July 18, 2013
We support the SEC's proposed changes to the filing of Form D.
Advance Form D:
The proposed changes to the filing requirements in the form of an Advance Form D would NOT require the Issuer to divulge meaningful confidential or operational details of their business, so would not have a chilling effect on 506(c) offerings.
1. We have never heard a complaint over the existing 15 day rule, so there is no reason to believe that the proposed amendment 15 day time period is anything other than appropriate.
2. We agree that consequences for failing to timely file an Advance Form D should be the immediate loss of Rule 506(c) as an exemption.
4. The idea that an Issuer should be permitted to file an Advance Form D "even if no specific offering is contemplated" appears confusing. It would force an Issuer to file amounts that may or may not be relevant to their actual plans and may actually be utilized to mislead market participants.
5. We favor providing the option for the Issuer that you have created. On the question of "should issuers be limited to providing certain specified information in the Advance Form D and required to file a subsequent amendment, after the first sale of securities to provide the remainder of the information required by Form D" as confusing (to the marketplace) and unnecessarily complicating. Why not keep it simple - give them the option as you have done, but keep the information requirements the same between the two options.
7. Potential investors or other market participants would indeed review Advance Form D filings on a real-time basis, as they do now. With so much conflicting and confusing information available online, Advance Form D filings would no doubt provide an "information source of record" for a particular solicitation and would be a valuable reference point for understanding marketplace activity by market participants.
Other Advance Form D Comments:
Issuers might also object to the Advance Form D on the grounds that should they be unsuccessful in reaching their stated financial goals, the published results would be detrimental to their future business prospects. In fact, most Issuers carefully research the opportunity for capital raising from investors before embarking on the cost and effort of a solicitation. The existence of the Advance Form D would serve to further incentivize Issuers to perform their necessary due diligence to avoid potential market embarrassment.
Form D Closing Amendment:
11. We support the reinstatement of the requirement of filing of a "Closing Amendment" for all Regulation D offerings, for the reasons outlined by the SEC.
12. The issue is what constitutes "Termination" of a Rule 506 offering. Many Issuers will hold an offering open "indefinitely", so how would the SEC compel an Issuer to file a Closing Amendment? To avoid this new reporting requirement, Issuers might gravitate towards "indefinite" offerings. The SEC should consider requiring a "Closing Date" on the first Form D filed, which would trigger the issuer to file a relevant Closing Amendment within 30 days after that date, or be in noncompliance.