What Do the SEC’s Proposed Reg D Rules Actually Require?

SEC reg D rule requirements

You might be wondering – what exactly do the SEC’s proposed changes to Reg. D and Form D actually require? I have put together the below distillation in an attempt to summarize the changes in one page.
The proposed rules make the following six fundamental changes to Reg. D and Form D:

  1. They require the filing of a Form D in Rule 506(c) generally solicited offerings at least 15 days before the issuer engages in general solicitation. As a practical matter, because the Form D is going to require a lot more information once these rules are effective, companies should plan to start working on Forms D with their professional advisors at least 30 days in advance of their first general solicitation so that they can be sure to make the 15 day deadline. For example, a company wants to participate in a public Demo Day on March 15th. The company should start working with its lawyers in February to be sure to make the deadline.
  2. They require the submission of written general solicitation materials used in Rule 506(c) offerings to the SEC before their use. Under the proposed rules, companies are going to have to submit their materials to a private SEC website—not EDGAR.
  3. They disqualify an issuer from relying on Rule 506 for one year for future offerings if the issuer, or any predecessor or affiliate of the issuer, did not comply within the last 5 years with Form D filings requirements in a Rule 506 offering. For example, if you miss a 15 or 30 day filing deadline, and you don’t cure the miss within 30 days, you won’t be able to use Rule 506 on your next offering for 1 year after your current offering. If you miss a 15 or 30 day deadline, but cure it within 30 days, you are OK—but you only get 1 cure per offering. So if you miss another 15 or 30 day deadline, you are in the penalty box.
  4. They require substantial additional information to be included in Form D. Republican Congressman Scott Garrett (5th District, New Jersey) calls this a “wildly-expanded Form D.” http://garrett.house.gov/press-release/congressmen-mchenry-garrett-send-letter-sec-chair-white-questioning-legality-proposed
  5. They require written general solicitation materials used in Rule 506(c) offerings to include specific legends. The legends are prescribed in the rules. They are lengthy. They exceed Twitter length.
  6. They require the filing of a closing amendment to Form D after the termination of any Rule 506 offering.

Helpful Links:

The draft rules

Comment on the draft rules

A letter critical of the proposed rules from two Congresspersons to the SEC

Comments submitted to this SEC so far

Angel Capital Association held a webinar on August 6, 2013

See also Save Reg D

About Joe Wallin

Joe Wallin focuses on emerging, high growth, and startup companies. Joe frequently represents companies in angel and venture financings, mergers and acquisitions, and other significant business transactions. Joe also represents investors in U.S. businesses, and provides general counsel services for companies from startup to post-public.
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