On December 20, 2024, the Securities and Exchange Commission (the “SEC”) settled three enforcement actions for failing to timely file a Form D in connection with private offerings. The three companies included one registered investment advisor and two private operating businesses. The companies were ordered to cease and desist from violating the charged provisions and to pay civil penalties of $60,000, $195,000 and $175,000.

A Form D is a notice filing that is filed with the SEC in connection with an offering or issuance of securities in reliance on the exemptions from the Securities Act of 1933 (“Securities Act”) registration requirements found in Regulation D. Rule 503 of Regulation D requires that a company relying on Rules 504 or 506 file a Form D with the SEC for each new offering of securities no later than 15 calendar days after the first sale of securities in the offering.

Failure to file a Form D within the permitted window does not result in the loss of the registration exemption, but such failure is still a violation of Regulation D. Importantly, the SEC noted that each of the three companies had engaged in general solicitation, which prevented them from relying upon the general private placement exemption under Section 4(a)(2) of the Securities Act. The SEC did not specify what specific communications constituted a general solicitation, but it cited the large number of prospective investors contacted by the companies to solicit investment and the significant number of investors accepted by the companies. Because the SEC concluded that the three companies engaged in general solicitation, the companies were then reliant on Rule 504 or Rule 506(c) of Regulation D, each of which require a Form D filing.

The charges brought against these companies is a surprising development because the SEC had not previously pursued enforcement action against a company for failure to file a Form D alone. To be clear, the enforcement actions do not allege that the three companies engaged in fraud or any other act that violated the Securities Act. With the current administration’s reduced regulatory enforcement posture, it is possible that SEC enforcement actions of this nature will not become the norm moving forward. Nevertheless, we urge clients to be especially attentive to Form D filing requirements when engaging in private offerings.

If you have any questions about these SEC enforcement actions or related issues, please contact David Morris ([email protected]) or Marcus Lind-Martinez ([email protected]). Thank you.

This article contains material of general interest and should not be construed as legal advice or a legal opinion on any specific facts or circumstances.  Under applicable rules of professional conduct, this content may be regarded as attorney advertising.