Frequently Asked Questions
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A private placement of securities involves selling securities without registering the securities with the SEC.
Regulation D is one registration exemption offered to issuers by The Securities Act of 1933 as amended. The Electronic Code of Federal Regulations (e-CFR) outlines the requirements for using the Regulation D exemption and the information that must be provided to investors.
What is a Private Placement Memorandum?
A Private Placement Memorandum (“PPM”) is a legal document, given to prospective investors when the issuer is seeking capital and issuing a security, that describes and explains exactly why and how the offering complies with the SEC’s Regulation D Offering Exemption. Unlike a prospectus, a PPM is used in “private offering of securities” when the securities are not registered under applicable federal or state law.
The PPM describes the company selling the securities, the terms of the offering, and the risks of the investment, amongst other things. The disclosures included in the PPM vary depending on which exemption from registration is being used, the target investors, the complexity of the terms of the offering, the issuer’s finances and other important facts.
What is a Subscription Agreement?
The Subscription Agreement, like the PPM, is a legal document.
The Subscription Agreement is somewhat similar to a purchase agreement: it is a promise by the issuer to sell a specific number and type of security. It is also a promise by an investor, sometimes referred to as the subscriber, to purchase a specific number of securities at a specified price from the issuer.
In addition to functioning as a type of purchase agreement, the Subscription Agreement can also help the issuer qualify potential subscribers/investors in determining whether or not the potential investor meets the definition of and qualifies as an accredited investor. This qualification is especially important if the issuer plans to use Rule 506(b) or Rule 506(c) of Regulation D.
We plan to use Rule 506(c) of Regulation D.
External Reference
Rule 504 of Regulation D
External FED. Reference
Rule 506 of Regulation D
External FED. Reference
Form D Filing Requirements for Reg D
Regulation D requires a notice to be filed with the SEC via a Form D “Notice of Exempt Offering Securities” by Companies and funds that have sold securities without registration under the Securities Act of 1933 in an offering based on a claim of exemption under Rule 504 or 506 of Regulation D.
When to File:
The Form D must be filed within 15 days after the first sale of securities but can also be filed in advance of he first dale (we recommend you consider an advance filing). For this purpose, the date of first sale is the date on which the investor is irrevocably contractually committed to invest so in other words you have received the funds along with a signed subscription agreement. If the due date falls on a Saturday, Sunday or holiday, it is moved to the next business day. The SEC does not charge any filing fee for a Form D notice or amendment.
Where to File:
The Form D notice and amendments must be filed with the SEC online, using the SEC's EDGAR (electronic gathering, analysis and retrieval) system.
Amendments to a Form D Filing:
A Form D filer may file an amendment to a previously filed Form D notice by indicating in the space provided on the form that the filing is an amendment rather than a new filing. A Form D filer should abide by the following guidance in determining whether it should file an amendment to a previously filed Form D notice:
A filer may file an amendment to a previously filed notice at any time
A filer must file an amendment to a previously filed notice for an offering:
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 the previously filed notice, except as provided below, as soon as practicable after the change; and
annually, on or before the first anniversary of the most recent previously filed notice, if the offering is continuing at that time
When amendment is not required:
A filer is not required to file an amendment to a previously filed notice to reflect a change that occurs after the offering terminates or a change that occurs solely in the following information contained in a previous Form D notice or amendment:
the address or relationship to the issuer of a related person identified;
an issuer's revenues or aggregate net asset value;
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%;
any address or state(s) of solicitation for a person receiving sales compensation;
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%;
the amount of securities sold in the offering or the amount remaining to be sold;
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;
the total number of investors who have invested in the offering; and
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%
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