Demystifying Form D Filings with the SEC: In-Depth Walkthrough and Tips

ultimately lives in their EDGAR database. I don't think it's been done before. And so we are going to do it right now. So let's do it. It's helpful to have the form in front of us so we know exactly what we're talking about. So you can see here this is indeed formed the Securities and Exchange Commission. Item one is the issuers identity, what the issuer identity is, is what is that entity that's ultimately filing this security with the SEC. So this isn't the sponsor

information. This is the the investment entities information. So it has the name of the issuer, the jurisdiction of incorporation. So if it's a Delaware, LLC, or a Nevada LLC, or wherever it is, that's the the jurisdiction that it's in. If it's ever been in existence before, there's some previous names that go here. And then here's we choose entity type, almost all of my clients choose LLC. Occasionally, for business clients, we choose a corporation that might make sense, it really

depends on your specific situation. Year of incorporation, most of mine are fairly new that I file, so it's almost always within the last five years. And then they want you to put in the year that it was formed. So we do that like that. Then we get to the principal place of business and contact information. Now this most of the time is you as the sponsor your information, or really whoever it means to get in touch in contact with. So this is going to be just the

address for notifications and a phone number. Item three, this is the related persons. Now this is where 99.9% of the times I'm looking for who's going to be the executive officer that's going to be involved now the executive officer could be the manager of an LLC, or it could be the manager of the manager of the LLC, it's that person who's probably the key contact the key decision maker, one person is identified. If you're doing it as part of a team, it might be there might be more than one.

But we only need for this form one one person identified. So there it's just last name, first name, middle name, street address contact information. And almost always I use executive officer, though could be director or promoter in specific circumstances, there's never really a need in my experience for clarification of that responses. The item four is the

industry group. Now this is mostly so that the SEC can keep track of what industries are generally using Reg D and so that they can get a better gauge on how to control what they're

trying to control. So most of mine are either in this real estate area, either construction residential commercials down there, other real estate if it's land, but then a lot of times I'll have technology, if I'm working for a technology business, or in business services, I may choose that if it's a specific business service that's raising money, occasionally, but not too often. We'll use a private equity fund really, that's more if it truly is a private equity fund, or

venture capital fund. We'll use those exemptions. Just to let the SEC that's the kind of organization it is. issuer size here they're looking for revenue range or the aggregate net asset value. Now, a lot of times you can choose and a lot of people do declined to disclose, I don't see necessarily a reason to

choose declined to disclose. Certainly if I had a was starting a real estate syndication company for example or a fun, I might want to put what is revenue range or what the asset value ranges just as a small token of promoting myself. If it was a business and a small, closely held business I probably would always choose declined to disclose Sometimes there's no revenues at all. And sometimes there's no aggregate

value, or sometimes both. So sometimes, depending on on my particular client, I'll choose either no revenues or declined to disclose. Now the exemption, so we've got several exemptions for rule 504. 504 is pretty out of favor at this point, I don't do any Rule 504 filings, I find it unnecessary and not applicable to really any of my clients. Really, my world is rule of 506b and rule 506c. Those are the two rules that are most used by us. And they can that's where we fill those out.

Now over here is the Investment Company Act section, I have an article on my website for the Investment Company Act that can walk you through that, if you're doing real estate specific, it doesn't apply. Under 3(c)7 is an exemption that automatically makes it so that you are not counted in under the Investment Company Act. There are other rules and feel free to give us a call if you want to discuss the Investment Company Act and whether you qualify. They're most often my clients do not.

Occasionally there is and occasionally, very occasionally, there will be another opportunity where there needs to be a filing. Under the Investment Company Act as well. type of filing most of my clients are doing new notice. But if there was a mistake or something changed, we might do an amendment. And then the date of first sale in this offering would be that first day when money exchanged hands from your

investor to you and deposited into your bank account. Or that point at which that amount of money became so that you couldn't get it back quickly to the investor. The duration of the offer, generally Reg D offerings are valid for only one year. But if it is more than one year, you would choose no and you would need to make sure to stay on top of it to file. The renewals on that types of securities offer is equity is generally self explanatory. You know, it's generally an interest

in the business itself into the assets. And so it's it's that ownership interest, whereas a debt may look completely different than equity, where it's a contract level relationship to the the LLC itself. And that money is owed back to the the investor upon certain guidelines. There are other more unique things like options or warrants. That's never really applicable to my clients. But it certainly is

available there as well. Security to be acquired about exercise of the option, again, not generally used by any of my clients, or it's probably not used by you. Nor is pooled investment fund interests. Mineral property securities or an other tenant in common securities, I suppose could be slightly of use. Generally, that's not used, except in the rare instance where I have a 1031 Exchange being done. I might be doing tenant and common security in that, in that

context. business combination transaction for contemplated for a merger acquisition or exchange offer is almost always a no, it would really be is if there was a security sale being taken place that was in connection with a merger acquisition or exchange offer, then we might say yes. On page three, now, we have the minimum investment amount. So almost always you say you set forward in your private placement memorandum, a minimum

investment that's required from the investor. So that is oftentimes 25,000 50,000 100,000, sometimes even up to a million as the minimum investment amount. That's what they're looking for here. If an investor came to you and said, I'd like to invest, what's that minimum that you're advertising or not advertising but that you're putting in your PPM that you would accept? Sales Compensation, if you're paying a

broker dealer to represent you, this is where that would go. If you were doing excuse me, if you were doing anything else, you would not complete sales compensation, you cannot pay sales compensation to a non licensed broker dealer. So this part you would always leave place unless you specifically had a broker dealer or in your transaction item 13 offerings and sales amount. So

line A is really looking for the total amount of the offering. So if it is a $5 million, that you're raising 5 million goes there in line B is the total amount that's currently sold as of the date of this filing. By sold again, we mean those monies that you've received from an investor and are currently either in your account or already have been deployed. And then the total amounts to be sold is simply this line a minus line B gives you the total amount that remains to be done.

Now you can have this be indefinite, and if it is indefinite, you would just choose this amount of indefinite but lying be still will have an entry, you'll still have $1 amount there. Investors section so this is looking for the number of in first line is looking for if it's possible,

that there are non accredited investors. So to you This means if you're doing a rule 506b offering, then you would check this box, and then you would put the number of non accredited investors who have already invested with you, you have up to 35 in any 90 day period, so it's probably less than 35. My guess is that if you put in a number that was 36, when you and you did this and you filed it with Edgar, I would suspect it

would probably kick it back to you. The second line is regardless of whether there are non accredited investors or not how many investors have already invested. So this is the sum of accredited and non accredited investors who have invested. Now obviously, if it's a rule 506c, this is the only part you're filling out, it's just the number of investors. Law line 15 Is sales commissions and finder fees much like up here sales compensation, you're going to leave this blank unless there is

a broker dealer involved. Now I know it's very tempting to see

this line here and say finders fees. Okay, so that means I can pay finders fees, the fastest way to get in trouble here is to pay finders fees, the rules are very, very strict on the use of finders, and I would highly recommend that you just not use them at all, the fastest way for a house of cards to come tumbling down is for somebody to use finders have an issue come up with one investor and the investor say to their plaintiff's attorney, I've got this guy told me to invest in

this, it was really great, and then it all fell apart, this will kill you, I would not spend my time at all using finers. Item 16 use of proceeds, this is really the amount that's being used to pay you. And this is the amount that's being paid you typically as like an acquisition fee, or as a marketing fee. So it is used for payments to these persons in risk. That is being used, right. So and that is to market the security or so a lot of times that will also be counted as the acquisition fee.

So I would put always put the amount that's there. If you don't know, if you've already read if you're starting to raise the money, and it's a 1% acquisition fee, then you may be choosing an estimate based on what it is. And that's totally acceptable. The last section really is for signing the form d and that is we again, we put the name of the issuer, the name of the signer, the signature of the person signing, and their title.

If you are doing it yourself and you marked in the box as you were the executive officer, I would always put as that you were the executive officer here and have you sign it. And that is the end of the majority of the forms for Form D. Now on pages five, we have instructions. Six we have more instructions. Seven we have more instructions. And now we get to pages eight through these are continuation pages. They do not need to be filed if they're not applicable if you've already

answered everything. So if there's multiple issuers, which sometimes there is we need to fill out these pages as well. And then also If there are multiple related persons that you're reporting, they would go here on page nine. And then if there were multiple people paying sales compensation, which I think I've beaten now that I would not recommend it unless you have a broker dealer, then I then this page would be used.

And then signatures go here on page 11. I hope that you found that helpful to walk through form D give you an idea about what to expect when you're filing it. Now it all gets filed with the SEC on the EDGAR database using your own issuers see ik, for more information about what that means and how to get this done. If you need help getting it done, my law firm

will certainly be happy to help you. We represent people doing offerings under Regulation D rule 506b and 506c that is all we do is work on Reg D offerings, so feel free to give us a call or visit our website for more information.