What Is Form D?

Form D is a document that must be filed with the Securities and Exchange Commission (“SEC”) by certain companies raising money from investors. The purpose of the filing is to notify the SEC that the company raising money is doing so under a specific federal exemption from registration. Under the Securities Act of 1933, any offer to sell securities must either be registered with the SEC or meet an exemption from registration. The exemptions applicable to Form D are Rules 504, 505, or 506 of Regulation D or Section 4(a)(5).

The form itself is a four page document — here’s a link to the actual Form D — that includes sections for the company to identify itself, its promoters, executive officers and directors, and details about the offering, including the exemption being relied upon, the duration of the offering, the equity being offered to the investors, and the compensation, if any, being paid to brokers in connection with the offering.

Filing Form D: The Process

Although the SEC provides access to a sample Form D via the link in the previous section, the filing must be made online through the SEC’s EDGAR system — EDGAR is an acronym for “electronic data gathering, analysis and retrieval.” The SEC published a helpful guide on how to make the filing, including the necessary filings that are required by the SEC prior to filing Form D. As a word of caution, though, the filings required prior to filing Form D will make the filer first navigate through a clunky and outdated system. 

As for timing, Form D must be filed with the SEC within 15 days after the first sale of securities in the offering. The SEC defines the date of first sale in the instructions of Form D as “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.” The SEC fortunately doesn’t charge a filing fee to make the Form D or the other related and necessary filings.

Effects of Making, and Failing to Make, the Form D Filing

The Form D filing is merely a notice filing, which means that the filing is not required to be made for a company to rely upon an exemption from registration. Companies that fail to make the filing, whether timely or otherwise, are not penalized by the SEC for failing to do so, with two caveats: 1) The SEC has the power to seek to enjoin the company from raising capital in the future under Regulation D; and 2) Since the filing is required under Rule 503, and a willful violation of Rule 503 is a felony, intentional failure to file Form D raises that risk.

Related State Filings

Each individual state has its own securities laws, which are often referred to as “blue sky laws.” Broadly speaking, those laws require, amongst other things, that certain types of securities offerings must be registered in the states in which the offering occurs. Registration at the state level creates a significant burden upon companies seeking to raise capital, due to the additional required filings and filing fees, particularly if investors are located in multiple states, each of which has its own particular registration requirements.

With that burden in mind, in 1996 Congress passed the National Securities Markets Improvement Act (“NSMIA”), which permits some securities offerings to be exempt from state registration requirements; those securities are referred to as “covered securities.” Companies seeking to raise capital therefore often seek to do so through covered securities. Of the three rules under Regulation D — those are Rules 504, 505, and 506 — only Rule 506 securities are deemed to be covered and therefore exempt from registration at the state level. Due to being covered, most Regulation D offerings are conducted in reliance upon Rule 506, as opposed to Rules 504 or 505.

Although exempt from state registration requirements, under the NSMIA companies issuing covered securities in reliance on Rule 506 must still comply with certain state level filing requirements — those usually include filing a copy of the Form D, along with paying a filing fee — if the issuing company conducts a securities offering or issuance within that state’s borders.

Some states allow such filings to be made easily and directly through the North American Securities Administrators Association’s (“NASAA”) Electronic Filing Depository. Many others do not. Here in Oregon, for example, filings may not be made through the NASAA’s Electronic Filing Depository and must instead be made the old fashioned way — that is, directly with Oregon’s state regulatory agency (the Oregon Department of Consumer and Business Services) by making the filing within 15 days after the first sale in Oregon and paying a filing fee of $250.