SEC on a Tear Updating Various C&DIs


In the last two weeks, the United States Securities and Exchange Commission’s (SEC) Division of Corporation Finance issued two new sets of Compliance and Disclosure Interpretations (C&DIs) relating to Regulation A+, Regulation D and Rule 147, all under the Securities Act of 1933 (Securities Act).

Regulation A+

On September 14, 2017, the SEC issued three new C&DIs relating to the filing of a Form 8-A in connection with a Regulation A+ offering, often referred to as a “mini-IPO.” Form 8-A is the securities registration statement that is necessary for an issuer to register securities under the Securities Exchange Act of 1934 (Exchange Act) and to list its securities on a national exchange, such as the New York Stock Exchange or Nasdaq. The Regulation A+ C&DIs provide the following guidance:

  • If an issuer registers a class of securities on Form 8 A concurrently (i.e., within five days) with the qualification of a Form 1-A Offering Statement or the qualification of a post-qualification amendment to a Form 1-A, then the financial statements in the Form 1-A or post-qualification amendment must be current at the time it is qualified.
  • If an issuer registers a class of its securities on Form 8-A concurrently with the qualification of Form 1-A and the qualified Form 1 A did not contain financial statements for the last full fiscal year preceding the fiscal year of effectiveness of the Form 8-A, then the issuer may file its first Form 10 K within 90 calendar days after the effectiveness of the Form 8 A.
  • If an issuer registers a class of its securities on Form 8-A concurrently with the qualification of Form 1-A and the qualified Form 1 A did not contain financial statements for one or more quarterly periods that followed the most recent annual or semiannual period for which financial statements were included in the Form 1-A, then the issuer must file quarterly reports for these quarterly periods on one or more Forms 10-Q for the completed quarterly periods that were not included in the Form 1 A within 45 days after effectiveness of the Form 8-A.

Regulation D and Rule 147

On September 20, 2017, the SEC (i) issued revised C&DIs to reflect amendments that were previously made to Rules 147 and 504 of the Securities Act, (ii) withdrew C&DIs to reflect the repeal of Rule 505 of the Securities Act and (iii) revised and repealed various C&DIs relating to Rule 506 of the Securities Act. By way of background, in October 2016, the SEC (i) amended Regulation D to increase the maximum offering amount possible under Rule 504 to $5 million and add “bad actor” disqualification provisions to Rule 504, (ii) repealed entirely Rule 505 and (iii) created a new intrastate offering exemption, Rule 147A under the Securities Act, which modernized the pre-existing safe harbor under Rule 147 largely by lifting the ban on general solicitation from such offerings. Highlights from the C&DIs include the following:

  • Securities offered in an offering that otherwise complies with Rule 506 will not lose their status as “covered securities” if the issuer fails to file a Form D with the SEC.
  • Private funds are precluded from relying on Sections 3(c)(1) or 3(c)(7) of the Investment Company Act if they make a “public offering” of their securities. Offerings made under Rule 504 may be public or non-public depending on the provision of the rule that is relied upon for the offering. If a private fund made a “public offering” of its securities under Rule 504, that private fund would no longer be able to rely on the applicable exclusion under Sections 3(c)(1) or 3(c)(7) and thus would be required to be registered under the Investment Company Act.
  • Rule 504 is not available to an issuer that is subject to a “bad actor” disqualification. On or after January 20, 2017, an issuer must determine if it is subject to a bad actor disqualification any time it offers or sells securities in reliance upon Rule 504.
  • If a family trust that is not deemed to be a separate legal entity has two trustees, only one of which resides in a state where a Rule 147 offering is being made, the issuer may still offer and sell securities to the family trust in the Rule 147 offering.

For additional information, please contact Marc Adesso, Wes Scott or any member of the Waller Capital Markets and Securities team.

The opinions expressed in this bulletin are intended for general guidance only. They are not intended as recommendations for specific situations. As always, readers should consult a qualified attorney for specific legal guidance.