Reg D Offering

Regulation D Offerings

Under the Securities Act of 1933, any offer to sell securities must either be registered with the SEC or meet an exemption. Regulation D (or Reg D) contains three rules providing exemptions from the registration requirements, allowing some companies to offer and sell their securities without having to register the securities with the SEC. For more information about these exemptions, read our publications on Rules 504505, and 506 of Regulation D.

While companies using a Reg D (17 CFR § 230.501 et seq.) exemption do not have to register their securities and usually do not have to file reports with the SEC, they must file what’s known as a “Form D” after they first sell their securities. Form D is a brief notice that includes the names and addresses of the company’s executive officers and stock promoters but contains little other information about the company.

In February 2008, the SEC adopted amendments to Form D, requiring that electronic filing of Form D be phased in during the period September 15, 2008 to March 16, 2009. Although as amended, the electronic Form D requires much of the same information as the paper Form D, the amended Form D requires disclosure of the date of first sale in the offering. Previously, disclosure of the first date of sale was not required. The Office of Small Business Policy has posted information on its web page about the filing requirements for the new Form D.  More about that at the end of this article.

As an entrepreneur, you are exceptionally good at what you do. You have been successful investing in real estate, cryptocurrency, commodities, or you have an amazing idea for a new product or service. You have the talent, but what you need is the capital to make it all happen.  When you use your own money to build your business, others pay little attention to your success or failure.  When you use other people’s money, organizations known by their acronyms pay remarkably close attention.  The SEC and DOJ are just two of those organizations.

This is why it is important to hire a law firm like Centarus.  This is all we do: (1) drafting private placements, (2) drafting public offerings, and (3) representing other lawyer’s clients in front of the Securities and Exchange Commission in regulatory defense actions, when they are facing investigation.

Our extensive litigation and regulatory defense experience allows us to draft documents that anticipate and avoid the mistakes we see other less experienced law firms make.  Our lawyers, in dealing with regulators, know things that cannot be learned in books.

There is no margin for error when  it concerns regulatory compliance.  As a securities law firm, we know that the SEC doesn’t inform securities violators that they, “will let you off with a warning this time, just don’t let it happen again.”  This is why you should always work with a Reg D Attorney.  Our PPM Attorney have drafted thousands of Regulation D private placement memorandums. And, unlike other law firms in this space, a major part of our business is regulatory defense.

Our regulatory defense practice involves clients of other law firms hiring us to represent them when an offering goes “wrong,” and the SEC or state regulators initiate an investigation into one or more offerings. Our experience defending clients in these types of actions is difficult to find at small and midsized law firms.  We urge prospective clients not to gamble their futures by using an internet template or non lawyer to draft securities offering documents.

Now that you more fully understand the importance of conducting a compliant offering, you may like to know more of what a Reg D Attorneys does when drafting a PPM.

Your Private Placement Memorandum will be used in multiple ways.  It will disclose to your investors what they are receiving for the capital they are investing. You can offer them equity in your company, you can offer them debt, or you can offer them convertible debt.  A Reg D Lawyer will guide you through each of these scenarios if you are unfamiliar with these options.

Your Reg D Offering will detail the risks involved, the terms of the investment, the time frame and all the other required information a sophisticated investor will be expecting to see.  As an early-stage securities issuer, you should avoid providing an interested investor a template PPM. Most sophisticated investors will hire a corporate or securities attorney to review a PPM before they invest, and if they or their attorneys determine that a template has been used, it will immediately dissuade these investors from investing.

A Reg D Lawyer will custom draft the Subscription Agreement that you will also provide to your investors.  This document is provided along with the PPM, and it is a legal document that qualifies your investor, making certain that they have the financial ability and sophistication to invest in your offering.  Additionally, it describes the financial terms of your offering and what investors are expecting to receive in exchange for their investment.

As you might expect, there are multiple securities regulations surrounding the issuance of a Regulation D private placement memorandum.  Working with a Reg D Attorney at our firm gives you the same confidence that you would have with a skilled professional in the medical or financial field.  We have earned this level of trust through our education, experience, professionalism and results.

The final aspect of your Reg D Offering is setting out to raise the capital.  There are never guarantees that clients will fully subscribe their offering.  However, as an entrepreneur with a track record of success, you know that luck favors the prepared.  Hiring our firm will allow you to be prepared. Additionally, you will be teamed up with experienced securities attorneys, who are known for working with small to midsized businesses for close to two decades.

The final responsibility of the process is to file a Form D notice within 15 days after the first sale of securities in the offering. Form D notices and amendments must be filed online using the SEC’s EDGAR (Electronic Data Gathering Analysis and Retrieval) system.

For more information on filing a Form D notice, you can visit the U.S. securities and Exchange commission web site here.

https://www.sec.gov/education/smallbusiness/exemptofferings/formd

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