[Federal Register: February 27, 2008 (Volume 73, Number 39)]
[Rules and Regulations]
[Page 10591-10642]
[DOCID:fr27fe08-12]

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Part IV

Securities and Exchange Commission

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17 CFR Parts 230, 232, and 239

Electronic Filing and Revision of Form D; Final Rule

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 230, 232, and 239

[RELEASE NOS. 33-8891; 34-57280; 39-2453; IC-28145; FILE NO. S7-12-07]
RIN 3235-AJ87

Electronic Filing and Revision of Form D

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

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SUMMARY: The Securities and Exchange Commission is adopting rule
amendments mandating the electronic filing of information required by
Securities Act of 1933 Form D through the Internet. We also are
adopting revisions to Form D and to Regulation D in connection with the
electronic filing requirement. The revisions simplify and restructure
Form D and update and revise its information requirements. The
information required by Form D will be filed with us electronically
through a new online filing system that will be accessible from any
computer with Internet access. The data filed will be available on our
Web site and will be interactive and searchable.

DATES: Effective Date: September 15, 2008 except the amendments to
Sec.  232.101(c)(6) and Sec.  232.201(a) are effective March 28, 2008,
Sec.  232.101(a)(1)(xiii) is effective March 16, 2009 and Sec.
230.503T, Sec.  232.101(b)(10) and Sec.  239.500T are effective from
September 15, 2008 to March 16, 2009.

FOR FURTHER INFORMATION CONTACT: Questions about this release should be
addressed to Gerald J. Laporte, Chief, or Corey A. Jennings, Attorney-
Advisor, Office of Small Business Policy, Division of Corporation
Finance, or Mark W. Green, Senior Special Counsel (Regulatory Policy),
Division of Corporation Finance, Securities and Exchange Commission,
100 F Street, NE., Washington, DC 20549-3628,<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION: We are adopting revisions to Rules 100,\1\
101,\2\ 104,\3\ 201,\4\ and 202 \5\ of Regulation S-T,\6\ Rules 502 \7\
and 503 \8\ of Regulation D,\9\ and Form D \10\ under the Securities
Act of 1933 (``Securities Act'').\11\ We also are adding temporary Rule
503T and Temporary Form D under the Securities Act and temporary Rule
101(b)(10) of Regulation S-T.
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    \1\ 17 CFR 232.100.
    \2\ 17 CFR 232.101.
    \3\ 17 CFR 232.104.
    \4\ 17 CFR 232.201.
    \5\ 17 CFR 232.202.
    \6\ 17 CFR 232.10 et seq.
    \7\ 17 CFR 230.502.
    \8\ 17 CFR 230.503.
    \9\ 17 CFR 230.501-508.
    \10\ 17 CFR 239.500.
    \11\ 15 U.S.C. 77a et seq.
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Table of Contents

I. Executive Summary and Background
    A. History and Purpose of Form D
    B. Need to Update Form D and Require Electronic Filing
    1. Easing Filing Burdens
    2. Better Public Availability of Form D Information
    3. Federal and State Uniformity and Coordination; One-Stop
Filing
    4. Improved Collection of Data for Commission Enforcement and
Rulemaking Efforts
    C. Summary of Adopted Amendments
II. Discussion of Amendments
    A. Amendments to Form D Content Requirements
    1. Basic Identifying and Contact Information
    2. Additional Information About Issuer
    3. Identification of Claimed Exemptions and Exclusions
    4. Indication of Type of Filing
    a. General Requirements
    b. Amendment of Previously Filed Form D
    5. Information About Offering
    6. Signature and Submission
    B. Electronic Filing of Form D
    C. General Solicitation and General Advertising Issues Presented
by Electronic Filing of Form D
III. Electronic Filing Procedure
    A. Mechanics
    B. Database Capabilities of Electronic Form D Repository
    C. System Implementation
IV. Paperwork Reduction Act Analysis
V. Cost-Benefit Analysis
VI. Consideration of Impact on Competition and Promotion of
Efficiency, Competition and Capital Formation
VII. Final Regulatory Flexibility Act Analysis
VIII. Statutory Basis and Text of Amendments

I. Executive Summary and Background

A. History and Purpose of Form D

    On June 29, 2007, we issued a release in which we proposed for
public comment rule amendments mandating the electronic filing of Form
D through the Internet and revisions to that form.\12\ In this release,
we are adopting the amendments substantially as proposed. As further
described below, companies will be permitted to file Form D information
voluntarily through the Internet when our new Form D electronic filing
system becomes available on September 15, 2008 and will be required to
file electronically through the Internet on and after March 16, 2009.
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    \12\ We proposed the amendments in Release No. 33-8814 (June 29,
2007) [72 FR 37376]. The comment letters we received in response to
the proposing release were filed in File Number S7-12-07 and are
available at http://www.sec.gov/comments/s7-12-07/s71207.shtml or
from our Public Reference Room at 100 F Street, NE., Washington, DC
20549.
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    Form D serves as the official notice of an offering of securities
made without registration under the Securities Act in reliance on an
exemption provided by Regulation D.\13\ Both public and nonpublic
companies file information using this form.
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    \13\ Regulation D contains separate exemptions for limited
offerings in Rules 504, 505 and 506. Form D also is to be used by
issuers making offerings of securities without registration in
reliance on the exemption contained in Section 4(6) of the
Securities Act [15 U.S.C. 77d(6)]. Although we primarily discuss
Regulation D in this release, the revised Form D also will continue
to apply to Section 4(6) offerings. Regardless of the type of
offering to which revised Form D applies, it will be required to be
filed electronically after a transition period during which we will
allow either paper or electronic filing.
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    Regulation D was part of a Commission initiative in the early 1980s
to provide a more coherent pattern of exemptive relief from the
registration requirements of the Securities Act, and particularly to
address the capital formation needs of small business.\14\ At the time,
we intended the Form D filing requirement in Rule 503 of Regulation D
to serve an important data collection objective.\15\ We expected that
the empirical data derived from the Form D filings would enable us to
better evaluate the effectiveness of Regulation D as a capital raising
device and eventually to further tailor our rules to provide
appropriate support for both capital formation, especially as it
relates to small business, and investor protection.\16\
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    \14\ We adopted Form D and Regulation D in 1982. Release No. 33-
6389 (Mar. 8, 1982) [47 FR 11251] (adopting Form D as a replacement
for Forms 4(6), 146, 240 and 242). They had been proposed in the
previous year. Release No. 33-6339 (Aug. 7, 1981) [46 FR 41791]
(proposing Regulation D and Form D).
    \15\ We stated in the proposing release for the original Rule
503:
    ``An important purpose of the notice * * * is to collect
empirical data which will provide a basis for further action by the
Commission either in terms of amending existing rules and
regulations or proposing new ones * * *. Further, the proposed Form
would allow the Commission to elicit information necessary in
assessing the effectiveness of Regulation D as a capital raising
device for small businesses.''
    Release No. 33-6339 (Aug. 7, 1981) [46 FR 41791, 41799].
    \16\ Release No. 33-6339 (Aug. 7, 1981) [46 FR 41791, 471799].
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    We modified the requirements relating to Form D in 1986, making
Form D a uniform notification form that could be filed with state
securities

regulators.\17\ This effort was undertaken with the cooperation of the
North American Securities Administrators Association (NASAA), the
organization of state securities regulators, as part of the
Commission's efforts to reduce the costs of capital formation for small
business and to promote uniformity between federal and state securities
regulation. At that time, we also eliminated the requirement to amend a
Form D filing for an offering every six months during the course of the
offering and the requirement to make a final Form D filing within 30
days of the final sale in the offering. We left intact the requirement
in Rule 503 to file a Form D notification within 15 days after the
first sale of securities in an offering, leaving that as the sole
current explicit requirement for a Form D filing.\18\
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    \17\ Release No. 33-6663 (Oct. 2, 1986) [51 FR 36385].
    \18\ 17 CFR 230.503.
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    In 1989, we amended the Regulation D exemptions to eliminate the
filing of Form D information as a condition to their availability.\19\
At that time, we also added Rule 507 to Regulation D to provide an
incentive for issuers to make a Form D filing, even though it was no
longer a condition to the availability of the Regulation D
exemptions.\20\ Specifically, Rule 507 disqualifies an issuer from
using a Regulation D exemption in the future if it has been enjoined by
a court for violating Rule 503 by failing to file the information
required by Form D.\21\ Consequently, an issuer has an incentive to
make a Form D filing to avoid the possibility that a court will enjoin
the issuer for violating Rule 503 and, as a result, disqualify the
issuer from using a Regulation D exemption in the future.
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    \19\ Release No. 33-6825 (Mar. 15, 1989) [54 FR 11369].
    \20\ Id.
    \21\ On August 3, 2007, we issued a release proposing changes to
Regulation D. See Release No. 33-8828 (Aug. 3, 2007) [72 FR 45116].
Among those changes were moving Regulation D's exemption
disqualification provisions to a new subparagraph (e) of Rule 502
and adopting a new exemption that would appear in a revised Rule 507
of Regulation D. The Regulation D release also sought additional
comment on the proposals we made in Release No. 33-8766 (Dec. 27,
2006) [72 FR 400] that concerned accredited investors in certain
private pooled investment vehicles. Since we have not adopted and
are still considering the changes proposed in the Regulation D
release and the accredited investor changes proposed in the private
pooled investment vehicle release, the new Form D and its
implementing rules do not reflect those changes, as did the Form D
in the Form D proposing release. We are still considering the
proposed changes to Form D that would be necessary to reflect
adoption of the Regulation D and private pooled investment vehicle
changes, and may adopt the Form D changes if we adopt the Regulation
D and private pooled investment vehicle changes.
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    In 1996, we proposed to eliminate the Form D filing requirement and
replace it with an issuer obligation to complete a Form D and retain it
for a period of time.\22\ At the time, our Task Force on Disclosure
Simplification had suggested that the Commission consider the continued
need for a Form D filing requirement.\23\ After reviewing comments on
the proposal, we determined that the information collected in Form D
filings was still useful to us ``in conducting economic and other
analyses of the private placement market'' and retained the
requirement.\24\ In 1998, we solicited public comment on, but did not
propose, requiring electronic filing of the Form D notice.\25\ The
public comments generally favored electronic filing in principle but
expressed concern about Form D filers needing to follow the same
procedures as then were required generally for filings through the
Commission's electronic filing system, called the Electronic Data
Gathering, Analysis and Retrieval or ``EDGAR'' system.
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    \22\ Release No. 33-7301 (May 31, 1996) [61 FR 30405].
    \23\ SEC Task Force on Disclosure Simplification, Final Report
17 (Mar. 5, 1996), available at http://www.sec.gov/news/studies/
smpl.txt.
    \24\ Release No. 33-7431, at 5 (July 18, 1997) [62 FR 39755,
39756].
    \25\ Release No. 33-7541 (May 21, 1998) [63 FR 29168].
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    In summary, our previous statements on Form D have suggested that,
at the federal regulatory level, the Form D filing serves two primary
purposes:
     Collection of data for use in the Commission's rulemaking
efforts; and
     Enforcement of the federal securities laws, including
enforcement of the exemptions in Regulation D.\26\
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    \26\ Release No. 33-6389 (Mar. 8, 1982) [47 FR 11251] and
Release No. 33-7431 (July 18, 1997) [62 FR 39755].
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    The information submitted in Form D filings also is useful for
other purposes. The staffs of state securities regulators and the
Financial Industry Regulatory Authority (FINRA), the successor to the
member firm regulatory functions of the National Association of
Securities Dealers, Inc. and NYSE Regulation, Inc., also use Form D
information to enforce securities laws and the rules of securities
self-regulatory organizations. Form D filings also have become a source
of information for investors. Our Web site advises potential investors
in Regulation D offerings to check whether the company making the
offering has filed a Form D notice and advises that ``[i]f the company
has not filed a Form D, this should alert you that the company might
not be in compliance with the federal securities laws.'' \27\ In
addition, the information in Form D filings serves as a source of
business intelligence for commercial information vendors, as well as
for participants in the venture capital, private equity, and other
industries that rely on Regulation D offerings and for competitors of
companies that file Form D information. Academic researchers use Form D
information to conduct empirical research aimed at improving the
workings of these industries.\28\ Journalists use Form D information to
report on capital-raising in these industries.\29\
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    \27\ See http://www.sec.gov/answers/formd.htm.
    \28\ For a discussion of how academic researchers are using
available data on private investments to improve the workings of the
venture capital industry, see A. Ginsberg, Truth, or Consequences:
Academic Researchers are Helping Policy Makers and Practitioners
Understand the Problems Facing the Venture Capital Industry,
Innovation Review 8 (Berkley Center for Entrepreneurial Studies,
Fall 2002).
    \29\ See, e.g., R.J. Terry and B. Hammer, NEA Closes $2.5
Billion Fund, Baltimore Bus. Journal, July 10, 2006.
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B. Need To Update Form D and Require Electronic Filing

    Currently, much of the information required by Form D appears to be
useful and justified in the interests of investor protection and
capital formation.\30\ It also appears that some useful information
that could be required by Form D is not required currently. On the
other hand, Form D currently requires some information that may no
longer be useful. Our staff receives many inquiries from market
participants suggesting that Form D could be clarified and simplified.
Moreover, the absence of an electronic system for filing Form D
information prevents issuers from filing through efficient modern
methods and limits the usefulness of the information collected on Form
D. The rules we adopt today address deficiencies in the Form D data
collection requirements and process.
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    \30\ For example, information provided in response to the
requirement to check the applicable specified exemptions from
registration claimed by the issuer helps the Commission monitor and
better evaluate use of the claimed exemptions in order to protect
investors and facilitate the development of private and limited
markets in which to raise capital.
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1. Easing Filing Burdens
    Our new Form D rules are intended to ease the costs and burdens of
preparing and filing Form D information. The informational requirements
will be streamlined and updated. The instructions will be clarified and
simplified. Issuers will file Form D information electronically through
a new online filing system that will be

accessible from any computer with Internet access. Issuers will provide
data by responding to discrete information requests. Appropriate data
entries will be reviewed automatically for proper characters and
consistency with entries in other fields. Data entry fields will be
accompanied by links to instructions and other helpful information. We
believe these system features, among others, will help facilitate a
relatively easy-to-use filing process that will deliver accurate
information quickly, reliably, and securely.\31\ The Form D filing will
continue to be required within 15 days of an issuer's first sale in an
offering without Securities Act registration in reliance on one or more
of the exemptions provided in Regulation D, and the rules will clarify
when amendments are required. Paper filing of Form D information will
be eliminated after a transition period in which the information may be
filed either electronically through the Internet or in paper.\32\
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    \31\ The new online filing system is discussed in further detail
in Part III of this release.
    \32\ Rule 101 of Regulation S-T, Rule 503 of Regulation D and
the description of Form D will mandate electronic filing of Form D
information subject to varied effective dates and temporary
provisions, which together will permit the information to be filed
either electronically through the Internet or in paper during the
transition period. The transition period is discussed more fully in
Part III.C below. Currently, our rules require issuers to file five
paper copies of the Form D with us by mail or physical delivery to
Commission headquarters. 17 CFR 230.503(a). The Commission received
27,843 Form D filings in its most recently ended fiscal year, 2007.
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2. Better Public Availability of Form D Information
    Requiring the electronic filing of Form D data through the Internet
will make the information filed more readily available to regulators
and members of the public.\33\ The information will be available on our
Web site and, because the online filing system will automatically
capture and tag data items, the data will be interactive and
searchable. The Commission's public Web site at http://www.sec.gov will
enable users to view the information in an easy-to-read format,
download the information into an existing application, or create an
application to use the information.
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    \33\ Most filings made with us currently are filed
electronically through our EDGAR system. We began to make EDGAR
electronic filing mandatory in 1993. Initially, a number of forms--
including Form D--were excluded from mandated electronic filing.
Since the launch of the EDGAR system, we have increased the number
of forms that are required to be filed electronically, but Form D
has remained a paper-only filing. It will continue to remain so
until the September 15, 2008 effective date of voluntary electronic
filing, when companies will be able to file Form D information
either in paper or electronically until the end of the phase-in
period on March 16, 2009. Beginning on that date, Form D information
will be required to be filed electronically through the Internet.
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    Unlike information filed with us electronically, paper filings are
available from us only in person in our Public Reference Room or by
means of a mail request. We charge a nominal fee for copies of Form D
filings. Some Form D filings are available at higher cost from private
vendors through the Internet and telephone requests.
3. Federal and State Uniformity and Coordination; One-Stop Filing
    For over 20 years, Form D has served as a means to promote federal
and state uniformity and coordination in securities regulation by
providing a uniform notification form that can be filed with the
Commission and with state securities regulators.\34\ The contemplated
electronic filing system for Form D information will continue that
tradition and can enhance the utility of Form D as a means to promote
uniformity and coordination between federal and state securities
regulation.
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    \34\ According to a unit of the American Bar Association, 48
states, the District of Columbia, Puerto Rico, and the U.S. Virgin
Islands accept filings on Form D. New York prescribes its own Form
99. Florida does not require any filing for the types of
transactions other jurisdictions require to be reported on Form D.
See Report on Blue Sky Survey of the NSMIA Subcommittee, Committee
on State Regulation of Securities, American Bar Association Business
Law Section (Feb. 2006).
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    The availability of Form D information filed with us through a
searchable electronic database will enable both federal and state
securities regulators to monitor the exempt securities transaction
markets more effectively. The system also will permit improved
coordination among federal and state regulators, which is essential to
efficient and effective capital formation through exempt transactions,
especially by smaller companies, and to investor protection. State
securities regulators will be able to access the information on our Web
site to learn if new Form D information of interest to them has been
filed.
    The system will enhance uniformity and coordination even more if it
results in ``one-stop filing,'' an approach we and NASAA are exploring.
One-stop filing will enable companies to file Form D information both
with us and with the states they designate in one electronic
transaction. While that capability will not be available when Form D
electronic filing with the Commission begins, we have been working
actively with NASAA to achieve that capability as soon as practicable.
We understand that NASAA is considering establishing its own new
electronic system that would interface with our system and would
receive filings and collect fees on behalf of participating state
securities regulators.\35\ One-stop filing will reduce significantly
the costs and burdens of preparing and filing Form D information with
the Commission and with state securities regulators. This could
represent a substantial savings for small businesses and others filing
Form D information.
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    \35\ The Commission's electronic filing system will not collect
fees on behalf of any states.
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    The commenters that responded to our Form D proposing release that
addressed one-stop filing supported it,\36\ but some made suggestions
and some expressed concerns.\37\ NASAA stated that it envisions a
system that would direct issuers to a NASAA-hosted Web site that lists
the fees for states a filer selects and enables the filer to make an
electronic payment to those states that would include a modest service
charge to defray costs of the site and service.\38\ NASAA also stated
that it envisions that the electronic payment would be made by means of
an electronic funds transfer or credit card transaction. NASAA further
envisions that, after payment, the system would allow a completed Form
D to be filed with the Commission and distributed by the NASAA-hosted
site to the states selected by the filer. Finally, NASAA anticipates
that the Commission would have no direct involvement or responsibility
for the state distribution and payment system. Two commenters expressed
concerns about one-stop filing, relating primarily to the prospects for
timely state adoption \39\ and, in one case, the use of the electronic
system as it relates to the National Securities Markets Improvement Act
of 1996.\40\ Finally, one

commenter expressed hope that companies would continue to be able to
file a Form D notice with a particular state or states and not with the
Commission where the company is comfortable relying on the Section 4(2)
exemption from registration at the federal level and no federal Form D
would be required.\41\ We have considered these comments and will
continue to consider them as we work with NASAA in an effort to
establish one-stop filing.
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    \36\ One commenter, for example, stated that if one-stop filing
were implemented properly, it would reduce significantly the costs
and burdens of preparing and filing Form D with the Commission and
the states. See letter from American Bar Association, Section of
Business Law, Committees on Federal Regulation of Securities and
State Regulation of Securities (ABA).
    \37\ See letters from ABA, Coalition of Private Investment
Companies (CPIC), Connecticut Department of Banking (Connecticut),
Managed Funds Association (MFA), Massachusetts Securities Division
(Massachusetts), NASAA and Pennsylvania Securities Commission
(Pennsylvania).
    \38\ See letter from NASAA.
    \39\ See letters from ABA and MFA.
    \40\ See letter from ABA (``There are several aspects of `one-
stop' filing about which we have particular reservations emanating *
* * partly from a desire to delineate clear boundaries as a result
of federal preemption under the National Securities Markets
Improvement Act of 1996 * * * .''). Section 102(a) of the National
Securities Markets Improvement Act of 1996 (``NSMIA'') [Pub. L. No.
104-290 110 Stat. 3416 (Oct. 11, 1996)] enacted new Section 18 of
the Securities Act [15 U.S.C. 77r], which, in part, limits the
authority of the states to regulate offers and sales of securities
exempt under ``rules or regulations issued under section 4(2)'' of
the Act [15 U.S.C. 77d(2)], which includes Rule 506 but not Rules
504 or 505 of Regulation D.
    \41\ See letter from ABA.
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4. Improved Collection of Data for Commission Enforcement and
Rulemaking Efforts
    The conversion to electronic filing of Form D information through
the Internet in an interactive data format will result in creation of a
database of Form D information and allow us and others to better
aggregate data on the private and limited offering securities markets
and the use of the various Regulation D exemptions. Further, the
software we will use for the Form D electronic filings will require
that filers address each required data field in the form, thus reducing
incomplete filings. Because of these and other features, our Form D
electronic filing system should assist in our enforcement efforts and
enhance our ability to use filed Form D information. The Form D
information database will allow us to better evaluate our exemptive
schemes on a continuing basis in order to facilitate capital formation
in a manner consistent with investor protection. The evaluation could
lead to improvements that would result in significant benefits to
companies that rely on the Regulation D exemptions, especially smaller
companies, as well as benefits to investors.

C. Summary of Adopted Amendments

    In sum, the amendments will:
     Mandate electronic filing of Form D information:
    [cir] After a phase-in period during which electronic filing will
be voluntary; and
    [cir] Through an online filing system that will

0
Be accessible from any computer with Internet access; and
0
Capture and tag data items, so that the data will be interactive and
viewable in an easy-to-read format; and
     Revise Form D's information requirements by:
    [cir] Permitting filers to identify all issuers in a multiple-
issuer offering in one Form D filing;
    [cir] Deleting the current requirement to identify as ``related
persons'' owners of 10 percent or more of a class of the issuer's
equity securities;
    [cir] Replacing the current requirement to provide a business
description of the issuer with a requirement to classify the issuer by
industry from a pre-established list of industries;
    [cir] Requiring revenue range information for the issuer, or net
asset value range information in the case of hedge funds (subject to an
option to decline to disclose);
    [cir] Requiring more specific information on the registration
exemption claimed by the issuer in the Form D notice as well as
information on any exclusion claimed from the definition of
``investment company'' under the Investment Company Act of 1940
(``Investment Company Act); \42\
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    \42\ 15 U.S.C. 80a-1 et seq.
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    [cir] Requiring reporting of the date of first sale in the
offering;
    [cir] Specifying when amendments to a previously filed Form D
notice are required by reason of mistakes of fact, errors or changes to
information in a previously filed notice or the passage of a calendar
year;
    [cir] Requiring reporting of whether the offering is expected to
last over a year;
    [cir] Limiting reporting of the minimum investment amount accepted
in the offering to the amount accepted from outside investors, so as
not to affect employee stock ownership incentive plans adversely;
    [cir] Requiring CRD numbers for both individual recipients of sales
compensation and associated broker-dealers;
    [cir] Replacing the current requirement to disclose information on
a wide variety of expenses and applications of proceeds with a
requirement to report expenses only as to amounts paid for sales
commissions and, separately stated, finders' fees, and report use of
proceeds only as to the amount of proceeds used to make payments to
executive officers, directors and promoters;
    [cir] Replacing the current federal and state signature
requirements with a combined signature requirement that includes an
undertaking to provide offering documents to regulators on request
(subject to applicable law), a consent to service of process and a
certification that the issuer is not disqualified by rule from relying
on an exemption claimed; and
    [cir] Permitting a limited amount of free writing in
``clarification'' fields to the extent necessary to clarify certain
information provided.
    The principal changes from the proposing release include:
     Permitting free writing to clarify responses to a total of
five requests for information;
     Specifying that amendments to a previously filed Form D
notice are required only for material mistakes of fact or errors, and
not for any mistake of fact;
     Providing additional exceptions from changes that
otherwise would require amendments to a previously filed Form D notice;
     Requiring an annual amendment to a Form D notice only if
an entire calendar year has passed since the last filing, and not every
year between January 1 and February 14; and
     Requiring expense and use of proceeds information on
amounts paid for sales commissions, finders' fees, and payments to
executive officers, directors and promoters, instead of eliminating
those requirements.

II. Discussion of Amendments

    As noted above, we believe the revisions we adopt today will have a
positive effect in many areas of interest to the Commission, state
securities regulators, investors, and companies that rely on Regulation
D exemptions. The revisions generally involve simplifying Form D,
easing the burdens of complying with the requirements of the form, and
modernizing the information capture process.
    For each offering of securities that is made without Securities Act
registration in reliance on a claimed exemption under Regulation D, the
issuer must file the information required by Form D with the Commission
no later than 15 days after the first sale of securities. The form
calls for issuers to provide basic identifying information and
fundamental information about the offering. Some of the requirements of
Form D have become outdated with the passage of time since the
Commission adopted them. Further, some of the current form's
requirements and instructions could be clarified and made less
burdensome. The revisions we adopt today address these issues. In
addition, the move to electronic filing necessitates several
modifications. We generally are adopting the amendments substantially
as proposed. Where we are not, we so note below.

A. Amendments To Form D Content Requirements

    Currently, Form D requires presentation of preliminary and other
information required by five sections designated ``A'' through ``E.''
The revisions organize the information requirements around 16 numbered
``items'' or categories of information. Instructions at the end of the
form explain the requirements for each item. On the online form, terms
and items at the front of the form will be linked to the instructions
at the back, which will be available immediately by clicking on a
particular term or item. In this regard, we are adding to the General
Instructions a sentence that provides that terms used but not defined
in the form that are defined in Rule 405 \43\ or Rule 501 \44\ have the
meanings given to them in those rules. The sentence will clarify the
application of Rule 501 and, to the extent it defines the term
``promoter,'' Rule 405.\45\
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    \43\ 17 CFR 230.405.
    \44\ 17 CFR 230.501.
    \45\ One commenter expressly supported defining the term
``promoter'' in the instructions. See letter from Connecticut.
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1. Basic Identifying and Contact Information
    New Form D generally carries over the requirements from current
Form D for basic identifying and contact information and information
about related persons, but modifies or omits some of these types of
requirements. The requirements carried over, however, are restructured
to reflect the electronic character of the filing.
    Item 1, similar to current Form D, requires basic identifying
information, such as the name of the issuer of the securities, any
previous names, the type of legal entity and the issuer's year and
place of incorporation or organization.\46\ We are revising the form to
provide specifically for the identification of multiple issuers in
multiple-issuer offerings. Form D currently does not provide for this,
sometimes raising questions as to how multiple-issuer offerings should
be reported.\47\ Although we proposed to add to the form a requirement
to supply the issuer's Commission file number, if any, we have decided
not to adopt that requirement. We believe requiring the Commission file
number would add a burden but would provide limited benefits because
most Form D filers are nonpublic companies and, as a result, would not
have a Commission file number. Furthermore, it is possible to use other
required information to aid in identifying issuers.
---------------------------------------------------------------------------

    \46\ Issuers will specify their legal entity type (e.g.,
corporation or limited partnership).
    \47\ Currently, the Form D instructions do not specify whether
all issuers in a multiple-issuer offering can be listed in the same
Form D notice or whether each issuer must submit essentially the
same notice. In this situation, the staff currently advises each
issuer to submit a separate Form D notice because the filings are
retrievable in our filing system only by reference to the name of
one issuer. The changes clarify the requirements of this item and
eliminate the burden on issuers to file what are essentially
duplicate notices in order to comply with the requirement to file
Form D information. The new online filing system will support
multiple-issuer filings. As a result, all issuers easily can be
identified in a single filing.
---------------------------------------------------------------------------

    With regard to identifying issuers, two commenters responded to our
solicitation of comment on whether Form D should require CUSIP numbers
and trading symbols. One commenter favored adding such a requirement in
order to help parse information and facilitate automating filing
notices.\48\ The other commenter, however, opposed adding the
requirement as burdensome to issuers and resulting in information that
is not useful.\49\ We believe that the system's data tagging features
will facilitate parsing information and obtaining filing notices to
such an extent that the burden of requiring CUSIP numbers and trading
symbols would not be justified by the benefits to be gained.
---------------------------------------------------------------------------

    \48\ See letter from Pink Sheets LLC.
    \49\ See letter from ABA.
---------------------------------------------------------------------------

    In response to a comment letter,\50\ we have provided a place to
identify an issuer as ``yet to be formed'' instead of providing a year
of organization. The current Form D provides this alternative.
---------------------------------------------------------------------------

    \50\ See id.
---------------------------------------------------------------------------

    Two commenters expressed concern as to whether a filer would be
able to specify its particular foreign place of incorporation or
organization rather than just be able to indicate that the location is
foreign.\51\ We confirm that the online filing system will enable
issuers to specify particular foreign jurisdictions.
---------------------------------------------------------------------------

    \51\ See letters from ABA and Connecticut.
---------------------------------------------------------------------------

    Item 2, similar to current Form D, requires filers to provide place
of business and telephone contact information.\52\
---------------------------------------------------------------------------

    \52\ Some information of the type that Items 2 and 3 require
will automatically appear in appropriate places when the filer
accesses the new online filing system. The system will replicate
information provided by the filer in the course of obtaining the
identifying information needed to access the new online filing
system or in updating such information. The filer will be able to
make changes to such information.
---------------------------------------------------------------------------

    The revised form will include instructions to clarify that post
office box numbers and ``care of'' addresses are not acceptable as
place of business information. One commenter asked that an issuer be
permitted to provide a ``care of'' address because mail might not
otherwise be delivered to the issuer where, for example, the issuer
operates out of another entity's office and a separate address listing
is precluded by lease restrictions or practical concerns.\53\ We
acknowledge the concern, but reiterate our statement in the proposing
release that this information is not collected for mailing purposes.
The purpose of this information is to allow securities enforcement
authorities to determine the location of the issuer's operations and
personnel responsible for the offering. Post office box numbers and
``care of'' addresses do not provide this information. In instances in
which lease restrictions or other practical concerns arise, the issuer
must make arrangements to provide acceptable place of business and
contact information.
---------------------------------------------------------------------------

    \53\ See letter from ABA.
---------------------------------------------------------------------------

    The revised form will differ from the proposed form as to place of
business and telephone contact information. The proposed version would
have required place of business and telephone contact information in a
multiple-issuer offering only for the primary issuer and would not have
permitted such information for the other issuers. In the proposing
release, we reasoned that issuers in multiple-issuer transactions
typically have the same place of business, and we generally do not need
more than one address to contact the responsible personnel for
enforcement purposes. In this regard and upon further consideration
after reviewing the public comment letters, we have decided that the
revised form will differ in one respect--it will permit, but not
require, such information for issuers other than the primary issuer in
a multiple-issuer offering. In so revising the form, we believe we
address the concerns expressed by two commenters. One commenter asked
that we require such information for all the issuers in multiple-issuer
offerings to accommodate states that currently require a separate Form
D from every issuer in a multi-issuer offering, or alternatively, that
we require a separate Form D from each of the issuers.\54\ The other
commenter asked that we permit multiple issuers to provide separate
addresses to avoid the implication that issuers are affiliated when
they are not.\55\ We believe these concerns are adequately addressed by
permitting all issuers to provide the information

because that enables issuers that are filing with states that otherwise
would require separate Forms D to include the information if they wish
to avoid filing the separate forms, if permitted by state law.
---------------------------------------------------------------------------

    \54\ See letter from Pennsylvania.
    \55\ See letter from ABA.
---------------------------------------------------------------------------

    One commenter asked that Form D require the name of a contact
person for the primary issuer and any other issuers in a multiple-
issuer offering.\56\ The commenter stated that contact might be
necessary in connection with the filing itself or in regard to
litigation or enforcement or for other purposes. We believe, however,
that address and telephone number information would be sufficient to
make an initial contact and that it should be possible to proceed from
that point to locate the most appropriate person based on the nature of
the contact.
---------------------------------------------------------------------------

    \56\ See letter from NASAA.
---------------------------------------------------------------------------

    Item 3, similar to current Form D, requires information about
related persons (executive officers, directors, and promoters).\57\ As
proposed, however, we are deleting the current requirement that issuers
identify as ``related persons'' owners of 10 percent or more of a class
of their equity securities.\58\ In so proposing, we reasoned that
---------------------------------------------------------------------------

    \57\ The instructions to Item 3 clarify that disclosure will be
required of each person who has functioned as a promoter of the
issuer within the past five years of the later of the first sale of
securities or the date upon which the Form D filing was required to
be made.
    \58\ We also are revising Item 3 to enable an issuer to clarify
its response. This change is discussed more fully in Part II.C
below.
---------------------------------------------------------------------------

     Investors should continue to have access to this
information, if it is material, in the private placement memorandum
customarily supplied to them or in other information made available
through the issuer; \59\
---------------------------------------------------------------------------

    \59\ Under some circumstances, an issuer must provide, rather
than merely make available, beneficial holder information. For
example, an issuer that offers securities to non-accredited
investors without registration under the Securities Act in reliance
on an exemption provided by Rule 505 [17 CFR 230.505] or 506 [17 CFR
230.506] must provide beneficial holder information under the
circumstances specified by Rule 502(b) [17 CFR 230.502(b)].
---------------------------------------------------------------------------

     We believe we can collect sufficient information to
satisfy the regulatory objectives of Form D by requiring only the
identification of executive officers, directors, and promoters; and
     Issuers that are not reporting companies have raised
privacy concerns with respect to the requirement to identify 10 percent
equity owners who are not executive officers, directors, or promoters
because they do not already have to disclose this information, and the
widespread availability of the information on our Web site may raise
additional privacy concerns for these companies as they seek to raise
capital through a private offering.\60\
---------------------------------------------------------------------------

    \60\ As we stated in the proposing release, from time to time
issuers have asked us to grant confidential treatment to this
information under Securities Act Rule 406 [17 CFR 230.406], but we
have denied such requests consistently because the information
currently is required by Form D. We estimated in the proposing
release that about 95 percent of the companies filing Form D notices
in 2006 were private companies, which frequently are not required to
make public the names of their equity owners in accordance with the
laws of the state or other jurisdiction of their organization.
---------------------------------------------------------------------------

    Two commenters explicitly supported the proposal to delete the
requirement to report publicly the names and addresses of 10 percent or
greater equity holders.\61\ Both commenters cited privacy concerns. One
of the commenters also stated that individual investors would have
access to the information to the extent relevant and omitting the
information would save time and eliminate filing burdens.\62\
---------------------------------------------------------------------------

    \61\ See letters from ABA and MFA.
    \62\ See letter from ABA.
---------------------------------------------------------------------------

    Four commenters objected to the proposal to delete the requirement
to disclose 10 percent or greater holders, citing the usefulness of the
information and, in some cases, questioning the validity of privacy
concerns.\63\ These commenters asserted, in essence, that the
information is useful to:
---------------------------------------------------------------------------

    \63\ See letters from Chris Evans (claiming to represent the
views of the vast majority of news organizations), Massachusetts,
NASAA and Pennsylvania.
---------------------------------------------------------------------------

     State regulators because, for example, it enables them to
determine whether the specified persons are disqualified from
conducting an offering or have an enforcement history that warrants
additional information and disclosure; \64\
---------------------------------------------------------------------------

    \64\ See letters citing one or more of these examples from
Massachusetts, NASAA and Pennsylvania.
---------------------------------------------------------------------------

     The general public because it reveals the investment
activity of public sector entities; \65\ and
---------------------------------------------------------------------------

    \65\ See letter from Chris Evans.
---------------------------------------------------------------------------

     Investors because this degree of ownership control is
material and it cannot be assumed this information will be provided
even if material, especially where disclosure or fraud may be an
issue.\66\
---------------------------------------------------------------------------

    \66\ See letters from Massachusetts and NASAA.
---------------------------------------------------------------------------

    We have considered the differing views on whether to retain the
requirement to report publicly the names and addresses of 10 percent or
greater equity holders. We still believe it is appropriate to delete
the requirement for the reasons discussed above and in the proposing
release. In this regard, we note that Item 3 will continue the current
Form D requirement to report executive officers and directors based on
the functions people perform rather than their titles. Issuers are
required to report the names and addresses of promoters whether they
act directly or indirectly.\67\ We have modified the instructions to
Item 3 slightly from the language proposed to clarify these
requirements. As a result, the requirements should result in public
reporting of all of a company's principal policymakers.
---------------------------------------------------------------------------

    \67\ The words ``directly or indirectly'' are used in the
applicable definition of the term ``promoter'' in Rule 405.
---------------------------------------------------------------------------

    As proposed, we are deleting the requirement that issuers provide
the name of the offering in Form D if the offering has a name. In so
proposing, we stated that naming offerings reported on Form D is not as
common today as it was before the 1986 tax reforms,\68\ when the
current Form D requirement was adopted. We understand that some issuers
have found this requirement to be unclear. For these reasons, we are
deleting the requirement.
---------------------------------------------------------------------------

    \68\ Tax Reform Act of 1986, Pub. L. 99-514, 100 Stat. 2085
(Oct. 22, 1986).
---------------------------------------------------------------------------

2. Additional Information About Issuer
    Item 4 of the new Form D requires issuers to identify their
industry group from a specified list. The requirement to provide
industry group information replaces the current requirement in Form D
to provide a description of the issuer's business.\69\ We believe
simply selecting an industry group classification from a pre-
established list is less burdensome for issuers and more useful for the
regulatory purposes underlying the Form D filing requirement. The
industry group classifications will provide us better, and more easily
retrievable, information about industries and offerings where we may
have identified policy issues.\70\ As proposed, if a company selects
the ``Pooled Investment Fund'' option, pop-up or other data fields will
require the issuer also to select from among lower level options
designating a specific type

of pooled investment fund and to select between ``yes'' and ``no'' as
to whether the issuer is registered as an investment company under the
Investment Company Act.
---------------------------------------------------------------------------

    \69\ The industry group list in the new form differs from the
one in the proposing release primarily in two ways. First, the new
form's list provides for additional choices under the heading
``Energy'' in order to reduce the number of issuers that would need
to choose the less helpful alternative of ``Other Energy.'' Second,
the new form's list omits the specific choices that had been under
the heading ``Business Services'' because we believe greater
specificity is not necessary for issuers in that industry group.
    \70\ The instruction to Item 4 provides that an issuer or
issuers that can be categorized in more than one industry group
should be categorized based on the industry group that most
accurately reflects the use of the bulk of the offering proceeds.
The instruction also provides that, for purposes of responding to
Item 4, the issuer should ``use the ordinary dictionary and commonly
understood meanings of the terms identifying the industry groups.''
---------------------------------------------------------------------------

    We proposed that Item 5 would require all issuers, regardless of
industry group, to either include revenue range information in the Form
D filing or choose the ``Decline to Disclose'' option, which might be
used if a private company considered its revenue range to be
confidential information.\71\ We further proposed that, if the business
were not intended to produce revenue, such as a fund that seeks asset
appreciation, it could select the ``Not Applicable'' option. We
continue to believe that this information will help us to determine the
types and sizes of most issuers that rely on the Regulation D and
Section 4(6) exemptions. For instance, as noted in the proposing
release, this information will increase significantly the effectiveness
of the data collected as a tool for assessing the use of the Regulation
D exemptions for small businesses and other different sizes of issuers.
---------------------------------------------------------------------------

    \71\ The revenue range will be for the most recently completed
fiscal year. Where an issuer has been in existence for less than a
year, it will identify its revenues to date.
---------------------------------------------------------------------------

    We are adopting Item 5, as proposed, except as it will apply to
issuers that classify themselves in Item 4 in the industry group
``hedge funds'' or as pooled investment funds other than venture
capital and private equity funds. In order to obtain information on the
size of these issuers, Item 5 will request them to provide aggregate
net asset value range information.\72\ Consistent with the revenue
range requirement applicable to other issuers, however, these issuers
will be given the option to ``Decline to Disclose'' that information or
to specify that such information is ``Not Applicable.'' This addition
responds to a comment letter stating that ``assets under management''
is a more meaningful measure of the size of such issuers than
revenues.\73\ We believe we can obtain adequate size information about
venture capital and private equity funds from the information on the
total offering amount supplied in response to Item 13, because these
types of funds typically do not engage in continuous offerings of
indefinite amount, unlike hedge funds and some other types of pooled
investment funds.
---------------------------------------------------------------------------

    \72\ The aggregate net asset value will be requested as of the
most recent practicable date.
    \73\ See letter from MFA. Similarly, in commenting on Rel. No.
33-8766 (Dec. 27, 2006) [72 FR 399], another commenter stated that
it believed it would be useful to the Commission and investors if
Form D would require information on pooled investment funds' assets
under management. See letter from CPIC.
---------------------------------------------------------------------------

    One commenter suggested that we eliminate the ``Decline to
Disclose'' option from the proposed revenue range requirement \74\ and
another suggested that we eliminate the revenue range requirement
entirely.\75\ The commenter that suggested we eliminate the ``Decline
to Disclose'' option reasoned that elimination would be necessary to
make the requirement effective as an information collection tool. The
commenter that suggested that we eliminate the requirement entirely
reasoned that many companies will opt out, reducing the integrity of
the information collected and possibly causing people to draw negative
inferences about the company. The commenter went on to state that
revenue information is not necessary for a notice filing, and requiring
it is inconsistent with the prohibition on general solicitation and
general advertising that applies to many offerings required to be
reported on Form D.\76\ We recognize that adopting the ``Decline to
Disclose'' option will reduce the amount of information that we
receive. We also recognize, however, that some companies may regard
this type of information as confidential. Weighing these countervailing
considerations in light of the importance of the information, we
believe that, on balance, it is best to provide filing companies the
option to decline to disclose their revenue range. Commenters did not
specify any negative consequences that a company may suffer if it
chooses to decline to disclose its revenue range. We believe the
information will be useful for the reasons described above. Finally, we
believe that revenue information in range form would not likely itself,
or in combination with the other information the new form requires,
raise general solicitation or general advertising issues.
---------------------------------------------------------------------------

    \74\ See letter from NASAA.
    \75\ See letter from ABA.
    \76\ See id. The ABA also stated that the form should not
require asset value information for essentially the same reasons. A
third commenter asked whether most private companies would decline
to disclose, ``thus calling into question the purpose of [the
item].'' The commenter did not suggest deleting the option to
decline or deleting the entire requirement. See letter from
Connecticut.
---------------------------------------------------------------------------

3. Identification of Claimed Exemptions and Exclusions
    Item 6 requires the issuer to identify the exemption or exemptions
being claimed for the offering, from among Rule 504's \77\ paragraphs
and subparagraphs, Rule 505, Rule 506, and Section 4(6), as applicable.
This requirement, in general, is carried over from the current Form D
requirement with added specificity, requiring the issuer to identify
the specific paragraph or subparagraph of any Rule 504 exemption being
claimed as well as any specific paragraph of Investment Company Act
Section 3(c) \78\ that the issuer claims for an exclusion from the
definition of ``investment company'' under the Investment Company
Act.\79\ We are requiring this increased level of specificity and
additional type of information in order to assist our policymaking and
rulemaking efforts in various areas. Identification of a claimed
exemption or exclusion often is key to analysis of the appropriateness
of the claim. State securities regulators also use this information to
determine the extent of their jurisdiction over the offering under
NSMIA. Unlike the requirement in current Form D, however, Item 6 does
not enable the issuer to check a box to indicate a claim to the Uniform
Limited Offering Exemption (ULOE) from state securities law
requirements. We believe that the ULOE box causes confusion and burdens
for companies completing Form Ds without resulting in a significant
amount of useful information. Most, if not all, companies claiming a
ULOE exemption also will check the Rule 505 box, because Rule 505 is
the Commission's companion exemption to the ULOE exemption.\80\
Similarly, revised Form D omits all other references to ULOE and the
provisions that, in general, require specified information on a state-
by-state basis in an appendix to the form and require specified
representations and undertakings. We believe that this information is
burdensome to provide without sufficient benefits in terms of
furthering the purposes of Form D.\81\
---------------------------------------------------------------------------

    \77\ 17 CFR 230.504.
    \78\ 15 U.S.C. 80a-3(c).
    \79\ The issuer will be able to select all the exclusions on
which it relies. Regulation D provides an exemption from the
Securities Act and not an exclusion from the definition of the term
``investment company'' under the Investment Company Act. Some
companies that use a Regulation D exemption, however, also are
excluded from the definition of investment company under the
Investment Company Act.
    \80\ See Release No. 33-7644 (Feb. 25, 1999) [64 FR 11090].
    \81\ One commenter expressed general agreement with our views
regarding ULOE. See letter from ABA.
---------------------------------------------------------------------------

    One commenter supported our proposal to delete the appendix portion
of current Form D, asserting that it is burdensome and without
sufficient benefits, but two other commenters objected.\82\ Another
commenter, without

expressly addressing the appendix, suggested that the form require
related information.\83\ One commenter objected to deleting any part of
the appendix, claiming that the information required provides macro-
level ownership information valuable to the Commission and other
regulators in analyzing fund flows and capital sources in an otherwise
opaque area.\84\ One commenter stated that it did not advocate
retaining the appendix in its current form but that the appendix
requires information such as the amount of securities sold by state and
the number and type of investors (accredited/non-accredited) that is
useful to state regulators for enforcement purposes.\85\ Finally, one
commenter offered the related suggestion that the form should require
issuers to specify the states in which they propose to offer or sell
securities because that would provide useful information to state
regulators in their efforts to uncover notice filing violations and
other problems.\86\
---------------------------------------------------------------------------

    \82\ See letters from ABA, Chris Evans and Connecticut,
respectively.
    \83\ See letter from Massachusetts.
    \84\ See letters from Chris Evans.
    \85\ See letter from Connecticut.
    \86\ See letter from Massachusetts.
---------------------------------------------------------------------------

    We believe the burden that would be imposed by a requirement to
provide all information called for by the appendix or similar
information is not justified by the value of the information in
furthering the purposes of Form D. In this regard, under appropriate
circumstances, state regulators still would be able to require this
type of information.\87\ At present, the Commission does not require
filing of information called for by the appendix, and most Form D
filers do not file the appendix with us. They file appendix information
only with those states that require it. We assume that states that
require filing of appendix information that they are entitled to
require may continue to do so. We also assume that the one-stop filing
system that we are exploring with NASAA may facilitate the filing of
this information with state regulators.
---------------------------------------------------------------------------

    \87\ We note that, even where NSMIA applies, Section 18(c)(2)(A)
of the Securities Act [15 U.S.C. 77r(c)(2)(A)] generally provides as
to the offer and sale of non-exchange-listed securities that nothing
under Section 18 prohibits ``any State from requiring the filing of
any document filed with the Commission [under the Securities Act],
together with annual or periodic reports of the value of securities
sold or offered to be sold to persons located in the State (if such
sales data is not included in documents filed with the Commission),
solely for notice purposes and the assessment of any fee, together
with a consent to service of process and any required fee.''
---------------------------------------------------------------------------

4. Indication of Type of Filing
a. General Requirements
    New Item 7 carries over the current Form D requirement to indicate
whether the filing is a new filing or an amendment. Including
identification of a filing as new or an amendment is appropriate
because the form permits amendments and issuers may have valid reasons
to wish to update or correct information previously provided in a Form
D filing. In addition, as discussed in the section immediately below,
we intend to clarify the circumstances where amendments are required.
As proposed, Item 7 requires that a new filing specify the date of
first sale or indicate that the first sale has yet to occur. We believe
that this information will be useful to regulators because it relates
to the timeliness of the filing and helps to establish a context in
which to evaluate other information provided.
    Item 7 will differ from what we proposed in that it will not permit
an issuer to designate the states to which the Form D is directed. As
more fully discussed above, our system will not be capable of receiving
filings directed to specific states when new Form D becomes effective
for federal purposes, although we have been working actively with NASAA
in an effort to achieve that capability.\88\ In the interim, we expect
that filers will direct filings to the states by mail, overnight
delivery, fax or whatever means are permitted or required by the
respective states. We expect that some states may permit issuers to
file a printed copy of a new Form D filed with us.
---------------------------------------------------------------------------

    \88\ We had proposed to permit issuers to designate the states
to which the Form D is directed, on the assumption that some states
would adopt one-stop filing and allow filings that specify that they
are directed to those states to constitute filings with those
states.
---------------------------------------------------------------------------

    One commenter objected to adding the requirement to report date of
first sale information.\89\ The commenter asserted that the definition
of ``first sale'' is unclear and a failure to file in the timeframe
Form D requires may be used by states to extract late filing penalties
or attempt to circumvent the limits NSMIA imposes by claiming that an
exemption under Rule 506 is unavailable due to non-compliance with the
filing requirement of Rule 503(a), even though filing a Form D is not a
condition to an exemption under Regulation D. We believe, however, that
providing the date of first sale involves little burden and that it is
not the reporting of the date that underlies the state-related concerns
but rather the date itself in relation to the date of filing.
---------------------------------------------------------------------------

    \89\ See letter from ABA.
---------------------------------------------------------------------------

    Two commenters objected to using the date of first sale as the
trigger for the Form D filing deadline.\90\ Both commenters based their
objection on the Commission staff's previously stated view that, solely
for purposes of triggering the Form D filing requirement, in a minimum-
maximum offering where the subscription funds are held in escrow
pending receipt of minimum subscriptions, the date of first sale occurs
when the first subscription agreement is received and first funds are
deposited into escrow.\91\
---------------------------------------------------------------------------

    \90\ See letters from ABA and Society of Corporate Secretaries
and Governance Professionals (SCSGP).
    \91\ See Release No. 33-6455, at Question 82 (Mar. 4, 1983) [48
FR 10045].
---------------------------------------------------------------------------

    We believe that the cited interpretation of the date of first sale
is correct for purposes of triggering the Form D filing requirement. We
believe the interpretation appropriately focuses on when the purchaser
makes an investment decision and commits to purchase the securities
offered. We also believe that it can be useful for regulatory purposes
if an issuer files a Form D before an offering closes to enable
regulators to consider the information provided before the offering
process ends. If regulatory action is appropriate, earlier
consideration potentially could cause it to be more timely and
effective.\92\ We have added language to the instructions to Form D
clarifying this meaning of date of first sale in accordance with this
interpretation. Specifically, the instructions will state that the date
of first sale is 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.
---------------------------------------------------------------------------

    \92\ For example, one commenter noted that state regulators use
Form D information for screening purposes to help prevent offerings
by those subject to disqualification and aid enforcement efforts.
See letter from NASAA.
---------------------------------------------------------------------------

b. Amendment of Previously Filed Form D
    As proposed, we are clarifying Form D to address when, how, and why
an amendment to a Form D may or must be filed. Those issues are not
addressed expressly in the current form. While both Rule 503 and the
instructions to the current Form D discuss the information that is
required when an amendment is filed,\93\ neither explicitly

requires the filing of an amendment. In certain offerings and
situations, however, an issuer may have made a material mistake of fact
or committed another material error in the filed Form D. Situations
also arise where changes occur and the initially filed Form D may not
be an accurate expression of the current facts in an ongoing offering.
Our staff currently interprets Rule 503 and the Form D instructions to
require amendments in ongoing offerings where there has been a material
change in information filed about the offering and where basic
information previously submitted about the issuer has materially
changed.
---------------------------------------------------------------------------

    \93\ Current Rule 503(d) states that amendments to Form D ``need
only report the issuer's name and the information required by Part C
and any material change in the facts from those set forth in Parts A
and B.'' The current instructions to Form D set forth the
information required in an amendment as only ``the name of the
issuer and offering, any changes thereto, the information requested
in Part C, and any material changes from the information previously
supplied in Parts A and B.''
---------------------------------------------------------------------------

    The staff has received questions regarding offerings of extended
duration, and how to determine whether and how to file Form D
amendments. For example, when offerings are expected to continue for an
extended period, the Commission's staff often is asked to assist
issuers in determining how to calculate an offering's aggregate
offering price and when an amendment to the Form D should be filed. The
staff's practice in this regard has been to advise issuers to use a
good faith and reasonable belief standard to calculate the aggregate
offering price and to amend the Form D annually.
    We are revising Rule 503 and the instructions to and description of
Form D to require amendments to the Form D notice in the following
three instances only:
     To correct a material mistake of fact or error in the
previously filed notice (as soon as practicable after discovery of the
mistake or error);
     To reflect a change in the information provided in a
previously filed notice (as soon as practicable after the change),
except that no amendment is required to reflect a change that occurs
after the offering terminates or a change that occurs solely in the
following information: \94\
---------------------------------------------------------------------------

    \94\ We believe the specified changes should not require an
amendment because the burden would not justify the resulting
benefits in terms of furthering the purposes of the form.
Consequently, it is not necessary to report them for Form D to serve
its primary function as a notice of an exempt offering.
---------------------------------------------------------------------------

    [cir] The address or relationship to the issuer of a related person
identified in response to Item 3 of Form D;
    [cir] An issuer's revenues or aggregate net asset value;
    [cir] The minimum investment amount, if the change is an increase,
or if the change, together with all other changes in that amount since
the previously filed notice, does not result in a decrease of more than
10%;
    [cir] Any address or state(s) of solicitation shown in response to
Item 12 of Form D;
    [cir] The total offering amount, if the change is a decrease, or if
the change, together with all other changes in that amount since the
previously filed notice, does not result in an increase of more than
10%;
    [cir] The amount of securities sold in the offering or the amount
remaining to be sold;
    [cir] The number of non-accredited investors who have invested in
the offering, as long as the change does not increase the number to
more than 35;
    [cir] The total number of investors who have invested in the
offering;
    [cir] The amount of sales commissions, finders' fees or use of
proceeds for payments to executive officers, directors or promoters, if
the change is a decrease, or if the change, together with all other
changes in that amount since the previously filed notice, does not
result in an increase of more than 10%; and
     Annually, on or before the first anniversary of the filing
of the Form D or the filing of the most recent amendment, if the
offering is continuing at that time.
    Rule 503 also will require an issuer that files an amendment to
provide current information in response to all requirements of Form D
regardless of why the amendment is filed. We believe it will be
relatively easy to provide such current information in most instances
due to the form's streamlined information requirements, the likelihood
that much of the information would not require change, and the fact
that the new online filing system will make available to the issuer the
version of the Form D to be amended to enable the issuer to respond
only to the changed items.
    The amendment requirements differ from what we proposed in that
they will:
     Provide expressly that a mistake of fact or error in the
information provided in a previously filed notice only requires an
amendment when material;
     Provide exceptions for changes in:
    [cir] The address or relationship to the issuer of a related person
identified in response to Item 3 of Form D;
    [cir] An issuer's aggregate net asset value; \95\
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    \95\ We had proposed an exception for changes in issuer size as
measured by revenue consistent with proposed Item 5's requesting
that issuers provide their revenue range. We are adopting an
exception for changes in issuer size that relates to both revenue
and aggregate net asset value to conform the exception to new Item
5. As previously discussed, new Item 5, as adopted, requests that
issuers provide either their revenue range or aggregate net asset
value, depending on their industry group.
---------------------------------------------------------------------------

    [cir] The minimum investment amount, if the change is an increase,
or if the change, together with all other changes in that amount since
the previously filed notice, does not result in a decrease of more than
10%;
    [cir] Any address or state(s) of solicitation shown in response to
Item 12 of Form D;
    [cir] The total offering amount, if the change is a decrease; \96\
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    \96\ We had proposed an exception for a change in the total
offering amount, if the change, together with all other changes in
that amount since the previously filed notice of sales on Form D,
would not result in an increase of more than 10%. We believe that
decreases in the total offering amount need not trigger an amendment
requirement.
---------------------------------------------------------------------------

    [cir] The amount of securities in the offering that remain to be
sold; \97\
---------------------------------------------------------------------------

    \97\ We had proposed an exception for a change in the amount of
securities sold in the offering. An exception is similarly
appropriate for the amount of securities that remain to be sold
because that amount varies inversely with changes in the amount of
securities sold.
---------------------------------------------------------------------------

    [cir] The total number of investors who have invested in the
offering; \98\
---------------------------------------------------------------------------

    \98\ We had proposed an exception for changes in the number of
accredited investors who have invested in the offering consistent
with proposed Item 14's requiring a report of the number of
accredited investors who have invested in the offering. We are
adopting the exception relating to the total number of investors
rather than the number of accredited investors to conform the
exception to new Item 14. New Item 14, as adopted, requires
disclosure of the total number of investors rather than the number
of accredited investors who have invested in the offering.
---------------------------------------------------------------------------

    [cir] The amount of sales commissions, finders' fees or use of
proceeds for payments to executive officers, directors or promoters, if
the change is a decrease, or if the change, together with all other
changes in that amount since the previously filed notice, does not
result in an increase of more than 10%; \99\
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    \99\ We believe that the additional specified exceptions should
not require an amendment because, similar to the other exceptions
proposed and adopted, the burden would not justify the resulting
benefits in terms of furthering the purposes of the form.
Consequently, it is not necessary to report them for Form D to serve
its primary function as a notice of an exempt offering.
---------------------------------------------------------------------------

     Require amendments to report the addition of executive
officers, directors and promoters in all offerings, and not provide an
exception from this requirement for offerings that last more than a
year in some circumstances; and
     Prescribe that annual amendments are due on or before the
first anniversary of the most recently filed Form D filing or
amendment, if the offering is continuing at that time, rather than each
year between January 1 and February 14.

    We have expressly subjected the mistake of fact or error in
information amendment requirements to a materiality standard in
response to comments received to make explicit what we intended.\100\
We have required amendments upon the addition of related persons
(executive officers, directors and promoters) without exception in
order to limit the ability to circumvent the purpose of the Form D
notice. We have adopted the one calendar year amendment requirement to
clarify the due date in response to a comment \101\ and provide
flexibility.\102\
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    \100\ Three commenters suggested that we clarify that only a
material mistake of fact or change can trigger an amendment
requirement. See letters from ABA, MFA and SCSGP. We did not add a
materiality reference to the amendment provision regarding changes
in the information reported. We believe that such a reference would
be inappropriate because any changes other than those specified as
not requiring an amendment would be information regulators need to
perform their regulatory functions.
    \101\ One commenter stated that the due date for the proposed
annual amendment was unclear. See letter from ABA.
    \102\ The omission of a January/February filing window from the
adopted annual amendment requirement will provide flexibility by,
for example, permitting a series of issuers to be placed on the same
administratively convenient annual amendment schedule in which they
file outside of the January/February window proposed to be mandated.
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    One commenter supported the amendment provisions as proposed,\103\
one commenter objected to the requirement that every amendment contain
current information,\104\ one commenter both objected to the annual
amendment requirement and suggested changes in the other amendment
requirements \105\ and one commenter said that it would be helpful to
state regulators to add a requirement to file an amendment to report
termination of offerings that last over a year.\106\
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    \103\ The commenter stated that the amendment requirements would
ensure that available information would be relatively current and
enable state regulators to screen, and provide responses to the
public regarding, offerings conducted in their states more
effectively. See letter from NASAA.
    \104\ See letter from SCSGP.
    \105\ See letter from ABA.
    \106\ See letter from Connecticut.
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    The commenter that objected to the requirement to provide current
information in every amendment stated that the requirement seems
unnecessary, might cause inadvertent errors in re-entering unchanged
information and make it difficult to determine what had changed.\107\
The commenter suggested that, instead, amendments only should require
information that has changed materially. As discussed above, we believe
it will be relatively easy to provide such current information in most
instances due to the form's streamlined information requirements, the
likelihood that much of the information would not require change, and
the fact that the new online filing system will make available to the
issuer the version of the Form D to be amended to enable the issuer to
respond only to the changed items. We also believe that it will be
relatively easy to determine what has changed due to the limited amount
of information required by the form and the ability to use the data
tagging features to help determine changes. We believe that
presentation only of those items that have changed materially would
result in information being presented out of context and might
transform a relatively light burden on the issuer to a relatively
heavier burden on each user who accesses the information.
---------------------------------------------------------------------------

    \107\ See letter from ABA.
---------------------------------------------------------------------------

    The commenter that objected to the annual amendment requirement did
so primarily based on the commenter's assertions that it would be
inconsistent with efforts to ease burdens and simplify. We believe the
annual amendment requirement viewed in the context of the online filing
system generally is consistent with efforts to ease burdens and
simplify. We believe it will be relatively easy to file annual
amendments in most instances for the reasons discussed above. We also
believe that the express annual amendment requirement is clear and, to
that extent, will serve to simplify the form.
    The commenter that objected to the annual amendment requirement
also stated that amendments should not be required when an issuer adds
recipients of sales compensation or related persons.\108\ Consistent
with the requirements of the current form, we believe that requiring
the names of additional recipients of sales compensation and related
persons is appropriate for a notice form and provides important
information about the offering for regulatory purposes.
---------------------------------------------------------------------------

    \108\ See letter from ABA.
---------------------------------------------------------------------------

    The same commenter essentially asked that that the proposed
exception from the amendment requirements for additions of related
persons be broadened.\109\ As proposed, in offerings that last more
than a year, a change in information on related persons would not
trigger an amendment, if the change was due solely to the filling of a
vacant position upon the death or departure in the ordinary course of
business of the previous occupant of the position.\110\ Upon further
consideration, we believe the exception for offerings that last more
than a year may permit easy circumvention of the intent of the
requirement. As adopted, the rule amendments will require a Form D
amendment upon the addition of any related person, but will not require
amendments to report changes of addresses of related persons.
---------------------------------------------------------------------------

    \109\ See letter from ABA.
    \110\ For example, a change in information regarding related
persons that occurs in connection with a change in control would not
be in the ordinary course of business.
---------------------------------------------------------------------------

    The same commenter stated that an amendment should not be needed
for an issuer to file with an additional state or states during an
ongoing offering.\111\ The amendment provisions would not require an
amendment solely because an issuer wished to file with an additional
state or states.
---------------------------------------------------------------------------

    \111\ See letter from ABA.
---------------------------------------------------------------------------

    Finally, one commenter suggested that the new annual and other
amendment rules not apply to paper Form D filings, asserting that, as
to such filings, filing amendments would be overly burdensome because
there would be no existing electronic version on the system to use as a
starting point.\112\ As further discussed below, there will be a period
during which the amendments we adopt in this release would be effective
except that electronic filing would be optional rather than mandatory
for a period of time after the electronic system becomes available.
During that time, in general, an issuer will be able to file new Form D
in either paper or electronic format or file current Form D in paper
format. Also during that time, the new annual and other amendment rules
will apply to all new Form D filings regardless of format and the
current amendment requirements will apply to all current Form D filings
in paper format. We believe that during the transition period this
approach will provide adequate flexibility to issuers and consistency
between the current and new versions of Form D and their respective
amendment requirements. Once the transition period ends, all federal
filings will be required to be on new Form D in electronic format and,
accordingly, the new amendment rules will apply. We believe that
applying the new amendment rules at that time even as to prior filings
of current Form D in paper format would not create a significant
additional burden due to the lack of a previous electronic version on
the system and that confusion likely would result from the lack of a
uniform approach to post-transition period amendments that itself could
impose a burden.
---------------------------------------------------------------------------

    \112\ Id.

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5. Information About Offering
    Items 8 through 16 will require factual information about the
offering itself. Most of the information sought currently is required
by Sections B and C of Form D.
    Duration of Offering. Item 8 will require the issuer to indicate
whether it intends that the offering will last over a year. Such
information currently is not specifically required by Form D. The
absence of an information requirement of this type has presented
compliance questions because regulators may not know whether an
offering may span an extended period of time based on the information
currently required by Form D.
    Type of Securities Offered. Item 9 will carry over the current
requirement to specify the type of securities being offered, such as
debt or equity, with additional categories of securities added. Some of
the additional categories will provide more clarity. The rest of the
additional categories will identify types of securities, the
specification of which we believe will help facilitate our rulemaking
efforts.\113\ The issuer will be required to specify all categories
that apply to the securities that are the subject of the exemption(s)
specified in response to Item 6.
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    \113\ The new categories would be ``Security to be Acquired Upon
Exercise of Option, Warrant or Other Right to Acquire Security,''
``Pooled Investment Fund Interests,'' ``Tenant-in-Common
Securities,'' and ``Mineral Property Securities.''
---------------------------------------------------------------------------

    Business Combination Transaction. Form D currently requires that
the issuer indicate only whether the offering is an exchange offer. New
Item 10 will require the issuer to indicate whether the offering is
being made in connection with a business combination such as an
exchange (tender) offer, a merger or acquisition, regardless of the
type of offering.\114\ We believe that, for purposes of Form D, it is
important to identify whether an offering is being made in connection
with a business combination transaction, whether structured as an
exchange or in some other manner, because such transactions sometimes
give rise to policy concerns.\115\
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    \114\ We also are revising Item 10 to enable an issuer to
clarify its response. We discuss this change more fully in Part II.C
below.
    \115\ For example, business combination transactions may raise
some of the types of policy concerns we intended to address in
adopting rules and rule amendments relating to filings by reporting
shell companies. Release No. 33-8587 (July 15, 2005) [70 FR 42234].
---------------------------------------------------------------------------

    Minimum Investment Amount. Item 11 will, as proposed, carry over
the requirement in Form D to specify the minimum investment amount per
investor. We are maintaining this requirement because offerings that
have low minimum investment amounts have presented particular
enforcement challenges in the past. We have changed Item 11 from what
we proposed to require specification of the minimum investment for
outside investors only, so as not to affect employee stock ownership
incentive plans adversely. Investors will be considered outside
investors if they are not employees, officers, directors, general
partners, trustees (where the issuer is a business trust), consultants,
advisors or vendors of the issuer, its parents, its majority-owned
subsidiaries, or majority-owned subsidiaries of the issuer's
parent.\116\ We believe that low investment amounts are more likely to
present enforcement challenges when offered to outside investors, and
have changed the requirement as a result.
---------------------------------------------------------------------------

    \116\ The standard for determining who is an ``outside
investor'' is similar to the standard in Securities Act Rule 701 [17
CFR 230.701] and Securities Act Form S-8 [17 CFR 239.16b] for
determining who is an eligible investor, except that for Form D
purposes vendors are included and certain family members are
excluded.
---------------------------------------------------------------------------

    Sales Compensation. Item 12 generally will carry over but simplify
the response to the requirements in Form D related to information on
sales compensation, as we proposed. In addition, also as proposed, it
will add a requirement to provide the CRD number of each person that is
a compensation recipient named in response to Item 12, provided the
person has a CRD number.\117\ In addition and as a complement to what
we proposed, Item 12 also will require that when both a person that
receives sales compensation and the person's associated broker-dealer
are reported, the issuer must provide the CRD number, if any, for both.
Also in addition to what we proposed, the instruction to Item 12 will
clarify that the compensation that can result in a reporting
requirement can be cash or other consideration; a finder or other
person that does not have a CRD number need not obtain one in order to
be listed; and, conversely, a finder or other person is required to be
listed where called for, regardless whether the finder or other person
has a CRD number.\118\ A CRD number corresponds to a broker or broker-
dealer's record located in the Central Registration Depository, a
computer database of brokers and broker-dealers that FINRA maintains.
It should be relatively easy for an issuer to obtain the CRD numbers
from the brokers and broker-dealers it retains. We have added
instructions to Form D informing filers where to obtain CRD numbers on
the Internet.\119\ Requiring reporting of the CRD numbers will
facilitate checking a broker's or broker-dealer's records. Requiring
reporting of the CRD numbers of listed persons as well as any
associated broker-dealers will enhance the informational value of the
item.
---------------------------------------------------------------------------

    \117\ The instruction to new Item 12 uses the term ``person''
rather than the proposed term ``individual'' to describe the sales
compensation recipients that an issuer must list. The term
``person'' is used in order to clarify that, as intended in the
proposed instruction, new Item 12 carries over the requirement in
current Form D that references the term ``person'' to identify
recipients of sales compensation regardless of whether the recipient
is a natural person.
    \118\ We believe this clarification generally would be
responsive to several comments related to Item 12. One commenter
suggested that the form clarify that cash and non-cash compensation
could trigger a reporting requirement and not every person has a CRD
number. See letter from Connecticut. Another commenter suggested
that the form clarify that issuers must report the names of persons
regardless whether they have CRD numbers. See letter from NASAA.
    \119\ Anyone with access to the Internet can check a broker's
CRD number and record by visiting http://brokercheck.finra.org. CRD
numbers also can be obtained by calling a state regulator or FINRA's
public disclosure hotline at<PHONE_NUMBER>. See http://www.nasaa.org/
Investor_Education/Investor_AlertsTips/292.cfm.
---------------------------------------------------------------------------

    Two commenters supported requiring CRD numbers in particular,\120\
while one commenter objected to Item 12 as proposed, stating that the
item could discourage users from using Regulation D, should not require
the names of individual recipients of sales compensation and, if it did
require their names, it should not require their CRD numbers.\121\
Consistent with current Form D's requirement to name up to five persons
associated with a particular broker-dealer that receive compensation in
connection with sales of securities in an offering and any associated
broker-dealer, we continue to believe that such information is
important. Also consistent with current Form D's requirements, we
continue to believe that it is useful to have the names of individuals
regardless of whether they are associated with a broker-dealer. Once
more than five individuals associated with the same broker-dealer
otherwise would be named, however, the burden of listing additional
names does not justify the benefit and it is sufficient in that case to
have the name of the associated broker-dealer alone.
---------------------------------------------------------------------------

    \120\ See letters from Massachusetts and NASAA.
    \121\ See letter from ABA.
---------------------------------------------------------------------------

    We believe that the new sales compensation disclosure requirements
will not discourage issuers from using Regulation D any more than the
current sales compensation reporting requirements do. The concern about
discouraging issuers from using Regulation D appears to be rooted in a

concern about regulator background checks on named persons. In this
regard, we note that background checks are possible under the
requirements of current Form D, and the only additional sales
compensation requirement under the new form, CRD numbers, merely would
facilitate that check.
    Finally, one commenter asked us to clarify the extent to which new
Item 12's sales compensation recipient disclosure requirement will
apply to foreign sales.\122\ Consistent with Preliminary Note 7 to
Regulation D, Regulation D's requirements and, as a result, Form D's
requirements, including new Item 12, will apply to foreign sales to the
extent the issuer seeks to rely on an exemption under Regulation D for
such foreign sales.\123\
---------------------------------------------------------------------------

    \122\ See letter from ABA.
    \123\ Preliminary Note 7 to Regulation D provides as follows:
``Securities offered and sold outside the United States in
accordance with Regulation S need not be registered under the
[Securities] Act. See Release No. 33-6863. Regulation S may be
relied upon for such offers and sales even if coincident offers and
sales are made in accordance with Regulation D inside the United
States. Thus, for example, persons who are offered and sold
securities in accordance with Regulation S would not be counted in
the calculation of the number of purchasers under Regulation D.
Similarly, proceeds from such sales would not be included in the
aggregate offering price. The provisions of this note, however, do
not apply if the issuer elects to rely solely on Regulation D for
offers or sales to persons made outside the United States.''
---------------------------------------------------------------------------

    Offering and Sales Amounts. Item 13 will carry over the current
requirements to provide the amount of total sales and the total
offering amount, but in a restructured, simplified format. Instructions
have been added to clarify interpretive issues that have arisen in
completing the form, such as how to respond to this requirement if the
amount of an offering is undetermined when the Form D filing is
made.\124\ One commenter suggested that the form require a final report
of actual sales results and be due not later than 15 business days
after the close of the offering.\125\ The commenter asserted that this
would better meet the practical needs of issuers in terms of
determining the trigger date for the Form D filing requirement,
coordinating the filing of Form D with the Commission with state filing
and fee calculation requirements, and determining the need for
amendments as the sales process proceeds. As previously noted, we
believe that it can be useful for regulatory purposes if an issuer
files a Form D before an offering closes to enable regulators to
consider the information provided before the offering process ends. If
regulatory action is appropriate, earlier consideration potentially
could cause it to be more timely and effective. We also believe that
issuers have been and will continue to be able to coordinate their
federal Form D and state filings without requiring Form D to contain
final sale information rather than offering information as of an
earlier time. Finally, we believe that any uncertainties as to when to
amend will be substantially resolved by the provisions we are adding to
the form requirements.
---------------------------------------------------------------------------

    \124\ We also are revising Item 13 to enable an issuer to
clarify its response. We discuss this change more fully in Part II.C
below.
    \125\ See letter from Stephen A. Marcus.
---------------------------------------------------------------------------

    Investors. Item 14 will elicit information on whether the issuer
intends to sell securities to persons who do not qualify as accredited
investors and the number of such persons who already have invested. It
will elicit information on the total number of investors who already
have purchased securities in the offering. The form currently requires
this information because it affects how we and state securities
regulators evaluate claimed exemptions and allocate enforcement
resources. We have modified Item 14 slightly from the proposed version
by requiring the issuer to specify the total number of investors in the
offering, rather than the number of accredited investors, so that
examiners can readily see that number, rather than being required to
add the numbers of accredited and non-accredited investors, as was the
case in the proposed version.
    Expenses and Use of Proceeds of Offering. We proposed to eliminate
the items requiring information on expenses and use of proceeds of the
offering. The current requirements frequently do not yield information
necessary for an evaluation of the claimed exemption or for enforcement
or rulemaking efforts. Many, if not most, Form D filings do not provide
use of proceeds information that serves the form's purposes, because
they specify only that the majority of proceeds will be used for
``working capital'' or ``general corporate purposes.'' In addition,
because of the diversity in use of proceeds in Regulation D offerings,
attempting to standardize responses to provide searchable data may be
challenging and not worthwhile.
    Commenters expressed mixed views on eliminating the requirements
for information on expenses and use of proceeds of the offering. One
commenter agreed with the Commission's view that the information is not
necessary and stated that providing the information is problematic
because of issuer burden, lack of applicable accounting standards and
category definitions, and estimated amounts.\126\ Commenters that
objected to deleting the requirements essentially stated that the
information helps to enable state regulators to screen offerings for
potential problems.\127\ One of these commenters addressed the issues
of burden and lack of specificity as to use of proceeds information by
suggesting that the form provide more checkboxes but exclude from those
checkboxes one that provides for general corporate purposes.\128\
---------------------------------------------------------------------------

    \126\ See letter from ABA.
    \127\ See letters from Connecticut, Massachusetts, NASAA and
Pennsylvania.
    \128\ See letter from NASAA.
---------------------------------------------------------------------------

    We have considered the comments and, as a result, rather than
deleting the current expenses and use of proceeds requirements in their
entirety, we are deleting most of them and adopting the rest of them in
new Items 15 and 16. New Item 15 will require the issuer to provide
only the amounts paid for sales commissions and, separately stated,
finders' fees in connection with the offering. New Item 16 will require
reporting of the amount of the gross proceeds the issuer used or
proposes to use for payments to related persons.\129\ New Items 15 and
16 will permit clarification where necessary to prevent the information
supplied from being misleading.\130\ Both items will require
substantially less information relating to offering expenses and use of
proceeds and, thereby, result in a substantially reduced burden. The
information new Items 15 and 16 will require is limited to expenses in
connection with the offering process and payments to related persons.
We believe that these types of expenses and payments are most likely to
be of regulatory interest. Consequently, we believe the benefits from
providing this information will justify the burdens in relation to
information necessary for regulatory purposes.
---------------------------------------------------------------------------

    \129\ For purposes of new Item 15, ``Related Persons'' are those
persons new Item 3 requires the issuer to report in the Form D
notice.
    \130\ We discuss the ability to clarify items in Part II.C
below.
---------------------------------------------------------------------------

6. Signature and Submission
    We are combining the federal and state signature requirements
currently in Sections D and E of Form D into one signature requirement.
This will simplify the filing and make it consistent with other
signature requirements of Commission forms. We are incorporating into
the signature block a consent to service of process similar to the one
currently in Form U-2, which is required to be filed separately but
simultaneously with a Form D by many states. Our intention in

making these changes is to maintain the usefulness of the signature
block to regulators in a manner that is consistent with easing burdens
on filers.
    The combined signature requirement, in general, provides that each
issuer signing the revised Form D \131\ has read the Form D, knows the
contents to be true, has duly caused the Form D to be signed on its
behalf by the undersigned duly authorized person, and is \132\
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    \131\ Each issuer in a multiple-issuer offering will be required
to sign the Form D. If all issuers authorize the same person to sign
on their behalf, however, only that person will need to sign.
    \132\ Both the current federal and state signature requirements
expressly provide that the issuer has duly caused the Form D to be
signed on its behalf by the undersigned duly authorized person. Only
the current state signature requirement, however, expressly provides
that the issuer has read the Form D and knows the contents to be
true.
---------------------------------------------------------------------------

     Notifying the Commission and the states in which the Form
D is filed of the offering and undertaking to furnish to them, on
written request, the information provided by each issuer to offerees in
accordance with applicable law;
     Consenting to service of process on individuals holding
specified positions; and
     Certifying that, if the issuer is claiming a Rule 505
exemption, it is not disqualified from relying on Rule 505 for one of
the reasons stated in Rule 505(b)(2)(iii).
    In undertaking to furnish to the states in which the Form D is
filed, on written request, the information provided to offerees, the
issuer will not be affecting any legal limits on the ability of these
states to require information.\133\
---------------------------------------------------------------------------

    \133\ See Section 18 under the Securities Act as discussed in
Part I.B.3.
---------------------------------------------------------------------------

    The signature requirement will be more extensive than the current
federal signature requirement and will differ in various ways from the
current state signature requirement. The proposed signature requirement
will be more extensive than the current state signature requirement,
for example, by including a consent to service of process. The
signature requirement also will be less extensive than the current
state signature requirement in several ways.\134\
---------------------------------------------------------------------------

    \134\ The new signature requirement, unlike the current state
signature requirement, will omit both an undertaking to provide a
Form D to specified state administrators and a representation
regarding ULOE. As noted above, however, under the new signature
requirement, issuers will undertake to furnish to the states in
which the Form D filing is made, on written request, the information
provided by each issuer to offerees. Also as noted above, revised
Form D will omit all references to ULOE and the provisions that, in
general, require specified information on a state-by-state basis in
an appendix to the form and require specified representations and
undertakings.
---------------------------------------------------------------------------

    The signature requirement also will differ in several ways from the
Form U-2 signature requirement. The principal difference between the
signature requirement and the Form U-2 signature requirement is that
Form U-2 requires the notarized signature of a corporate officer (or
that person's equivalent in the case of other entities) and requires a
consent to jurisdiction and venue as well as a consent to service of
process.\135\
---------------------------------------------------------------------------

    \135\ The new signature requirement's addressing consent to
service but not consent to jurisdiction or venue is consistent with
the signature requirement in Form ADV [17 CFR 279.1], which can
satisfy both federal and state filing requirements for investment
adviser registration.
---------------------------------------------------------------------------

    Some commenters expressly supported a combined signature
requirement,\136\ but they and other commenters expressed concerns. Two
commenters expressed the concern that the undertaking to provide
offering materials could be read in a manner inconsistent with
NSMIA,\137\ one commenter asked for clarification regarding the
application of NSMIA,\138\ and two commenters expressed the concern
that the combined signature requirement was too narrow because it did
not contain all that is contained in the current state signature
requirement and Form U-2.\139\
---------------------------------------------------------------------------

    \136\ See letters from ABA and NASAA.
    \137\ See letters from ABA and MFA.
    \138\ See letter from ABA.
    \139\ See letters from Connecticut and NASAA.
---------------------------------------------------------------------------

    The commenters that expressed the concern that the undertaking to
provide offering materials could be read in a manner inconsistent with
NSMIA stated that the undertaking could be misunderstood to mean that,
as a result of the undertaking, states could require the offering
materials in all instances regardless of the limits NSMIA otherwise
would impose on their ability to do so.\140\ Both of these commenters
suggested that the Commission could resolve the concern by omitting the
undertaking, and one of these commenters \141\ suggested that, in the
alternative, the Commission could clarify that the undertaking would be
inapplicable to offerings under Rule 506. In response to these
concerns, the new form will clarify in the context of the offering
materials undertaking that where securities that are the subject of the
Form D are covered securities under NSMIA, whether in all instances or
due to the nature of the offering that is the subject of the Form D,
the states cannot routinely require the offering materials under the
undertaking or otherwise and can require the offering materials only to
the extent Section 18(c)(1) permits them to do so under its
preservation of their anti-fraud authority. Also, we have added
language to the undertaking specifying that it only applies to written
requests made ``in accordance with applicable law.''
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    \140\ See letters from ABA and MFA.
    \141\ See letter from ABA.
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    The commenter that requested the NSMIA-related clarification asked
that we clarify the relationship between Section 18(c)(2)(A) and the
new signature requirement's consent to service provision in particular
and between Section 18(b)(4)(D) and new Form D in general. Section
18(c)(2)(A) generally provides, in relevant part, that the states
retain the right under NSMIA to obtain a consent to service of process
from an issuer engaged in an offering under Rule 506 of Regulation D.
Section 18(b)(4)(D) generally provides that the states retain the right
under NSMIA to impose on an issuer engaged in an offering under Rule
506 ``notice filing requirements that are substantially similar to
those required by rule or regulation under section 4(2) that are in
effect on September 1, 1996.'' Similarly to what we noted above in
regard to the undertaking to provide offering materials, neither the
consent to service provision nor anything else related to new Form D
affects any legal limits on the ability of the states to require
information.
    Both commenters that expressed the narrowness concern addressed the
consent to service provision. One commenter stated that the consent to
service should be broadened to include consents to jurisdiction and
venue as are contained in Form U-2 to eliminate fully the need to file
Form U-2 and enable investors to avoid needing to plead and prove
jurisdiction as an issuer should that wants to offer or sell in a
state.\142\ The other commenter stated that the consent to service
provision should be broadened to apply to a broader array of acts, as
does Form U-2, and to include the Rule 262 disqualification provision
we proposed to delete.\143\ The commenter reasoned that the form should
include the Rule 262 disqualification provision because state bad actor
provisions might apply to offerings under Rule 504 or 505.
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    \142\ See letter from NASAA.
    \143\ See letter from Connecticut.
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    We believe that the consent to service provision as proposed and
adopted strikes the right balance between regulatory benefit and issuer
burden. We acknowledge that the consent to service will not be as broad
in effect as Form U-2 because that form's consent to service applies to
a somewhat broader array of acts and that form also contains

consents to jurisdiction and venue. We believe, however, that the Form
D consent provision's application to a somewhat narrower array of facts
is appropriate because the facts it applies to are tailored to the
subject matter of Form D. The Form D consent to service provision
generally applies to ``any activity in connection with the offering of
securities that is the subject of this [Form D].'' In contrast, the
Form U-2 consent to service provision generally applies to actions
relating to ``the sale of securities.'' Finally, although Form D will
not require consents to jurisdiction and venue, we note that under
appropriate circumstances, state regulators still would be able to
require this type of information.

B. Electronic Filing of Form D

    We are amending Regulation S-T,\144\ Rule 503 of Regulation D, and
Form D to implement the requirement for issuers to file the information
required by Form D with us electronically through an online filing
system.\145\ A large majority of commenters supported electronic
filing, but some expressed concern about whether electronic filing
would impose more burdens on issuers \146\ or raise general
solicitation issues.\147\ The concerns regarding burdens generally
related to the operation of the online system, and we address those
concerns below where we discuss the operation of the system in more
detail.\148\
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    \144\ Regulation S-T is the Commission's general regulation
governing electronic filing.
    \145\ The online filing system will automatically capture and
tag data items and is discussed in further detail in Part III of
this release.
    \146\ See letters from ABA, Stephen A. Marcus and SCSGP.
    \147\ See letters from Connecticut, Massachusetts and NASAA.
    \148\ We address the concerns relating to general solicitation
issues in Part II.C below.
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    One commenter expressed the concern that, even though Forms D
currently are publicly accessible, their increased public accessibility
as a result of mandated electronic filing would encourage third parties
to use Form D for purposes beyond its original intent or current use
and might result in issuers making less use of Form D than they do now
and, thereby, deprive them of the benefits of the use of Regulation D
and cause the Commission to receive less information than it does
now.\149\ The commenter suggested that, as an alternative, the
Commission permit Form D filings to be confidential for a specified
amount of time, such as a year, if the issuer has made no public
disclosure of the offering. The Form D would, however, be available to
the Commission and states with which it was filed during that time. We
acknowledge the commenter's concerns. As we discussed in the proposing
release and above, however, public availability of Form D provides a
measure of investor disclosure and serves other useful purposes. In
addition, as a practical matter, even if we were to permit confidential
filing, Forms D would be subject to requests under the Freedom of
Information Act (``FOIA'').\150\
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    \149\ See letter from ABA.
    \150\ 5 U.S.C. 552 et seq. The Commission's regulations that
implement that statute are at 17 CFR 200.80 et seq.
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    Rule 101(c)(6) of Regulation S-T \151\ currently requires the
information required by Form D to be filed in paper format. The
amendments will delete the reference to Form D from Rule 101(c)(6) and
will revise subparagraph (a)(1) of Rule 101 \152\ to add a new
subparagraph (xiii) that will add Form D to the rule's list of
documents required to be filed electronically.
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    \151\ 17 CFR 232.101(c)(6).
    \152\ 17 CFR 232.101(a)(1).
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    Rule 100 of Regulation S-T,\153\ which specifies the persons or
entities subject to the electronic filing requirements of Regulation S-
T, expressly includes, among others, Exchange Act reporting companies
whose filings (such as Form D) are subject to review by the Division of
Corporation Finance. In order to assure that Rule 100 also will apply
to non-reporting companies that file Form D, the amendments revise
paragraph (a) of Rule 100 of Regulation S-T \154\ to add a reference to
entities that are not Exchange Act reporting companies but whose
filings are subject to review by the Division of Corporation Finance.
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    \153\ 17 CFR 232.100.
    \154\ 17 CFR 232.100(a).
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    We also are amending Regulation S-T, as proposed, to make hardship
exemptions unavailable for Form D filings.\155\ The amendments revise
subparagraph (a) of Rules 201 \156\ and 202 \157\ to exclude Form D
from the filings for which hardship exemptions are available. We
believe hardship exemptions should not be available for Form D filings
because of the relative ease of electronic filing, the limited value of
paper filings and the utility of a uniform, comprehensive database. In
adopting the conversion of the Form D filing from a paper system to an
electronic system, we assume that issuers will have access to a
computer and the Internet. In the absence of an issuer's having a
personal or office computer and Internet access, public libraries
around the country often have computer and Internet access that an
issuer could use. We therefore do not envision the need for a hardship
exemption to permit paper filing.\158\
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    \155\ We note, however, that a filer may request a filing date
adjustment under Rule 13(b) of Regulation S-T [17 CFR 232.13(b)].
This rule addresses circumstances where an electronic filer attempts
in good faith to file a document with the Commission in a timely
manner but the filing is delayed due to technical difficulties
beyond the filer's control. In those instances, the filer may
request an adjustment of the document's filing date. The staff may
grant the request if it appears that the adjustment is appropriate
and consistent with the public interest and the protection of
investors.
    \156\ 17 CFR 232.201(a).
    \157\ 17 CFR 232.202(a).
    \158\ We also are adopting an amendment to Rule 104(a) of
Regulation S-T [17 CFR 232.104(a)] to make it clear that unofficial
PDF copy submissions are unavailable for Form D notices. The new
online filing system, further described below, will make filed Form
D information available on our Web site in what we believe will be
an easy-to-read format similar to that which could be provided
through an unofficial PDF copy.
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    The amendments revise Rule 503 of Regulation D and Form D in
several ways related to electronic filing. The amendments delete from
Rule 503 references to the paper-based concept of copies in
subparagraphs (a) and (b) and a manual signature in subparagraph (b).
Subparagraph (a) will continue to specify when a notice on Form D
initially must be filed and will be revised to specify also when an
amendment to a Form D filing must or could be filed.\159\
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    \159\ Subparagraph (a) will continue to provide that an issuer
must file the Form D no later than 15 calendar days after the first
sale of securities in the offering. As currently, an issuer could
file the Form D at any time before that if it has determined to make
the offering. Also as currently, a mandatory capital commitment call
would not constitute a new offering, but would be made under the
original offering, so no new Form D filing would be required solely
as a result. See Part II.A.4.b of this release for a discussion of
when an amendment must or could be filed.
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    One commenter \160\ suggested that we ease burdens by extending the
filing deadline to at least 30 days from the date of first sale,\161\
defining the date of first sale as the consummation of the first
closing of a sale of securities in the offering, extending the cut-off
time for electronic filing from 5:30 to 10 p.m. Eastern time \162\ and
providing that

when a Form D otherwise would be due on a weekend or holiday it be
deemed due on the next business day. We are not aware of the current
deadline's having been difficult to meet in the past and believe that
carrying it forward is not likely to cause problems in the future. For
the same reasons, we believe that it is not necessary to extend the
cut-off time from 5:30 to 10 p.m. In this regard, we note that filings
under Rule 462(b) and Section 16(a) to which the extended cut-off time
applies typically must be made much more quickly than a filing on Form
D.\163\ We are, however, further revising Rule 503(a)(1) to provide
that when a Form D filing otherwise would be due on a weekend or
holiday it will be deemed due on the next business day. This approach
is consistent with the way Exchange Act Rule 0-3(a) \164\ generally
treats filing deadlines under the Exchange Act.\165\
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    \160\ See letter from ABA.
    \161\ As discussed above in connection with Item 13 in Part
II.A.5, another commenter suggested that the form require a final
report of actual sales results and be due not later than 15 business
days after the close of the offering.
    \162\ Rule 13 of Regulation S-T [17 CFR 232.13] generally
provides that a filing by direct transmission beginning on or before
5:30 p.m. Eastern time on a business day is deemed filed that day
and, if such a filing were to begin after that time, it would be
deemed filed on the next business day. Rule 13 also provides,
however, that a 10:00 p.m. deadline applies for registration
statements and post-effective amendments filed under Rule 462(b) [17
CFR 230.462(b)] and beneficial ownership reports filed under Section
16(a) [15 U.S.C. 78p(a)], in general, by officers, directors and
principal security holders of reporting companies that have a class
of equity securities registered under Section 12 [15 U.S.C. 78l] of
the Exchange Act.
    \163\ For example, Section 16(a)(2)(C) [15 U.S.C. 78p(a)(2)(C)]