The Securities and Exchange Commission requires companies to file a specific form called “Form D” when raising capital from investors. The required filing has been put in place by the SEC so that it will be notified when a particular company raising funds is doing so under one of the allowable federal exemptions from registration. Per the 1933 Securities Act, a company offering securities must either obtain an exemption from SEC registration or they must register the security with the SEC. Form D and its submission are involved when the exemptions come from Rules 504, 505, or 506 of Regulation D or Section 4(a)(5).
Form D consists of four pages. The sections of the form include those in which the company provides information about itself, its directors and executive officers, its promoters, the offering, and its duration, the exemption being claimed, any compensation being paid to brokers from the offering, and any equity offered to investors.
The Process of Filing Form D
Once the first sale of securities from the offering occurs, the issuer has 15 days to file Form D with the SEC. The SEC does not require a filing fee to file Form D.
Why You Should File Form D
When an issuer is operating under one of the Rules (504, 505, or 506) of Regulation D, there are a number of benefits to filing Form D. These include:
- No filing fees
- Little to no time is required to learn state laws – it covers you throughout the nation
- The process is simple – you only need to notify the SEC of executive officers, stock promoters, and other general info
- It protects you from liabilities that could damage the reputation of your company
- The public can easily find your company’s information
Depending on the Form D filing regulations of your state, you may also need to file this form with your state, which may also include a filing fee.
Why You Should Not File Form D
Most companies file Form D because it offers the most benefits. Some of the few reasons not to file Form D include:
- You want to keep your investors’ names private and out of public knowledge
- You intend to issue a public offering for securities
After You Have Filed Form D
Once you have filed Form D, the SEC will validate your request and decide whether to accept or reject your application. You will receive the determination through email. If the SEC rejects your application, it will explain why in the email and give instructions on how to correct the issue(s).
A Form D filing as the result of participating in an applicable Regulation D exemption has a number of advantages. Before proceeding to file the form with the SEC, the issuer must determine if those advantages outweigh any potential disadvantages.
