When your company is receiving venture capital financing or issuing private securities, your company may not have to register with the SEC, but the company is still subject to certain disclosures and must comply with securities laws. The SEC Form D is an important document that most companies receiving financing must file through the SEC's EDGAR filing system in order to protect themselves from legal consequences.
In order to ensure that your company is in compliance with all SEC regulations and securities laws, it is important to find a securities lawyer you can trust before you consider financing or offering sales of equity. Priori Legal can help match you with a securities lawyer who fits your needs.
Breaking Down the SEC Form D Filing
About Regulation D Offerings
Regulation D (or Reg D) offerings are securities issued under the SEC's Regulation D. This regulation governs private placement exemptions that allow companies to raise capital through equity sales or debt securities without having to register with the SEC. Generally, startups or smaller private companies going through financing rounds issue Regulation D offerings.
What Is the SEC Form D?
The SEC Form D, sometimes called a Notice of Sale of Securities, is a notice whereby a company declares an exempt offering of securities under Regulation D. While the SEC usually requires securities issuers to report regularly, companies that qualify under Regulation D can simply issue a single Form D notice after each major issuance using the SEC's EDGAR database.
Form D Filing
The SEC Form D requires companies to make several disclosures and provide basic information about the company and its investors. More specifically, Form D requires the following information:
- basic information about the company, its officers, and its corporate structure;
- a summary of the offering;
- securities pricing and funds raised;
- date of first sale;
- identities of any brokers;
- disclosure documentation; and
- the specific exemption claimed .
Benefits of Regulation D Offerings
Regulation D offerings allow a company to obtain funding faster while avoiding the costs associated with a public offering. In addition, the SEC requires less disclosure documentation under Regulation D. In the case of early-stage startups or other situations where a public offering would not be possible or practical, Regulation D offerings ensure that companies can access capital via equity sales in a structured environment.
When to File a Form D
Most venture capital financing rounds require private companies to file Form D via the SEC's online EDGAR database. In addition, private companies must file Form D after any sale of equity. Although there are exceptions to this rule, it is important to consider your Regulation D compliance requirements before any sale of private securities. A securities lawyer will be able to tell you exactly when an SEC Form D is necessary.
Depending on your situation, the cost of filing Form D can vary. Hourly rates for Priori securities lawyers start around $225 per hour and range up to $450 per hour. In order to get a better sense of cost for your particular situation, put in a request to schedule a complimentary consultation and receive a free price quote from one of our lawyers.
What can happen if I don’t file a Form D when I should?
If you don’t file a Form D after a qualifying sale, you can be liable for SEC penalties for non-compliance. These include injunctive relief, fines, other penalties, and possible criminal prosecution. In addition, the SEC can revoke your company's qualification for a Regulation D exemption, which opens your company up to shareholder fraud allegations and penalties.