The primary regulatory filing requirement for a registered investment adviser (RIA) firm is the Form ADV. The Form ADV Part 1, Part 2, and Part 3 (more commonly referred to as the Form CRS for certain advisers to retail clients) is filed via the online Investment Adviser Registration Depository (IARD) system. However, some RIA firms that advise private funds may also be required to file a Form D via the Electronic Data Gathering, Analysis and Retrieval (EDGAR) system or blue sky filings with each state from which funds are raised and investors reside. In this post, we highlight some Form D and Blue Sky filing requirements.
Note: COMPLY’S RIA in a Box LLC is not a law firm and does not provide legal advice. We strongly advise that all companies consult with proper legal counsel for all matters related to Rule 506 of Regulation D. This overview is provided for general information purposes only and should not be relied upon to take any action.
What are Blue Sky filings?
Blue Sky filings are in response to Blue Sky Laws which are state regulations established as safeguards to “protect investors against fraudulent sales practices and activities.” Blue Sky Laws, which vary from state to state, typically require sellers to register their offering and provide financial details of the deal and the entities involved before their offering can be sold in a particular state, unless a specific state exemption is available. Firms must comply with both federal regulations and state securities laws and regulations in the states where securities are offered and sold. As a result of this registration, investors have verifiable information on which to base their judgement and investment decisions.
Updating and Amending Blue Sky Filings
Since Blue Sky filing requirements vary from state to state, the annual amendment requirements vary as well. While some states may not require an annual amendment, other states may require Blue Sky amendments to be submitted annually. We highly recommend the firm’s Chief Compliance Officer (CCO) review each states requirements annually, as updates may have been made to the previous years rules and regulations.
How do I submit my firms Blue Sky filing?
Since Blue Sky filings have to be submitted to each individual state, submission rules and details vary. While some states accept Blue Sky filings electronically through the North American Securities Administrators Association (NASAA) Electronic Filing Depository System (EFD), other states require paper filings.
Regulation D and Form D filings
As outlined by the Securities and Exchange Commission (SEC):
Form D is a form to be used to file a notice of an exempt offering of securities with the Securities and Exchange Commission. Commission rules require the notice to be filed 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 or Section 4(a)(5) of that statute. Commission rules further require the notice to be filed within 15 days after the first sale of securities in the offering. For this purpose, the date of first sale is the date on which the first investor is irrevocably contractually committed to invest. 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.
A company must file their Form D within 15 days after the first sale of securities in the offering. For this purpose, the date of first sale is the date on which the first investor is committed to invest. The SEC does not charge filing fees for Form D filing notices or amendments.
Updating and Amending Form D Filings
After the initial Form D is submitted and if the offering is continuous (which is common with a hedge fund), the filer has to submit an annual amendment before the anniversary date. Certain private funds, such as private equity funds, generally do not submit an annual amendment if fundraising has been completed and no new investors are being accepted. In addition to potential annual amendment filings, a Form D might need to intermittently be amended if any of the information filed is materially inaccurate, such as an address change, officers of the reporting entity, or changes to the number of investors. We highly recommend you consult with your CCO, compliance consultant, or outside legal counsel to decide whether an amendment is required.
How to submit a Form D Filing
Form D filings must be made using the SEC’s EDGAR filing system.
Unregistered and Exempt Reporting Advisers May Still Need to File Blue Sky and Form D Filings
There is a common misconception that only private fund advisers required to register as RIA firms with the SEC may need to file Blue Sky and Form D filings. It’s important to note that the registration status of the private fund adviser does not impact the adviser’s potential requirement to make Blue Sky or Form D Filings. This means that smaller fund advisers not required to register as an RIA with the relevant state(s) or the SEC along with exempt reporting adviser (ERA) firms will commonly still have Blue Sky and Form D filing requirements. Thus, even when a fund adviser may not have reached the size threshold to file a Form PF via the IARD filing system, the fund adviser needs to ensure all other Form ADV, Blue Sky, and Form D filing requirements are still met.
How can COMPLY can help?
To help address the unique regulatory requirements of fund advisers, we recently released a customized version of our industry-leading MyRIACompliance® online RIA compliance software platform to better service fund advisers. Our private fund platform provides tools to manage and automate compliance processes and streamline regulatory filings such as Blue Sky and Form D filings, all in a centralized location saving private fund advisers time and money and providing them reassurance they are meeting all compliance requirements. The new platform is designed for SEC-registered private fund advisers and exempt reporting advisers (ERAs).
Note: The information contained herein is an overview regarding certain private fund regulatory compliance considerations. It is not intended to be a comprehensive analysis or apply to any one private fund’s particular situation.