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New York Relents on Form D Filings

December 18, 2020 By Andrew Abramowitz Leave a Comment

Form D FilingsAs of December 2, 2020, New York has joined other states in requiring that Form Ds filed with the SEC for securities offerings be submitted to the state via the EFD electronic system, replacing the state’s previously-required Form 99.

New York has long been a holdout on this front since 1996 when Congress passed the National Securities Market Improvement Act, which was intended to rationalize the crazy quilt patchwork of individual state “blue sky” laws to be complied with wherever securities were sold. NSMIA expressly preempted any requirements from a state beyond filing a copy of the Form D along with a filing fee and a consent to service of process. Most states quickly amended their blue sky laws to require only what NSMIA permitted. New York, however, continued to require the filing of a Form 99, which clearly required more disclosure from issuers than was permitted under NSMIA.

A subcommittee of the New York State Bar Association issued a position paper to the effect that New York’s Form 99 requirement could be disregarded for private placements because of the preemption by NSMIA. Many large law firms, in turn, advised their clients that no filing in New York was necessary. Still, it’s an uncomfortable position for risk-averse corporate law firms to advise clients that it’s acceptable to ignore what, from the state AG’s perspective, was still a requirement.

Now, with New York having relented on this issue, the procedure is the same as with most states: prepare and file the Form D with the SEC, and then just check the box for New York on the EFD filing. New York’s filing fee of $300 to $1,200, depending on the offering amount, is added to the total from other states on the filing. This development eliminates one of the quirks of New York law that made it unique, but it’s really an unqualified good development and long overdue.

Filed Under: SEC Disclosure Matters

The SEC is Enforcing Accredited Investor Verification Rules

December 15, 2018 By Andrew Abramowitz Leave a Comment

The SEC is Enforcing Accredited Investor Verification RulesThe SEC recently brought an enforcement action against a fund investing in digital assets for a failure to register a sale of securities under Section 5 of the Securities Act. The fund had filed a Form D with the SEC that, in itself, offers no clue as to what went wrong. The form reports the sale of fund interests under the exemption provided by Rule 506(b) of Regulation D. This is the common exemption used for private placements of securities, and by complying with the applicable rules under Regulation D, there would be a safe harbor protecting the issuer against a registration violation.

[Read more…]

Related posts:

  1. Reluctance to Engage in Accredited Investor Verification
  2. The SEC Streamlines Accredited Investor Verification Under Rule 506(c)
  3. Verification of Accredited Investor Status

Filed Under: SEC Disclosure Matters

Does It Matter that Few Investors Read SEC Disclosure?

August 2, 2018 By Andrew Abramowitz Leave a Comment

Jason Zweig, writing in the Wall Street Journal, discusses efforts to make securities disclosure more understandable to the typical investor. He quotes the Nobel-laureate behavioral economist Richard Thaler as saying that “nobody reads” the dense disclosure mandated by the SEC. This is clearly a bit of hyperbole, but I think we can all agree that a majority of investors don’t read a prospectus cover to cover before making their investment decision. The question is what to do about it.

[Read more…]

Filed Under: SEC Disclosure Matters

The SEC Expands the Pool of Smaller Reporting Companies

July 24, 2018 By Andrew Abramowitz Leave a Comment

The SEC Expands the Pool of Smaller Reporting CompaniesThe SEC has greatly expanded the number of public companies that can take advantage of the “scaled disclosure” provisions of Regulation S-K. Under these rules, smaller reporting companies have less onerous requirements that apply to their periodic filings. For example, smaller reporting companies do not need to include the lengthy Compensation Discussion and Analysis disclosure that larger companies do. Following the SEC’s recent action, the definition of “smaller reporting company” includes registrants with a public float of less than $250 million (up from $75 million), as well as registrants with annual revenues of less than $100 million for the previous year and either no public float or a public float of less than $700 million (previously, less than $50 million of annual revenues with no public float).

[Read more…]

Related posts:

  1. Regulation A+ – An Improved Way for Smaller Companies to Go Public
  2. Links to Some of My Greatest Hits
  3. SEC Crackdown on Undisclosed Unregistered Offerings

Filed Under: SEC Disclosure Matters

What We Can Learn from Changes in Public SEC Filings

June 1, 2018 By Andrew Abramowitz Leave a Comment

Title III CrowdfundingPeter R. Orszag, writing in Bloomberg View, highlights a study of public SEC-filed Form 10-K annual reports, which found that companies that make changes to the disclosure in their 10-Ks from one year to the next tend to have lower stock returns than average after publication of those changes. The study found that a significant majority of the changes constituted disclosure of negative information, so the resulting decline in performance is not surprising.

[Read more…]

Related posts:

  1. Streamlining of Blue Sky Filings
  2. SEC Crackdown on Undisclosed Unregistered Offerings
  3. Legal Disclosure Requirements for Title III Crowdfunding

Filed Under: General Corporate/M&A Matters, SEC Disclosure Matters

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"Andrew Abramowitz, a lawyer in Manhattan who has worked with both buyers and sellers of private placements, said every investor should approach a private placement skeptically." -- Paul Sullivan (New York Times)

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"If the goal [...] is to protect people from losing all of their money in an illiquid investment, the current standard fails on that count, too. Andrew Abramowitz, a lawyer in Manhattan who has worked with both buyers and sellers of private placements, said a better standard might be to limit how much of their net worth people can invest." -- Paul Sullivan (New York Times)

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