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» Reg D Requirement – The SEC Form D Explained

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Regulation D of the Securities and Exchange Act of 1933 makes it possible for companies to raise money, without formerly registering with the SEC.  Instead of going through all the steps to issue a public offering, a company can issue a private offering under Reg D.  There are multiple rules for Reg D including: Rule 504, Rule 505, and Rule 506.  Each one details out the amount of capital that can be raised, how many investors can participate, and the accreditation standards for investors.  Regardless of which rule you use, the SEC requires you to complete and file Form D.

Here is what you need to know about Form D, prior to issuing a private offering:

  • Form D Must Be Filed with the SEC. If you are raising money under Rule 504, Rule 505, or Rule 506a/b you can file Form D after you sell your security.  If you are raising money under Rule 506c, allowing for general solicitation, you must file fifteen days prior to selling any shares or units.
  • The form is filed electronically. This is through the EDGAR database. In order to file you need to have access with a secure login.  Start this process at least two weeks in advance, as it can take time.
  • Date of First Sale. The electronic version was amended to include a disclosure for the first date you sold a unit or share through your private offering.  If you are using Rule 506c this will be filed well in advance of a sale.
  • Business Information. You need to disclose basic business information, including: name, address, state of incorporation, business type, industry, and annual revenue.
  • Related Persons. You need to document “related persons”.  These are people that are promoting the offering or acting on behalf of the company in relation to the private offering.
  • Type of Exemption. You need to decide which rule you are using to raise money and identify it here.
  • Type of Security. Document the type of security you are issuing.  For example: are you raising debt or selling shares for equity?
  • Minimum Investment. Is there a minimum investment you are requiring for people to participate?
  • Sales Compensation. If you are working with a broker dealer, and offering a commission, you will need to document it here.
  • Offering Details. Disclose how much money you are trying to raise.  You can go back later and amend this at any time.
  • Accredited Investors. If you have sold any shares or units to non-accredited investors, you must disclose it here. WARNING be very careful of accepting funds from non-accredited investors.  It could open you up to additional regulations.
  • Use of Funds. Disclose how you intend to use the capital you are raising through your private placement offering.

The information requested in Form D is not too extensive but you should know the answers prior to starting the process.  It is important to understand which rule you want to use for your private placement offering.  For example do you want to be able to market your offering?  If so, you need to issue it under Rule 506c.  For additional clarification, consult a Securities Attorney.

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