November 13, 2009
David Feldman will be a panelist at the Financial Executive Institute seminar entitled, "Where’s the Money? Finding Public vs. Private Capital Today."
David Feldman's book, Reverse Mergers: Taking a Company
Public Without an IPO, now in its third printing, was published in 2006
by Bloomberg Press (available on http://www.amazon.com).
View David Feldman's reverse merger blog at www.reversemergerblog.com.
David Feldman is a contributor to PIPES: Revised and Updated Edition - A Guide to Private Investments in Public Equity (Bloomberg Press, 2005) available on
http://www.amazon.com.
Dov Scherzer is the U.S. contributor to the British
treatise, Internet Law and Regulation (Sweet & Maxwell, 2d Ed. 1997;
3d Ed. 2002; 4th ed. 2007),
Available Here.
Dov Scherzer is the U.S. contributor to the British
treatise, Electronic Signatures Law and Regulation (Sweet & Maxwell,
1st Ed. 2004),
Available Here.
In the News
David
Feldman quoted extensively on the SEC's
proposals to revamp Form D filings in
the Compliance Week Coverage on September
11th, 2007.
Faster,
Better Form D Filings on the Way?
By
Melissa Klein Aguilar
Form
D, one of the workhorse documents in
financial reporting, is poised to get
a major overhaul that will push it into
the electronic era for good.
The Securities and Exchange Commission
has proposed revamping Form D entirely,
adding some new disclosures and eliminating
some old ones. Companies would also
be required to file the document electronically,
making its contents more easily accessible
to the public.
Under SEC rules, companies that rely
on a registration exemption for private
or limited offerings of securities provided
under Regulation D must file a Form
D after they first sell their securities.
Form D notification must be filed within
15 days after the first sale of securities
in an offering, a deadline that would
not change under the SEC's proposed
reforms.
The most significant change, securities
experts say, would be filing Form D
electronically.
"Traditionally, the Form D was
filed, and from a practical perspective,
it wasn't really clear anybody looked
at it," says Eric Perkins, a principal
in the law firm Hirschler Fleischer.
"With the new proposed electronic filing
system, the data will be more easily
analyzed and easy to search and review."
David Feldman, of the law firm Feldman
Weinstein & Smith, agrees that the
electronic filing of Form D would be
a "positive."
"You could always obtain a Form
D, but most people didn't bother," says
Feldman. Since they're filed on paper,
copies of Form D filings are only available
from the SEC in person in its public
reference room or by mail request, or
through private vendors.
The rule proposal is part of a broad
package of measures first announced
by the SEC in May that intended to ease
the raising of capital and the financial
reporting requirements for smaller companies.
The comment period on the proposed changes
to Form D ended last week and drew only
a handful of responses.
While Feldman says the proposed revisions
to Form D may appear "to just be procedural,"
he says, "They're more valuable than
that."
For starters, the changes could halve
the time it takes to file a Form D,
he says. Historically the form "has
suffered from being awkward and frustrating
in the past," he says. Proposed reforms
such as abolishing the current requirement
to identify 10 percent holders of a
class of equity securities and a requirement
to estimate the use of proceeds of the
offering, would be "a big plus" to simplify
the form, he says.
The revised form would include 14 numbered
items. "Items that typically were of
questionable relevance and took the
most time to compile and analyze have
been removed," Perkins says. The revised
form "cuts to the heart of the essential
information about an offering under
Reg D that will be helpful."
Another departure is that the proposed
new Form D would allow multiple issuers
in multiple issuer offerings to file
one Form D and eliminate duplicative
filings, Perkins says. That change would
be particularly helpful in securitized
tenant-in-common offerings, he notes,
since they are often structured to have
two issuers and so require the filing
of separate forms.
Under the proposal, a question would
be added about the issuer's revenue
range, but companies could decline to
provide that information. The revised
form would also require issuers to indicate
whether the offering is being made in
connection with a business combination
transaction.
Going Online
Currently, issuers must file five paper
copies of the form with the SEC by mail
or by physical delivery to Commission
headquarters. Under the proposal, issuers
would be required to file the Form D
information electronically through a
new online filing system accessible
from any computer with Internet access.
The SEC noted in its proposing release
that issuers that don't already have
an EDGAR access code would need to apply
for one to file electronically. The
Form D data would be publicly available
on the SEC Web site and would be interactive
and searchable.
The SEC received 25,239 Form D filings
in fiscal 2006, and roughly 95 percent
of the companies filing them were private
companies.
The SEC also suggests in its proposing
release that the costs and burden associated
with preparing and filing the form could
be cut further if state regulators decide
to accept electronic filings of Form
D notices with the SEC.
"It is our hope that state securities
regulators would permit one-stop' filing
with the Commission and rely on Commission
filings as satisfying state law filing
requirements for offerings covered by
a federal Form D filing," the SEC rule
proposal states. Whether state regulators
would go along with that idea, however,
remains to be seen.
While such a move would benefit issuers,
Feldman doesn't expect state regulators
to jump on the idea, since the current
reporting regime lets them collect filing
fees. "My hope is that there will be
some sort of compromise, maybe where
companies would still pay the state
fee but would only need to file the
form with the SEC," he says.
Perkins also says a move to one-stop
filing "would be helpful," but agrees
that isn't likely to happen overnight.
"I don't think it's something all states
will immediately embrace, but there
may be an evolution toward a single
filing system for these types of offerings
under Reg D," he says.
Feldman also notes that the proposal
would add a requirement to provide a
Central Registration Depository number-a
number that state regulators and the
National Association of Securities Dealers
use to identify brokers and broker-dealers-for
every intermediary involved in the transaction.
That may raise some concerns, he says,
since "it suggests that nobody other
than a registered broker should be an
intermediary in a transaction," and
some unregistered brokers collect consulting
fees when companies raise money through
private or limited offerings.
Meanwhile, a separate proposal also
related to Regulation D, which was published
for comment by the SEC in August, would
create a new registration exemption
for offers and sales of securities to
a new category of "large accredited
investors." It would also permit limited
advertising in exempt offerings to investors
that meet that definition and would
revise the term "accredited investor,"
among other things. That proposal is
out for comment until Oct. 9.
