inc. and XBRL US, Inc..

filing through this system.181 The Form D itself will include guidance functions to assist in

completing the form.182

In order to file, issuers will need the same codes as are required to file on our electronic

filing system, EDGAR, today. An issuer that does not already have EDGAR filing codes, and to

which the Commission has not previously assigned a user identification number, which we call a

“Central Index Key (CIK)” code, will obtain the codes by filing electronically a Form ID183 at

https://www.filermanagement.edgarfiling.sec.gov and filing, in paper by fax within two business

days before or after filing the Form ID, a notarized authenticating document. The authenticating

document will be manually signed by the applicant over the applicant’s typed signature, include

the information contained in the Form ID, confirm the authenticity of the Form ID184 and, if filed

after electronically filing the Form ID, include the accession number assigned to the

electronically filed Form ID as a result of its filing.185 Under the online system, if the Form D

filing is made on behalf of multiple issuers, each issuer will be required to have its own CIK

code and a confirming code, which we call a “CIK Confirmation Code (CCC),” for validation.

Two commenters expressed concern about the need for an issuer to obtain access codes

through the Form ID process in order to file through the new online system.186 We plan to

181

In the proposing release, we stated our expectation that the system would permit an issuer, in Item 7, to

designate the states to which the Form D is directed on the assumption that some states would adopt

one-stop filing and allow filings that specify that they are directed to those states to constitute filings with

them. As discussed above in more detail in Part I.B.3, we have been working actively with NASAA to

achieve one-stop filing capability but it would not be available when electronic filing of Form D begins.

182

For example, the system might use drop-down menus as a guidance function.

183

17 CFR 239.63, 249.446, 269.7 and 274.402.

184

An issuer could confirm the authenticity of a Form ID by, for example, stating that “[name of issuer]

hereby confirms the authenticity of the Form ID [filed] [to be filed] on [specify date] containing the

information contained in this document.”

185

17 CFR 232.10(b). An “accession number” is a unique number generated by EDGAR for each electronic

submission. Assignment of an accession number does not mean that EDGAR has accepted a submission.

186

See letters from ABA (focusing particularly on the burden on non-reporting companies) and Stephen A.

consider ways to simplify the authentication process in order to replace the requirement to fax

the notarized authenticating document, and expect that a more simplified process may be

available by the time electronic Form D filing is mandated.187

To access and file a Form D through the new online system, issuers will begin by having

a valid identification number, confirming code and separate password, which we call a

“Password” and logging on to the system. The identification number, confirming code and

password, together with a password modification authorization code, are referred to as “EDGAR

access codes.” Data entry will be required to be performed quickly enough to avoid time-outs

that end the session. A time-out most likely will occur no less than one hour following the user’s

last activity on the system. Time-outs will be implemented due to cost and technical limitations,

but it would be possible to extend a session with any keystroke.188

Two commenters suggested that the system provide a way to save an incomplete form

and one of them stated that it would be desirable as a practical matter for the system to enable an

issuer to prepare a filing offline and then access the system to submit it.189 One commenter

stated that a saving feature was needed to avoid time-outs.190 The other commenter stated that

Marcus.

187

In the proposing release, we solicited comment on whether issuers that only file Form D with the

Commission should be able to authenticate a Form ID by providing to the Commission a copy of a local

business license rather than by faxing the otherwise required notarized authenticating document. We

received no responses to this question.

188

The new online filing system technically will be part of EDGAR but likely in some respects will be similar

to the online filing system for Forms 3 [17 CFR 249.103 and 274.202], 4 [17 CFR 249.104 and 274.203],

and 5 [17 CFR 249.105] filed under Section 16(a) of the Exchange Act, in general, by officers, directors

and principal security holders of reporting companies that have a class of equity securities registered under

Section 12 of the Exchange Act. Form D filers will access the online filing system and, essentially, prepare

the filing by responding to questions and filling in blanks. The online filing system for Forms 3, 4 and 5

does not provide a way to save an incomplete form, but does provide the alternative of preparing filings

before accessing the system and then submitting them through, rather than preparing them on, the online

system.

189

See letters from ABA and SCSGP.

190

See letter form SCSGP.

the absence of a saving feature would virtually require that a careful filer prepare a Form D

offline on a specially created template and then input all the information again online and, as a

result, would risk inputting incorrect information and waste time and money.191

We agree that it would be useful to filers to be able to avoid the need to provide all of the

required information both online and in a single session. Contrary to our earlier expectation, we

anticipate that the system will provide a way to avoid the need to provide all of the required

information both online and in a single session. For example, the system may permit the issuer

to prepare the filing offline and submit it online or to save an incomplete form online from

session to session for a short period of time, such as six calendar days, between sessions.192

An issuer will be able to prepare an amendment based on the content of a previously filed

form.193 The system will validate as many fields as possible for data type and required fields

while the filer fills in the fields on the screen. Issuers will have an opportunity to correct errors

and verify the accuracy of the information before submitting the filing. Links will be available

to enable issuers to access information, such as the instructions to Form D.

The issuer will be able to download and print the filing before and after submission.194

Once the filing is submitted, the system will indicate receipt of the filing. In many cases, the

191

See letter from ABA.

192

Some information provided by the filer in the course of obtaining EDGAR access codes or updating such

information will automatically appear in appropriate places when the filer accesses the new online filing

system. As a result, in order to make changes to such information, it generally will be necessary to do so

through an updating process through the main EDGAR system rather than the Form D online filing

system. The updating process is a well-established typically online process applicable to EDGAR filers

generally that would be relatively easy to complete.

193

When an issuer files an amendment to a Form D filing, it will access its Form D filing on the online filing

system and type over the inaccurate information. In that case, the online filing system will replace the

inaccurate information with the new information, save the revised version of the Form D filing in its

amended state causing it to be an amendment and a new filing, and record the date of amendment. The

information in the Form D that was accessed for purposes of the amendment will, however, remain

unchanged on the system accessible to the public.

194

We believe the ability to download and print the filing before and after submission meets the concerns of

system will display a unique number assigned to the submission, which we call an “accession

number” but, in any event, the accession number will follow in an e-mail notification to the filer.

A filer will be able to see the filing on our Web site shortly after filing.

Upon filing of the Form D notice with the Commission, state securities regulators will be

able to identify on our Web site Form D filings that specify their states.195 Filers generally

would specify one or more states in response to proposed Items 1 (jurisdiction of incorporation

or organization), 2 (principal place of business and contact information), 3 (related person

addresses) and 12 (addresses of recipients of sales compensation) of Form D.196 State

specification information will be interactive and searchable because the new online filing system

will automatically capture and tag that information as it will other Form D filing information.

Most Form D filings currently are made by law firms on behalf of issuers.197 We expect

that the simplification and restructuring of Form D and the conversion of Form D filings to an

electronic system may decrease legal fees to make Form D filings and perhaps allow more

issuers to file a Form D notice themselves without the assistance of a law firm.

Database Capabilities of Electronic Form D Repository

the commenter that asked that the system allow the user to view the information before submission and

print an as-filed version after submission. See letter from ABA.

195

In Release No. 33-6339 (Aug. 18, 1981) [46 FR 41791], the Commission stated the following in its

discussion of Rule 503: “It should be noted that, although the revised filing requirements do not require

that the user also file a notice with the state(s) in which the offering is to be sold, it is anticipated that the

Commission will routinely furnish copies of the notice forms to the appropriate state commissions.”

196

As discussed above in more detail, we no longer contemplate effectuating a one-stop filing system by

giving filers an opportunity to direct their filings to designated states as provided by proposed Item 7, but

we have been working actively with NASAA in an effort to accomplish this in a different manner.

Consequently, Item 7 does not provide for designation of states.

197

Our Division of Corporation Finance conducted a one-month review of Form D filings and determined that,

based primarily on the cover letters that accompany most paper Form D filings, about 75% of the filings

were made by law firms on behalf of issuers.

A review of Form D filings by our Division of Corporation Finance uncovered errors and

omissions in the information provided.198 In an effort to enhance the quality of the data collected

by the proposed electronic Form D, we are including internal checks in the new online system

that should decrease the number of errors and omissions in Form D filings. The system will

prevent an issuer from submitting Form D information electronically unless all necessary data

fields are completed in a manner consistent with the nature of each field199 and the logical

relationships between or among the fields.200 This will not only promote the integrity of the data

collected by the Form D repository, but also will make it easier for issuers to complete or amend

their filings.

System Implementation

The new online system is expected to be available to receive filings on a voluntary basis

on September 15, 2008. Electronic filing will be required for all filings on or after March 16,

2009. We are treating the period between the two dates as a transition period during which

electronic filing of Form D information with us using the new online filing system will be

voluntary. Issuers may also file a paper version of the new Form D with us during the transition

period, without using the online filing system.

The transition period serves several purposes. It should both enable issuers to become

familiar with the new Form D and online filing system and help alert us to any problems. One

198

Some of the most frequent errors were failures to indicate whether a filing is an amendment or a new filing

and claims that do not match the facts described (for example, issuers claiming that an offering is limited to

accredited investors and then including information regarding participation of non-accredited investors in

the offering).

199

The system will check, for example, to make sure that number characters are used in responding to the

field in proposed Item 13 for the offering and sales amounts.

200

Where, for example, the filer claims a Rule 505 or Rule 506 exemption in response to Item 6 and specifies

that more than 35 non-accredited investors have invested in response to Item 14, a pop-up or other feature

will warn that only 35 non-accredited investors are permitted in these types of offerings and require the

filer to select “OK” before proceeding.

commenter suggested that we permit voluntary filing for a period of at least a year to work out

any issues that arise and provide time to allow states to adopt conforming one-stop filing rules

and set up a central payment system.201 We believe that a shorter period of time should be

adequate for discovering and addressing any issues in the new form or system that might arise.

We also believe mandating electronic filing of Form D as soon as feasible even without a onestop filing capability in place is preferable, in order to realize without unnecessary delay the

many benefits we believe mandated electronic filing will provide separate and apart from the

benefits that one-stop filing would provide. In this regard, we believe that beginning to mandate

electronic filing without one-stop filing in place will not delay, and in fact will facilitate, the

development of one-stop filing on which we are working actively with NASAA.

Issuers that choose not to file electronically during the transition period may use either

the current paper form or a paper version of the new Form D. Although the information in new

Form D is somewhat different from that in current paper Form D, we believe a short period when

either version of the form can be used is appropriate. Similarly, we will permit an amendment to

be filed in paper format using either version of the form until electronic filing becomes

mandatory. As previously discussed, however, the new annual and other amendment rules will

apply to all new Form D filings regardless of format and the current amendment requirements

will apply to all current Form D filings in paper format. By the time electronic filing is

mandated, however, we believe an adequate amount of time will have passed since electronic

filing will have become voluntary for Form D filings that it would be appropriate to require

electronic filing using new Form D of initial filings and all amendments applying the new

amendment rules regardless whether the filing being amended was filed on current or new Form

201

See letter from ABA.

We are establishing the transition period by delaying until the end of the period the

effective date of new Item 101(a)(1)(xiii), which mandates electronic filing of new Form D, and

adopting temporary provisions that will apply only during the transition period.202 We are

adopting temporary Item 101(b)(10) of Regulation S-T to permit but not require electronic filing

of new Form D during the period. We are adopting temporary Rule 503T and Temporary Form

D, which are similar to current Rule 503 and Form D, respectively, and, in general, will enable

filers to file current or new Form D in paper format during the transition period.203

Two commenters addressed the question in the proposing release as to whether, in the

future, public companies should be exempted from the Form D filing requirement in Rule 503

and instead be required to file Form D information as part of a periodic or current report.204 Both

commenters suggested that we defer consideration of such an exemption. One commenter cited

concerns with the potential for confusion and problems with differing formats and retrieval.205

The other commenter cited risks to uniformity between federal and state requirements, additional

costs and potential inadvertent violations.206 We intend to consider in the future the issues that

these comments raise.

IV.

PAPERWORK REDUCTION ACT ANALYSIS

202

Most of the provisions we adopt today will be effective on September 15, 2008 when the transition period

begins. We are, however, providing earlier effective dates for the changes to Items 101(c)(6) and 201(a) of

Regulation S-T. The change to Item 101(c)(6) will remove Form D from the list of documents that cannot

be filed electronically and the change to Item 201(a) will add Form D to the list of documents for which a

temporary hardship exemption from electronic filing will not be available. The earlier effective date will

have no practical effect on the Form D filing requirements but will facilitate the Commission’s

consideration and potential adoption of other revisions to Items 101(c)(6) and 201(a) that it proposed in

Release No. 33-8859 (Nov. 1, 2007) [72 FR 63513].

203

Among the differences between the current and temporary versions of Rule 503 and Form D

is a reduction in the number of paper copies required to be filed from five to two (one of which, in each

case, must be a manually signed original).

204

See letters from Connecticut and NASAA.

205

See letter from Connecticut.

206

See letter from NASAA.

Background

The amendments will affect two forms that contain “collection of information”

requirements within the meaning of the Paperwork Reduction Act of 1995 (“PRA”).207 The titles

of the affected information collections are Form D (OMB Control No. 3235-0076) and Form ID

(OMB Control No. 3235-0328). The purposes of the amendments are, in general, to clarify,

simplify and update the information requirements of Form D and modernize the related

information capture process. We published a notice requesting comment on the collection of

information requirements in the proposing release, and submitted a request to the Office of

Management and Budget (”OMB”) for review under 44 U.S.C. 3507(d) and 5 CFR 1320.11. As

we discuss in more detail below, we have withdrawn that request and plan to replace it in order

to reflect a new estimate based on the most recently ended fiscal year that had not yet ended at

the time we submitted the original request to OMB. When we receive OMB clearance, we will

publish notice in the Federal Register. An agency may not conduct or sponsor, and a person is

not required to respond to, a collection of information requirement unless it displays a currently

valid control number. Compliance with the collections of information as revised will be

mandatory. The information required by the collection of information in Form D as revised will

not be kept confidential by the Commission; the information required by Form ID will be kept

non-public, subject to a request under FOIA.

Form D is filed by issuers as a notice of sales without registration under the Securities

Act based on claims of exemption under Regulation D or Section 4(6) of the Securities Act.

Form ID is filed by registrants, individuals, transfer agents, third-party filers or their

agents to request the assignment of access codes that permit the filing of securities documents on

EDGAR. This form enables the Commission to assign an identification number (CIK),

207

44 U.S.C. 3501 et seq.

confirmation code (CCC), password and password modification authorization code to each

EDGAR filer, each of which is designed to protect the security of the EDGAR system.

Estimated Collection of Information Burdens

As we previously expected and discussed in the proposing release as to the proposed

amendments, we expect that the adopted amendments will not affect the overall collection of

information burden of Form D but will cause additional respondents to file a Form ID each year

and, as a result, will increase the annual collection of information burden. We have, however, as

further discussed below, refined and updated the information we used to arrive at our estimate of

the effect of the amendments. As a result, we have revised our estimate of the current number of

respondents that file Form ID each year without the effect of the amendments and the additional

number of respondents that will file Form ID each year as a result of the amendments.

We expect that the amendments will not affect the number of Form D filings made and,

on balance, will obligate issuers to report on Form D essentially the same amount of information

as they are required to report on Form D today. As previously noted, we are adopting the

amendments substantially as proposed. We expect nearly all of the variations between what we

expressly proposed and what we adopted to lessen the collection of information burden or not

affect it. We expect a small minority of variations to increase the collection of information

burden. On balance, however, we expect the variations will not increase the collection of

information burden.

We expect that the following variations from the proposals will lessen the collection of

information burden of Form D:

•

provide that if a Form D filing otherwise is due on a Saturday, Sunday or holiday, it

will be due on the first business day following;

•

eliminate the proposed requirement to provide the issuer’s Commission file number

(if any);

•

provide additional exceptions from the requirement to amend Form D for changes in:

o the address or relationship to the issuer of a related person identified in

response to Item 3 of Form D;

o the minimum investment amount, if the change is an increase, or if the

change, together with all other changes in the amount since the previously

filed notice, does not result in a decrease of more than 10%;

o any address or state(s) of solicitation shown in response to Item 12 of Form D;

o the total offering amount (if the change is a decrease); and

o the amount of securities in the offering that remain to be sold; and

•

prescribe that annual amendments are due on or before the first anniversary of the

most recently filed Form D filing or amendment, if the offering is continuing at that

time, rather than each year between January 1 and February 14.

We expect that the following variations from the proposals will not affect the collection

of information burden of Form D:

•

provide clarifications;

•

permit issuers to provide information that is not required;

•

permit issuers to clarify information;

•

request but not require that issuers in specified industry groups provide their

aggregate net asset value range (and provide an additional exception from the

requirement to amend Form D for changes in aggregate net asset value);

•

eliminate the ability to specify states to which the Form D is directed;

•

prescribe that the minimum investment amount relates to outside investors rather than

all investors;

•

prescribe disclosure of the total number of investors rather than the number of

accredited investors; and

•

provide temporary rules that, in conjunction with varied effective dates, establish the

transition period during which electronic filing of Form D proceeds from prohibited

to optional to mandated.

Finally, we expect that the following variations from the proposals will increase the

collection of information burden of Form D:

•

require amendments to report the addition of executive officers, directors and

promoters in all offerings, and not provide an exception from this requirement for

offerings that last more than a year in some circumstances;

•

require that when both an individual and the individual’s associated broker-dealer are

disclosed, the issuer must present the CRD number, if any, for both rather than just

one; and

•

require disclosure of the following amounts or, if not known, an estimate:

o expenses for amounts paid for sales commissions and, separately stated,

finders’ fees; and

o use of proceeds but only as to the amount used to make payments to executive

officers, directors and promoters.208

As noted above, we expect that, on balance, the variations from the proposals will not

increase the collection of information burden. Consequently, we continue to believe that the

208

While we expect the requirement to disclose these expense and use of proceeds amounts will increase the

collection of information burden of Form D, we also expect that our adoption of an additional exception

from the requirement to amend Form D for specified changes in these amounts will limit the increase.

overall information collection burden of Form D will remain approximately the same as it is

today.209

In the proposing release, we stated our then current estimate that, without the effect of the

amendments, 196,800 respondents file Form ID each year at an estimated burden of .15 hours

per response, all of which is borne internally by the respondent for a total annual burden of

29,520 hours. We later refined the estimate to the extent that we reduced from 196,800 to

46,400 the estimated number of respondents that file Form ID each year resulting in a total

annual burden of 6960 hours. We reduced the estimate primarily based on the actual number of

Forms ID per year we recently have received. We reflected the new estimate in the request we

submitted to OMB rather than the estimate used in the proposing release.

Also in the proposing release, we stated our then current estimate that an additional

18,600 respondents would file Form ID each year and, as a result, would cause an additional

annual burden of 2790 hours. We now are revising that estimate as a result of using updated

information for our most recently ended fiscal year that ended after we issued the proposing

release and submitted the related request to OMB.210 Our new estimate is that, as a result of the

amendments, an additional 19,300 respondents will file a Form ID each year and, consequently,

will cause an additional burden of 2895 hours.211 Accordingly, we have with withdrawn the

request we submitted to OMB and plan to replace it with a new request.

209

We estimate the burden of Form D to be 4.0 hours per response of which one hour is borne internally and

three hours are borne externally.

210

Also after we issued the proposing release and submitted the related request to OMB, we obtained slight

corrections to the fiscal year 2006 data we provided in the proposing release and request. The corrected

data for fiscal year 2006 is that 16,879 companies made 25,717 Form D filings and, of these companies,

15,969 (94.6%) did not report under the Exchange Act and 910 (5.4%) did report under the Exchange Act.

If we had calculated the estimate in the proposing release using the corrected figures for fiscal year 2006,

we would have estimated that, as a result of the proposed amendments, an additional 18,700 respondents

would file a Form ID each year and, as a result, would cause an additional burden of 2805 hours.

211

We arrived at our revised estimate that an additional 19,300 respondents would file a Form ID each year

based on the following information and analysis. In fiscal year 2007, 17,519 companies made 27,843 Form

Consistent with our belief that the variations between what we expressly proposed and

what we adopted will not affect the number of Forms D filed, we believe that the variations will

not affect our estimate of the Form ID collection of information burden.

Comments on Collection of Information Burdens

We solicited comment in the proposing release on the PRA estimates we provided there

and we solicit comment on the revised estimates we now provide in this release.

One commenter expressly addressed our PRA estimate of the amount of the estimated

burden per response for Form ID and that commenter212 and another commenter213 expressed

concern about the potential burdens resulting from the requirement to file Form ID in order to

obtain the access codes necessary to file a Form D on EDGAR. The commenter that expressly

addressed our PRA estimate of .15 hours per response for Form ID stated that the estimate is not

consistent with the experiences of several members of the committees that together provided the

comment. We are not aware of respondents generally incurring response time in excess of our

estimate of .15 hours per response for Form ID and continue to believe the estimate to be

D filings. Of these companies, 16,655 (95.1%) did not report under the Exchange Act and 864 (4.9%) did

report under the Exchange Act. The annual number of Form D filings rose from 17,390 in fiscal year 2002

to 27,843 in fiscal year 2007 for an average increase of approximately 2100 Form D filings per year.

Assuming the number of Form D filings continues to increase by 2100 filings per year for each of the next

three years, the average number of Form D filings in each of the next three years would be about 32,100.

Assuming that the ratio of the number of companies that make a Form D filing to the number of Form D

filings in fiscal year 2007 remains constant over the next three years, an average of about 20,200 companies

would make Form D filings in each of the next three years. Assuming also that the ratio between the

number of non-reporting and reporting companies under the Exchange Act that made Form D filings in

fiscal year 2007 remains constant over the next three years, an average of about 19,300 non-reporting and

900 reporting companies would make Form D filings in each of the next three years. Assuming further that

all non-reporting companies that would make a Form D filing would not already have EDGAR access

codes and, as a result, would be required to file a Form ID, the number of companies that would need to file

a Form ID as a result of the amendments would on average be about 19,300 per year over the next three

years. Because each Form ID filing is estimated to require .15 hours, the total additional burden would, on

average, be about 2895 hours per year over the next three years (19,300 Forms ID x .15 hours per Form

ID). We consider the average number of Form ID filings expected to be made per year over the next three

years because the PRA requires that our estimates represent the average yearly burden over a three-year

period.

212

See letter from ABA (focusing particularly on the burden on non-reporting companies).

213

See letter from Stephen A. Marcus.

appropriate. We acknowledge the general concerns with the Form ID process but we believe it

should be required for Form D filers as it is for other filers on EDGAR.

We believe that the new online system should be as secure as our EDGAR system in

general because it will be a part of the EDGAR system and, as such, its filings will be

disseminated on EDGAR and displayed on the Commission’s public Web site. In order to

achieve that uniform degree of security, we believe it is appropriate to require issuers that seek to

file Form D to complete the same Form ID authentication process to obtain the same access

codes as those persons or entities who seek to file with the Commission for many other reasons.

We solicit comment on the expected PRA effects of the amendments, including the

following:

•

the accuracy of our estimates of the additional burden hours that will result from

adoption of the amendments;

•

whether the adopted changes to the collections of information are necessary for the

proper performance of the functions of the Commission, including whether the

information will have practical utility;

•

ways to enhance the quality, utility and clarity of the information to be collected;

•

ways to minimize the burden of the collections of information on those who respond,

including through the use of automated collection techniques or other forms of

information technology; and

•

any effects of the amendments on any other collections of information not previously

identified.

Any member of the public may direct to us any comments concerning these burden estimates and

suggestions for reducing the burdens. Persons submitting comments on the collection of

information requirements should direct their comments to the OMB, Attention: Desk Officer for

the Securities and Exchange Commission, Office of Information and Regulatory Affairs,

Washington, DC 20503, and send a copy of the comments to Nancy M. Morris, Secretary,

Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549-9303, with

reference to File No. S7-12-07. Requests for materials submitted to OMB by the Commission

with regard to these collections of information should be in writing, refer to File No. S7-12-07,

and be submitted to the Securities and Exchange Commission, 100 F Street, NE, Washington,

DC 20549. OMB is required to make a decision concerning the collection of information

between 30 and 60 days after publication of this release. Consequently, a comment to OMB is

best assured of having its full effect if OMB receives it within 30 days of publication.

COST-BENEFIT ANALYSIS

Background

As proposed, the adopted amendments restructure the information required by Form D

and mandate the electronic filing of Form D information after a period of time during which

electronic filing is voluntary. Currently, much of the information required by Form D appears to

be useful and justified in the interests of investor protection and capital formation. It also

appears that some useful information that could be required by Form D is not required currently.

On the other hand, Form D currently requires some information that may no longer be useful.

Our staff receives many inquiries from market participants suggesting that Form D could be

clarified and simplified. Moreover, the absence of an electronic system for filing Form D

information prevents issuers from filing through efficient modern methods and limits the

usefulness of the information collected on Form D. The rules we adopt today address

deficiencies in the Form D data collection requirements and process. We expect that the

amendments, in general, will provide benefits by clarifying, simplifying and updating the

information requirements of Form D and modernizing the related information capture process.

We solicited comment on the expected benefits and costs and on any others that may

result from adoption of the proposed changes as well as suggested alternatives. We also

requested that commenters provide empirical data and other factual support for their views to the

extent possible. No commenter expressly addressed the cost-benefit analysis in the proposing

release but some commenters cited benefits consistent with those described immediately above

in the course of making a variety of suggestions and observations. We discuss these comments

throughout the release as applicable.214

214

As to benefits, for example, we noted that one commenter stated that if one-stop filing were implemented

properly, it would reduce significantly the costs and burdens of preparing and filing Form D with the

Commission and the states. See letter from ABA. As to costs, for example, we noted that the same

Benefits

We expect the amendments to benefit issuers, regulators and members of the public. In

particular, the amendments should

•

ease filing burdens;

•

result in better public availability of Form D information;

•

enhance the utility of Form D as a means to promote federal and state uniformity and

coordination; and

•

improve collection of data for Commission enforcement and rulemaking efforts.

The amendments should ease filing burdens because filers should find it easier to respond

to the revised information requirements of Form D.215 It should be easier to

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