Micro Cap IPO - Merger & Acquisition and Public Market Exit Services for Investor Backed Ventures

Private Investment Offering Services

Private Offerings:

We have substantial expertise in negotiating, structuring, pricing and managing private offerings. Private investment offerings are not registered with the SEC or a state securities division. 

We assist client companies with conducting well documented private offerings supported by quality due diligence packages. We have a close association with qualified affiliated lawyers if specialized legal services are needed.

Our Contract CFO and Investment Banking Services are generally required by most companies where the executive team lacks personal experience and training in corporate finance and the many moving parts associated with emerging venture business development. With our help, you will avoid making many typical mistakes that could undermine your success and even cause a legacy of destructive litigation and burned relationship bridges. 

WORD OF CAUTION: We believe all private offerings should be well thought through so future steps and direction of the venture is deeply understood. Of course thoroughly packaging and professionally presenting an investment opportunity, regardless of whether you are soliciting professional investors or friends and family, is essential. We also assist with selection of all required professionals and manage them when needed.

SEC information of interest:
Most private offerings of securities should be "accredited" investor only offerings for many reasons. Accredited investors are defined under Rule 501 of Regulation D of the 1933 Securities and Exchange Act. Accredited investors must meet specified requirements including sophistication and significant financial net worth. 

Form D Filing Requirement:

The most commonly known violation of private offerings that are conducted without qualified legal counsel assisting is failing to timely file Form D with the SEC and any applicable states. The article below addresses most related FAQs:

"Private Placements: What Happens if You Fail to File Form D or File it Late?," by Thomas A. Cifelli

Form D is a document that the SEC requires a company to file when it issues unregistered securities in a private placement using the authority of one of the safe harbor exemptions under Regulation D.  

Form D is available online, and it must be filed with the SEC within 15 days of the first sale of a security in a private placement. Best practices suggest filing it at commencement of a private offering and filing a copy of Form D with each state in which purchasers of the securities reside within 15 days of the first sale within each state.

Form D is a relatively simple document to complete and file. If an issuer fails to file Form D, historically that would cause a loss of the federal private placement exemption and consequently violation the securities laws prohibiting selling unregistered securities.  Today however, a failure to file a Form D does not result in the loss of the federal registration exemption.  The SEC has issued guidance on this in Question 257.07 of the Securities Act Rules Questions and Answers of General Applicability.  

While filing Form D is a requirement for using a registration exemption under Regulation D, it is not a condition to qualifying for the exemption.  Instead, the only potential consequence on the federal level is that the SEC could take action against the issuer and seek to have the issuer enjoined from future use of Regulation D under Rule 507.  If the violation is willful, it could also constitute a felony.

The major practical downside to not timely filing required Form Ds is two-fold: First, if you find yourself in litigation with disgruntled investors, while failing to file Form D may not result in the SEC seeking penalties against an issuer for selling unregistered securities, it could put an issuer at a disadvantage in civil litigation by eliminating one piece of evidence that an issuer can use to build their case that they substantially complied with Regulation D.  In addition, the SEC may seek substantial penalties against an issuer who has failed to properly file Form D.

The second practical downside is for companies who become attractive to institutional investment capital such as venture capital and private equity firms, part of these sophisticated investor’s process is thorough due diligence. They will expect compliance with Form D filings. This could cause a delay in consummating any such transaction, including delaying the SEC and FINRA approving a company to go public which has falied to file required Form Ds in connection with its private offering rounds.

What are the consequences for failing to file Form D at the state level?  Most Regulation D offerings are conducted through Rule 506.  When an issuer makes use of Rule 506 to issue securities, those securities are considered "covered securities," and state registration requirements are preempted.  However, states are permitted to require that the issuer file a copy of the Form D and pay a filing fee with the state securities administrator where residents of that state invested. Is the preemption of state securities registration requirements in a Rule 506 offering lost if the issuer fails to file with a state?  The SEC's position is that it is not.  Under Question 257.08 of the Securities Act Rules Questions and Answers of General Applicability, the preemption is not conditioned on properly making a notice Form D filing with a state.  Some states take the opposite position.  The Wisconsin Department of Financial Institutions for instance takes the position that if a Form D is filed late in Wisconsin, the issuer must find another exemption or register the security. My person opinion is that if the Wisconsin Department of Financial Institutions ever took the case you court and claimed that a Rule 506 offering needed to be registered because a Form D was late, Wisconsin would lose that case, as courts have repeatedly held that failure to make a notice filing does not strip the offering of the status of a "covered security." But taking such a case to court would be expensive.  In addition, there can still be significant consequences on the state level beyond losing a registration exemption for an issuer who fails to make required notice filings.  States can issue fines or even stop orders, preventing further sales of securities by an issuer.  Arkansas, for example, is one state that has been particularly aggressive in issuing fines for late Form D filings.

The good news here is that if an issuer accidental fails to file a required Form D when conducting an offering, or files it late, that will not invalidate the private placement registration exemption, which would potentially be a catastrophic event for an issuer.  However, the SEC and state securities administrators can still issue fines and prevent an issuer from engaging in future private placements, so issuers still need to be diligent in making all required securities filings when conducting private placements.


1/ Hamby v. Clearwater Consulting Concepts, Lllp, 428 F.Supp.2d 915, 920 (E.D. Ark., 2006).

2/ In a court trial, the issuer would have to produce additional evidence to show substantial compliance with Regulation D, such as subscription documents that evidenced an inquiry into whether the investors were accredited or sophisticated.

3/ See http://www.wdfi.org/fi/securities/regexemp/exemptions/23_19_506.htm

4/ See for example Chanana's Corp. v. Gilmore, 539 F.Supp.2d 1299 (W.D. Wash., 2003) for an example of a case where a court concludes that a late filing does not cause a security to lose its status as a "covered security."

5/ Private Placements: What Happens if You Fail to File Form D?, by Alexander Davie, Esq., September 20, 2011.

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