Form D goes digital

Beginning 16 March 2009, every Form D – the notice required to be filed with the Securities and Exchange Commission for a nonpublic issuer offering in reliance on Regulation D under the Securities Act of 1993 – will have to be filed electronically on the SEC's Electronic Data Gathering, Analysis and Retrieval System (EDGAR).

Issuers must first obtain EDGAR access codes from the SEC by filing a Form electronically, then within the next two days faxing the SEC a notarised authenticated document. State regulators eventually plan to develop a system to interface electronically with EDGAR, but it is likely that paper filings will be required by some states for some time, according to an analysis in law firm Debevoise & Plimpton's Private Equity Report.

Form Ds electronically filed with the SEC will be accessible from any computer with Internet access, and the SEC will capture and tag data items to make them interactive and viewable in an easily read format. This is likely to be a boon for the financial journalism industry, but bad news for those issuers who might otherwise like to prevent such information from being widely disseminated.

“This information was available before, it's just going to be more readily available,” says Franci Blassberg, a partner in Debevoise's private equity practice.

But for issuers who raise less capital than they were hoping for – a common problem in current markets – it will be harder to keep the bad news to themselves.

“Reg D generally requires funds to disclose the amount raised within 15 days of the first sale. Funds that have disappointing first closings may be sensitive to disclosing that the closing has occurred,” Blassberg says.

But issuers needn't worry about general solicitation and advertising issues arising from the new easy access to Form D: the SEC has created a safe harbour if the issuer makes a good faith, reasonable attempt to comply with Form D requirements.

There have also been a number of changes to the form itself. The new Form D requires the disclosure of net asset values for investment funds, but that requirement is subject to opt out. There are also new disclosures required with respect to sale commissions and finders' fees that are likely to flag the use of unregistered placement agents and finders for regulators.

The new Form D also contains explicit requirements for all amendments filed to Form D, and to continuing offerings that had been filed on the old or temporary Form D beginning on 16 March. Amendments will be required, if the offering is continuing, (1) annually, (2) to rectify a material mistake of fact or error, and (3) to report any change in information.