As a result of the filing issues surrounding state Blue Sky Review, the North American Securities Administrators Association (“NASAA”) has found a way to streamline the filing process for issuers who are required to submit a Form D for a Regulation D, Rule 506 offering to state regulators and pay associated filing fees to each jurisdiction.
Note: 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. RIA in a Box LLC does not offer any services or assistance with regards to private securities offerings.
Rule 506`1` of Regulation D is a “safe harbor” for the private offering exemption of Section 4(a)(2) of the Securities Act. Issuers relying on Rule 506 of Regulation D are exempt from registration with the SEC and state regulators, but they must file a Form D with the SEC and state regulators after the first sale of securities is made.
The Electronic Filing Depository system (“EFD”), developed by NASAA, “is an internet accessible database system that allows issuers to submit Form D for Regulation D, Rule 506 offerings and pay related fees to state securities regulators. The system will provide an electronic receipt of the submission as proof of your offering. Issuers will also be able to monitor the progress of the states’ review of the offering to respond to any deficiencies that may arise. EFD also provides a public-facing website allowing members of the public to search and view, free of charge, Form D filings made with state securities regulators.”.
The NASAA news release dated August 5, 2015 has announced the success of EFD as over 10,000 notice filings have been made via EFD to state regulators since its launch on December 15, 2014`2`. EFD has made it easier for Issuers to submit filings to state regulators all at once as compared to the countless paper notice filings that have passed over the threshold of each state regulators office. EFD has proven in the past nine months to be an efficient and easily accessible electronic filing system, available 24 hours a day, seven days a week. Not only is EFD a place to submit filings efficiently, it is also a place where Issuers can monitor their filings with each state regulator, respond to deficiencies, and keep track of each electronic receipt of filings to keep for compliance records. However, users beware, some state regulators may require additional filing materials per their respective Blue Sky regulations. It is always best to check with your state regulator to verify an additional filing requirements.
In order to use EFD, Issuers of securities that qualify as Regulation D, Rule 506 offerings are eligible to apply for a UserID to file their state notice filings through EFD via https://www.efdnasaa.org. Only those who complete a system registration and authorization may participate in electronic filing for Form D. Issuers will be charged a system use fee of $150 for each filing. This fee covers the cost of hosting, maintenance, and support of the EFD system. The fee does not apply to amendments, renewals, terminations, or withdrawals of each filing. NASAA members will utilize EFD free of charge.
Currently EFD is a place for Issuers who are relying on the Rule 506 exemption; however, NASAA is considering expanding EFD to include additional state registration and notice filing materials. Currently, only 43 NASAA members`3` are available on the platform except for Arizona, California, Connecticut, Florida, Louisiana, Massachusetts, New York, North Carolina, Oregon, and Michigan; however, NASAA is hopeful to have all NASAA members available on the platform in the future.
`1` http://www.sec.gov/answers/rule506.htm
`2` http://www.nasaa.org/33829/nasaa-launches-streamlined-electronic-filing-depository/
`3` https://www.efdnasaa.org/about