
[Federal Register: February 27, 2008 (Volume 73, Number 39)]
[Rules and Regulations]               
[Page 10591-10642]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27fe08-12]                         


[[Page 10591]]

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Part IV





Securities and Exchange Commission





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17 CFR Parts 230, 232, and 239



Electronic Filing and Revision of Form D; Final Rule


[[Page 10592]]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 230, 232, and 239

[RELEASE NOS. 33-8891; 34-57280; 39-2453; IC-28145; FILE NO. S7-12-07]
RIN 3235-AJ87

 
Electronic Filing and Revision of Form D

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

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SUMMARY: The Securities and Exchange Commission is adopting rule 
amendments mandating the electronic filing of information required by 
Securities Act of 1933 Form D through the Internet. We also are 
adopting revisions to Form D and to Regulation D in connection with the 
electronic filing requirement. The revisions simplify and restructure 
Form D and update and revise its information requirements. The 
information required by Form D will be filed with us electronically 
through a new online filing system that will be accessible from any 
computer with Internet access. The data filed will be available on our 
Web site and will be interactive and searchable.

DATES: Effective Date: September 15, 2008 except the amendments to 
Sec.  232.101(c)(6) and Sec.  232.201(a) are effective March 28, 2008, 
Sec.  232.101(a)(1)(xiii) is effective March 16, 2009 and Sec.  
230.503T, Sec.  232.101(b)(10) and Sec.  239.500T are effective from 
September 15, 2008 to March 16, 2009.

FOR FURTHER INFORMATION CONTACT: Questions about this release should be 
addressed to Gerald J. Laporte, Chief, or Corey A. Jennings, Attorney-
Advisor, Office of Small Business Policy, Division of Corporation 
Finance, or Mark W. Green, Senior Special Counsel (Regulatory Policy), 
Division of Corporation Finance, Securities and Exchange Commission, 
100 F Street, NE., Washington, DC 20549-3628, (202) 551-3460.

SUPPLEMENTARY INFORMATION: We are adopting revisions to Rules 100,\1\ 
101,\2\ 104,\3\ 201,\4\ and 202 \5\ of Regulation S-T,\6\ Rules 502 \7\ 
and 503 \8\ of Regulation D,\9\ and Form D \10\ under the Securities 
Act of 1933 (``Securities Act'').\11\ We also are adding temporary Rule 
503T and Temporary Form D under the Securities Act and temporary Rule 
101(b)(10) of Regulation S-T.
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    \1\ 17 CFR 232.100.
    \2\ 17 CFR 232.101.
    \3\ 17 CFR 232.104.
    \4\ 17 CFR 232.201.
    \5\ 17 CFR 232.202.
    \6\ 17 CFR 232.10 et seq.
    \7\ 17 CFR 230.502.
    \8\ 17 CFR 230.503.
    \9\ 17 CFR 230.501-508.
    \10\ 17 CFR 239.500.
    \11\ 15 U.S.C. 77a et seq.
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Table of Contents

I. Executive Summary and Background
    A. History and Purpose of Form D
    B. Need to Update Form D and Require Electronic Filing
    1. Easing Filing Burdens
    2. Better Public Availability of Form D Information
    3. Federal and State Uniformity and Coordination; One-Stop 
Filing
    4. Improved Collection of Data for Commission Enforcement and 
Rulemaking Efforts
    C. Summary of Adopted Amendments
II. Discussion of Amendments
    A. Amendments to Form D Content Requirements
    1. Basic Identifying and Contact Information
    2. Additional Information About Issuer
    3. Identification of Claimed Exemptions and Exclusions
    4. Indication of Type of Filing
    a. General Requirements
    b. Amendment of Previously Filed Form D
    5. Information About Offering
    6. Signature and Submission
    B. Electronic Filing of Form D
    C. General Solicitation and General Advertising Issues Presented 
by Electronic Filing of Form D
III. Electronic Filing Procedure
    A. Mechanics
    B. Database Capabilities of Electronic Form D Repository
    C. System Implementation
IV. Paperwork Reduction Act Analysis
V. Cost-Benefit Analysis
VI. Consideration of Impact on Competition and Promotion of 
Efficiency, Competition and Capital Formation
VII. Final Regulatory Flexibility Act Analysis
VIII. Statutory Basis and Text of Amendments

I. Executive Summary and Background

A. History and Purpose of Form D

    On June 29, 2007, we issued a release in which we proposed for 
public comment rule amendments mandating the electronic filing of Form 
D through the Internet and revisions to that form.\12\ In this release, 
we are adopting the amendments substantially as proposed. As further 
described below, companies will be permitted to file Form D information 
voluntarily through the Internet when our new Form D electronic filing 
system becomes available on September 15, 2008 and will be required to 
file electronically through the Internet on and after March 16, 2009.
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    \12\ We proposed the amendments in Release No. 33-8814 (June 29, 
2007) [72 FR 37376]. The comment letters we received in response to 
the proposing release were filed in File Number S7-12-07 and are 
available at http://www.sec.gov/comments/s7-12-07/s71207.shtml or 
from our Public Reference Room at 100 F Street, NE., Washington, DC 
20549.
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    Form D serves as the official notice of an offering of securities 
made without registration under the Securities Act in reliance on an 
exemption provided by Regulation D.\13\ Both public and nonpublic 
companies file information using this form.
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    \13\ Regulation D contains separate exemptions for limited 
offerings in Rules 504, 505 and 506. Form D also is to be used by 
issuers making offerings of securities without registration in 
reliance on the exemption contained in Section 4(6) of the 
Securities Act [15 U.S.C. 77d(6)]. Although we primarily discuss 
Regulation D in this release, the revised Form D also will continue 
to apply to Section 4(6) offerings. Regardless of the type of 
offering to which revised Form D applies, it will be required to be 
filed electronically after a transition period during which we will 
allow either paper or electronic filing.
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    Regulation D was part of a Commission initiative in the early 1980s 
to provide a more coherent pattern of exemptive relief from the 
registration requirements of the Securities Act, and particularly to 
address the capital formation needs of small business.\14\ At the time, 
we intended the Form D filing requirement in Rule 503 of Regulation D 
to serve an important data collection objective.\15\ We expected that 
the empirical data derived from the Form D filings would enable us to 
better evaluate the effectiveness of Regulation D as a capital raising 
device and eventually to further tailor our rules to provide 
appropriate support for both capital formation, especially as it 
relates to small business, and investor protection.\16\
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    \14\ We adopted Form D and Regulation D in 1982. Release No. 33-
6389 (Mar. 8, 1982) [47 FR 11251] (adopting Form D as a replacement 
for Forms 4(6), 146, 240 and 242). They had been proposed in the 
previous year. Release No. 33-6339 (Aug. 7, 1981) [46 FR 41791] 
(proposing Regulation D and Form D).
    \15\ We stated in the proposing release for the original Rule 
503:
    ``An important purpose of the notice * * * is to collect 
empirical data which will provide a basis for further action by the 
Commission either in terms of amending existing rules and 
regulations or proposing new ones * * *. Further, the proposed Form 
would allow the Commission to elicit information necessary in 
assessing the effectiveness of Regulation D as a capital raising 
device for small businesses.''
    Release No. 33-6339 (Aug. 7, 1981) [46 FR 41791, 41799].
    \16\ Release No. 33-6339 (Aug. 7, 1981) [46 FR 41791, 471799].
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    We modified the requirements relating to Form D in 1986, making 
Form D a uniform notification form that could be filed with state 
securities

[[Page 10593]]

regulators.\17\ This effort was undertaken with the cooperation of the 
North American Securities Administrators Association (NASAA), the 
organization of state securities regulators, as part of the 
Commission's efforts to reduce the costs of capital formation for small 
business and to promote uniformity between federal and state securities 
regulation. At that time, we also eliminated the requirement to amend a 
Form D filing for an offering every six months during the course of the 
offering and the requirement to make a final Form D filing within 30 
days of the final sale in the offering. We left intact the requirement 
in Rule 503 to file a Form D notification within 15 days after the 
first sale of securities in an offering, leaving that as the sole 
current explicit requirement for a Form D filing.\18\
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    \17\ Release No. 33-6663 (Oct. 2, 1986) [51 FR 36385].
    \18\ 17 CFR 230.503.
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    In 1989, we amended the Regulation D exemptions to eliminate the 
filing of Form D information as a condition to their availability.\19\ 
At that time, we also added Rule 507 to Regulation D to provide an 
incentive for issuers to make a Form D filing, even though it was no 
longer a condition to the availability of the Regulation D 
exemptions.\20\ Specifically, Rule 507 disqualifies an issuer from 
using a Regulation D exemption in the future if it has been enjoined by 
a court for violating Rule 503 by failing to file the information 
required by Form D.\21\ Consequently, an issuer has an incentive to 
make a Form D filing to avoid the possibility that a court will enjoin 
the issuer for violating Rule 503 and, as a result, disqualify the 
issuer from using a Regulation D exemption in the future.
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    \19\ Release No. 33-6825 (Mar. 15, 1989) [54 FR 11369].
    \20\ Id.
    \21\ On August 3, 2007, we issued a release proposing changes to 
Regulation D. See Release No. 33-8828 (Aug. 3, 2007) [72 FR 45116]. 
Among those changes were moving Regulation D's exemption 
disqualification provisions to a new subparagraph (e) of Rule 502 
and adopting a new exemption that would appear in a revised Rule 507 
of Regulation D. The Regulation D release also sought additional 
comment on the proposals we made in Release No. 33-8766 (Dec. 27, 
2006) [72 FR 400] that concerned accredited investors in certain 
private pooled investment vehicles. Since we have not adopted and 
are still considering the changes proposed in the Regulation D 
release and the accredited investor changes proposed in the private 
pooled investment vehicle release, the new Form D and its 
implementing rules do not reflect those changes, as did the Form D 
in the Form D proposing release. We are still considering the 
proposed changes to Form D that would be necessary to reflect 
adoption of the Regulation D and private pooled investment vehicle 
changes, and may adopt the Form D changes if we adopt the Regulation 
D and private pooled investment vehicle changes.
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    In 1996, we proposed to eliminate the Form D filing requirement and 
replace it with an issuer obligation to complete a Form D and retain it 
for a period of time.\22\ At the time, our Task Force on Disclosure 
Simplification had suggested that the Commission consider the continued 
need for a Form D filing requirement.\23\ After reviewing comments on 
the proposal, we determined that the information collected in Form D 
filings was still useful to us ``in conducting economic and other 
analyses of the private placement market'' and retained the 
requirement.\24\ In 1998, we solicited public comment on, but did not 
propose, requiring electronic filing of the Form D notice.\25\ The 
public comments generally favored electronic filing in principle but 
expressed concern about Form D filers needing to follow the same 
procedures as then were required generally for filings through the 
Commission's electronic filing system, called the Electronic Data 
Gathering, Analysis and Retrieval or ``EDGAR'' system.
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    \22\ Release No. 33-7301 (May 31, 1996) [61 FR 30405].
    \23\ SEC Task Force on Disclosure Simplification, Final Report 
17 (Mar. 5, 1996), available at http://www.sec.gov/news/studies/
smpl.txt.
    \24\ Release No. 33-7431, at 5 (July 18, 1997) [62 FR 39755, 
39756].
    \25\ Release No. 33-7541 (May 21, 1998) [63 FR 29168].
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    In summary, our previous statements on Form D have suggested that, 
at the federal regulatory level, the Form D filing serves two primary 
purposes:
     Collection of data for use in the Commission's rulemaking 
efforts; and
     Enforcement of the federal securities laws, including 
enforcement of the exemptions in Regulation D.\26\
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    \26\ Release No. 33-6389 (Mar. 8, 1982) [47 FR 11251] and 
Release No. 33-7431 (July 18, 1997) [62 FR 39755].
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    The information submitted in Form D filings also is useful for 
other purposes. The staffs of state securities regulators and the 
Financial Industry Regulatory Authority (FINRA), the successor to the 
member firm regulatory functions of the National Association of 
Securities Dealers, Inc. and NYSE Regulation, Inc., also use Form D 
information to enforce securities laws and the rules of securities 
self-regulatory organizations. Form D filings also have become a source 
of information for investors. Our Web site advises potential investors 
in Regulation D offerings to check whether the company making the 
offering has filed a Form D notice and advises that ``[i]f the company 
has not filed a Form D, this should alert you that the company might 
not be in compliance with the federal securities laws.'' \27\ In 
addition, the information in Form D filings serves as a source of 
business intelligence for commercial information vendors, as well as 
for participants in the venture capital, private equity, and other 
industries that rely on Regulation D offerings and for competitors of 
companies that file Form D information. Academic researchers use Form D 
information to conduct empirical research aimed at improving the 
workings of these industries.\28\ Journalists use Form D information to 
report on capital-raising in these industries.\29\
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    \27\ See http://www.sec.gov/answers/formd.htm.
    \28\ For a discussion of how academic researchers are using 
available data on private investments to improve the workings of the 
venture capital industry, see A. Ginsberg, Truth, or Consequences: 
Academic Researchers are Helping Policy Makers and Practitioners 
Understand the Problems Facing the Venture Capital Industry, 
Innovation Review 8 (Berkley Center for Entrepreneurial Studies, 
Fall 2002).
    \29\ See, e.g., R.J. Terry and B. Hammer, NEA Closes $2.5 
Billion Fund, Baltimore Bus. Journal, July 10, 2006.
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B. Need To Update Form D and Require Electronic Filing

    Currently, much of the information required by Form D appears to be 
useful and justified in the interests of investor protection and 
capital formation.\30\ It also appears that some useful information 
that could be required by Form D is not required currently. On the 
other hand, Form D currently requires some information that may no 
longer be useful. Our staff receives many inquiries from market 
participants suggesting that Form D could be clarified and simplified. 
Moreover, the absence of an electronic system for filing Form D 
information prevents issuers from filing through efficient modern 
methods and limits the usefulness of the information collected on Form 
D. The rules we adopt today address deficiencies in the Form D data 
collection requirements and process.
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    \30\ For example, information provided in response to the 
requirement to check the applicable specified exemptions from 
registration claimed by the issuer helps the Commission monitor and 
better evaluate use of the claimed exemptions in order to protect 
investors and facilitate the development of private and limited 
markets in which to raise capital.
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1. Easing Filing Burdens
    Our new Form D rules are intended to ease the costs and burdens of 
preparing and filing Form D information. The informational requirements 
will be streamlined and updated. The instructions will be clarified and 
simplified. Issuers will file Form D information electronically through 
a new online filing system that will be

[[Page 10594]]

accessible from any computer with Internet access. Issuers will provide 
data by responding to discrete information requests. Appropriate data 
entries will be reviewed automatically for proper characters and 
consistency with entries in other fields. Data entry fields will be 
accompanied by links to instructions and other helpful information. We 
believe these system features, among others, will help facilitate a 
relatively easy-to-use filing process that will deliver accurate 
information quickly, reliably, and securely.\31\ The Form D filing will 
continue to be required within 15 days of an issuer's first sale in an 
offering without Securities Act registration in reliance on one or more 
of the exemptions provided in Regulation D, and the rules will clarify 
when amendments are required. Paper filing of Form D information will 
be eliminated after a transition period in which the information may be 
filed either electronically through the Internet or in paper.\32\
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    \31\ The new online filing system is discussed in further detail 
in Part III of this release.
    \32\ Rule 101 of Regulation S-T, Rule 503 of Regulation D and 
the description of Form D will mandate electronic filing of Form D 
information subject to varied effective dates and temporary 
provisions, which together will permit the information to be filed 
either electronically through the Internet or in paper during the 
transition period. The transition period is discussed more fully in 
Part III.C below. Currently, our rules require issuers to file five 
paper copies of the Form D with us by mail or physical delivery to 
Commission headquarters. 17 CFR 230.503(a). The Commission received 
27,843 Form D filings in its most recently ended fiscal year, 2007.
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2. Better Public Availability of Form D Information
    Requiring the electronic filing of Form D data through the Internet 
will make the information filed more readily available to regulators 
and members of the public.\33\ The information will be available on our 
Web site and, because the online filing system will automatically 
capture and tag data items, the data will be interactive and 
searchable. The Commission's public Web site at http://www.sec.gov will 
enable users to view the information in an easy-to-read format, 
download the information into an existing application, or create an 
application to use the information.
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    \33\ Most filings made with us currently are filed 
electronically through our EDGAR system. We began to make EDGAR 
electronic filing mandatory in 1993. Initially, a number of forms--
including Form D--were excluded from mandated electronic filing. 
Since the launch of the EDGAR system, we have increased the number 
of forms that are required to be filed electronically, but Form D 
has remained a paper-only filing. It will continue to remain so 
until the September 15, 2008 effective date of voluntary electronic 
filing, when companies will be able to file Form D information 
either in paper or electronically until the end of the phase-in 
period on March 16, 2009. Beginning on that date, Form D information 
will be required to be filed electronically through the Internet.
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    Unlike information filed with us electronically, paper filings are 
available from us only in person in our Public Reference Room or by 
means of a mail request. We charge a nominal fee for copies of Form D 
filings. Some Form D filings are available at higher cost from private 
vendors through the Internet and telephone requests.
3. Federal and State Uniformity and Coordination; One-Stop Filing
    For over 20 years, Form D has served as a means to promote federal 
and state uniformity and coordination in securities regulation by 
providing a uniform notification form that can be filed with the 
Commission and with state securities regulators.\34\ The contemplated 
electronic filing system for Form D information will continue that 
tradition and can enhance the utility of Form D as a means to promote 
uniformity and coordination between federal and state securities 
regulation.
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    \34\ According to a unit of the American Bar Association, 48 
states, the District of Columbia, Puerto Rico, and the U.S. Virgin 
Islands accept filings on Form D. New York prescribes its own Form 
99. Florida does not require any filing for the types of 
transactions other jurisdictions require to be reported on Form D. 
See Report on Blue Sky Survey of the NSMIA Subcommittee, Committee 
on State Regulation of Securities, American Bar Association Business 
Law Section (Feb. 2006).
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    The availability of Form D information filed with us through a 
searchable electronic database will enable both federal and state 
securities regulators to monitor the exempt securities transaction 
markets more effectively. The system also will permit improved 
coordination among federal and state regulators, which is essential to 
efficient and effective capital formation through exempt transactions, 
especially by smaller companies, and to investor protection. State 
securities regulators will be able to access the information on our Web 
site to learn if new Form D information of interest to them has been 
filed.
    The system will enhance uniformity and coordination even more if it 
results in ``one-stop filing,'' an approach we and NASAA are exploring. 
One-stop filing will enable companies to file Form D information both 
with us and with the states they designate in one electronic 
transaction. While that capability will not be available when Form D 
electronic filing with the Commission begins, we have been working 
actively with NASAA to achieve that capability as soon as practicable. 
We understand that NASAA is considering establishing its own new 
electronic system that would interface with our system and would 
receive filings and collect fees on behalf of participating state 
securities regulators.\35\ One-stop filing will reduce significantly 
the costs and burdens of preparing and filing Form D information with 
the Commission and with state securities regulators. This could 
represent a substantial savings for small businesses and others filing 
Form D information.
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    \35\ The Commission's electronic filing system will not collect 
fees on behalf of any states.
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    The commenters that responded to our Form D proposing release that 
addressed one-stop filing supported it,\36\ but some made suggestions 
and some expressed concerns.\37\ NASAA stated that it envisions a 
system that would direct issuers to a NASAA-hosted Web site that lists 
the fees for states a filer selects and enables the filer to make an 
electronic payment to those states that would include a modest service 
charge to defray costs of the site and service.\38\ NASAA also stated 
that it envisions that the electronic payment would be made by means of 
an electronic funds transfer or credit card transaction. NASAA further 
envisions that, after payment, the system would allow a completed Form 
D to be filed with the Commission and distributed by the NASAA-hosted 
site to the states selected by the filer. Finally, NASAA anticipates 
that the Commission would have no direct involvement or responsibility 
for the state distribution and payment system. Two commenters expressed 
concerns about one-stop filing, relating primarily to the prospects for 
timely state adoption \39\ and, in one case, the use of the electronic 
system as it relates to the National Securities Markets Improvement Act 
of 1996.\40\ Finally, one

[[Page 10595]]

commenter expressed hope that companies would continue to be able to 
file a Form D notice with a particular state or states and not with the 
Commission where the company is comfortable relying on the Section 4(2) 
exemption from registration at the federal level and no federal Form D 
would be required.\41\ We have considered these comments and will 
continue to consider them as we work with NASAA in an effort to 
establish one-stop filing.
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    \36\ One commenter, for example, stated that if one-stop filing 
were implemented properly, it would reduce significantly the costs 
and burdens of preparing and filing Form D with the Commission and 
the states. See letter from American Bar Association, Section of 
Business Law, Committees on Federal Regulation of Securities and 
State Regulation of Securities (ABA).
    \37\ See letters from ABA, Coalition of Private Investment 
Companies (CPIC), Connecticut Department of Banking (Connecticut), 
Managed Funds Association (MFA), Massachusetts Securities Division 
(Massachusetts), NASAA and Pennsylvania Securities Commission 
(Pennsylvania).
    \38\ See letter from NASAA.
    \39\ See letters from ABA and MFA.
    \40\ See letter from ABA (``There are several aspects of `one-
stop' filing about which we have particular reservations emanating * 
* * partly from a desire to delineate clear boundaries as a result 
of federal preemption under the National Securities Markets 
Improvement Act of 1996 * * * .''). Section 102(a) of the National 
Securities Markets Improvement Act of 1996 (``NSMIA'') [Pub. L. No. 
104-290 110 Stat. 3416 (Oct. 11, 1996)] enacted new Section 18 of 
the Securities Act [15 U.S.C. 77r], which, in part, limits the 
authority of the states to regulate offers and sales of securities 
exempt under ``rules or regulations issued under section 4(2)'' of 
the Act [15 U.S.C. 77d(2)], which includes Rule 506 but not Rules 
504 or 505 of Regulation D.
    \41\ See letter from ABA.
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4. Improved Collection of Data for Commission Enforcement and 
Rulemaking Efforts
    The conversion to electronic filing of Form D information through 
the Internet in an interactive data format will result in creation of a 
database of Form D information and allow us and others to better 
aggregate data on the private and limited offering securities markets 
and the use of the various Regulation D exemptions. Further, the 
software we will use for the Form D electronic filings will require 
that filers address each required data field in the form, thus reducing 
incomplete filings. Because of these and other features, our Form D 
electronic filing system should assist in our enforcement efforts and 
enhance our ability to use filed Form D information. The Form D 
information database will allow us to better evaluate our exemptive 
schemes on a continuing basis in order to facilitate capital formation 
in a manner consistent with investor protection. The evaluation could 
lead to improvements that would result in significant benefits to 
companies that rely on the Regulation D exemptions, especially smaller 
companies, as well as benefits to investors.

C. Summary of Adopted Amendments

    In sum, the amendments will:
     Mandate electronic filing of Form D information:
    [cir] After a phase-in period during which electronic filing will 
be voluntary; and
    [cir] Through an online filing system that will

0
Be accessible from any computer with Internet access; and
0
Capture and tag data items, so that the data will be interactive and 
viewable in an easy-to-read format; and
     Revise Form D's information requirements by:
    [cir] Permitting filers to identify all issuers in a multiple-
issuer offering in one Form D filing;
    [cir] Deleting the current requirement to identify as ``related 
persons'' owners of 10 percent or more of a class of the issuer's 
equity securities;
    [cir] Replacing the current requirement to provide a business 
description of the issuer with a requirement to classify the issuer by 
industry from a pre-established list of industries;
    [cir] Requiring revenue range information for the issuer, or net 
asset value range information in the case of hedge funds (subject to an 
option to decline to disclose);
    [cir] Requiring more specific information on the registration 
exemption claimed by the issuer in the Form D notice as well as 
information on any exclusion claimed from the definition of 
``investment company'' under the Investment Company Act of 1940 
(``Investment Company Act); \42\
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    \42\ 15 U.S.C. 80a-1 et seq.
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    [cir] Requiring reporting of the date of first sale in the 
offering;
    [cir] Specifying when amendments to a previously filed Form D 
notice are required by reason of mistakes of fact, errors or changes to 
information in a previously filed notice or the passage of a calendar 
year;
    [cir] Requiring reporting of whether the offering is expected to 
last over a year;
    [cir] Limiting reporting of the minimum investment amount accepted 
in the offering to the amount accepted from outside investors, so as 
not to affect employee stock ownership incentive plans adversely;
    [cir] Requiring CRD numbers for both individual recipients of sales 
compensation and associated broker-dealers;
    [cir] Replacing the current requirement to disclose information on 
a wide variety of expenses and applications of proceeds with a 
requirement to report expenses only as to amounts paid for sales 
commissions and, separately stated, finders' fees, and report use of 
proceeds only as to the amount of proceeds used to make payments to 
executive officers, directors and promoters;
    [cir] Replacing the current federal and state signature 
requirements with a combined signature requirement that includes an 
undertaking to provide offering documents to regulators on request 
(subject to applicable law), a consent to service of process and a 
certification that the issuer is not disqualified by rule from relying 
on an exemption claimed; and
    [cir] Permitting a limited amount of free writing in 
``clarification'' fields to the extent necessary to clarify certain 
information provided.
    The principal changes from the proposing release include:
     Permitting free writing to clarify responses to a total of 
five requests for information;
     Specifying that amendments to a previously filed Form D 
notice are required only for material mistakes of fact or errors, and 
not for any mistake of fact;
     Providing additional exceptions from changes that 
otherwise would require amendments to a previously filed Form D notice;
     Requiring an annual amendment to a Form D notice only if 
an entire calendar year has passed since the last filing, and not every 
year between January 1 and February 14; and
     Requiring expense and use of proceeds information on 
amounts paid for sales commissions, finders' fees, and payments to 
executive officers, directors and promoters, instead of eliminating 
those requirements.

II. Discussion of Amendments

    As noted above, we believe the revisions we adopt today will have a 
positive effect in many areas of interest to the Commission, state 
securities regulators, investors, and companies that rely on Regulation 
D exemptions. The revisions generally involve simplifying Form D, 
easing the burdens of complying with the requirements of the form, and 
modernizing the information capture process.
    For each offering of securities that is made without Securities Act 
registration in reliance on a claimed exemption under Regulation D, the 
issuer must file the information required by Form D with the Commission 
no later than 15 days after the first sale of securities. The form 
calls for issuers to provide basic identifying information and 
fundamental information about the offering. Some of the requirements of 
Form D have become outdated with the passage of time since the 
Commission adopted them. Further, some of the current form's 
requirements and instructions could be clarified and made less 
burdensome. The revisions we adopt today address these issues. In 
addition, the move to electronic filing necessitates several 
modifications. We generally are adopting the amendments substantially 
as proposed. Where we are not, we so note below.

[[Page 10596]]

A. Amendments To Form D Content Requirements

    Currently, Form D requires presentation of preliminary and other 
information required by five sections designated ``A'' through ``E.'' 
The revisions organize the information requirements around 16 numbered 
``items'' or categories of information. Instructions at the end of the 
form explain the requirements for each item. On the online form, terms 
and items at the front of the form will be linked to the instructions 
at the back, which will be available immediately by clicking on a 
particular term or item. In this regard, we are adding to the General 
Instructions a sentence that provides that terms used but not defined 
in the form that are defined in Rule 405 \43\ or Rule 501 \44\ have the 
meanings given to them in those rules. The sentence will clarify the 
application of Rule 501 and, to the extent it defines the term 
``promoter,'' Rule 405.\45\
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    \43\ 17 CFR 230.405.
    \44\ 17 CFR 230.501.
    \45\ One commenter expressly supported defining the term 
``promoter'' in the instructions. See letter from Connecticut.
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1. Basic Identifying and Contact Information
    New Form D generally carries over the requirements from current 
Form D for basic identifying and contact information and information 
about related persons, but modifies or omits some of these types of 
requirements. The requirements carried over, however, are restructured 
to reflect the electronic character of the filing.
    Item 1, similar to current Form D, requires basic identifying 
information, such as the name of the issuer of the securities, any 
previous names, the type of legal entity and the issuer's year and 
place of incorporation or organization.\46\ We are revising the form to 
provide specifically for the identification of multiple issuers in 
multiple-issuer offerings. Form D currently does not provide for this, 
sometimes raising questions as to how multiple-issuer offerings should 
be reported.\47\ Although we proposed to add to the form a requirement 
to supply the issuer's Commission file number, if any, we have decided 
not to adopt that requirement. We believe requiring the Commission file 
number would add a burden but would provide limited benefits because 
most Form D filers are nonpublic companies and, as a result, would not 
have a Commission file number. Furthermore, it is possible to use other 
required information to aid in identifying issuers.
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    \46\ Issuers will specify their legal entity type (e.g., 
corporation or limited partnership).
    \47\ Currently, the Form D instructions do not specify whether 
all issuers in a multiple-issuer offering can be listed in the same 
Form D notice or whether each issuer must submit essentially the 
same notice. In this situation, the staff currently advises each 
issuer to submit a separate Form D notice because the filings are 
retrievable in our filing system only by reference to the name of 
one issuer. The changes clarify the requirements of this item and 
eliminate the burden on issuers to file what are essentially 
duplicate notices in order to comply with the requirement to file 
Form D information. The new online filing system will support 
multiple-issuer filings. As a result, all issuers easily can be 
identified in a single filing.
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    With regard to identifying issuers, two commenters responded to our 
solicitation of comment on whether Form D should require CUSIP numbers 
and trading symbols. One commenter favored adding such a requirement in 
order to help parse information and facilitate automating filing 
notices.\48\ The other commenter, however, opposed adding the 
requirement as burdensome to issuers and resulting in information that 
is not useful.\49\ We believe that the system's data tagging features 
will facilitate parsing information and obtaining filing notices to 
such an extent that the burden of requiring CUSIP numbers and trading 
symbols would not be justified by the benefits to be gained.
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    \48\ See letter from Pink Sheets LLC.
    \49\ See letter from ABA.
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    In response to a comment letter,\50\ we have provided a place to 
identify an issuer as ``yet to be formed'' instead of providing a year 
of organization. The current Form D provides this alternative.
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    \50\ See id.
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    Two commenters expressed concern as to whether a filer would be 
able to specify its particular foreign place of incorporation or 
organization rather than just be able to indicate that the location is 
foreign.\51\ We confirm that the online filing system will enable 
issuers to specify particular foreign jurisdictions.
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    \51\ See letters from ABA and Connecticut.
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    Item 2, similar to current Form D, requires filers to provide place 
of business and telephone contact information.\52\
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    \52\ Some information of the type that Items 2 and 3 require 
will automatically appear in appropriate places when the filer 
accesses the new online filing system. The system will replicate 
information provided by the filer in the course of obtaining the 
identifying information needed to access the new online filing 
system or in updating such information. The filer will be able to 
make changes to such information.
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    The revised form will include instructions to clarify that post 
office box numbers and ``care of'' addresses are not acceptable as 
place of business information. One commenter asked that an issuer be 
permitted to provide a ``care of'' address because mail might not 
otherwise be delivered to the issuer where, for example, the issuer 
operates out of another entity's office and a separate address listing 
is precluded by lease restrictions or practical concerns.\53\ We 
acknowledge the concern, but reiterate our statement in the proposing 
release that this information is not collected for mailing purposes. 
The purpose of this information is to allow securities enforcement 
authorities to determine the location of the issuer's operations and 
personnel responsible for the offering. Post office box numbers and 
``care of'' addresses do not provide this information. In instances in 
which lease restrictions or other practical concerns arise, the issuer 
must make arrangements to provide acceptable place of business and 
contact information.
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    \53\ See letter from ABA.
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    The revised form will differ from the proposed form as to place of 
business and telephone contact information. The proposed version would 
have required place of business and telephone contact information in a 
multiple-issuer offering only for the primary issuer and would not have 
permitted such information for the other issuers. In the proposing 
release, we reasoned that issuers in multiple-issuer transactions 
typically have the same place of business, and we generally do not need 
more than one address to contact the responsible personnel for 
enforcement purposes. In this regard and upon further consideration 
after reviewing the public comment letters, we have decided that the 
revised form will differ in one respect--it will permit, but not 
require, such information for issuers other than the primary issuer in 
a multiple-issuer offering. In so revising the form, we believe we 
address the concerns expressed by two commenters. One commenter asked 
that we require such information for all the issuers in multiple-issuer 
offerings to accommodate states that currently require a separate Form 
D from every issuer in a multi-issuer offering, or alternatively, that 
we require a separate Form D from each of the issuers.\54\ The other 
commenter asked that we permit multiple issuers to provide separate 
addresses to avoid the implication that issuers are affiliated when 
they are not.\55\ We believe these concerns are adequately addressed by 
permitting all issuers to provide the information

[[Page 10597]]

because that enables issuers that are filing with states that otherwise 
would require separate Forms D to include the information if they wish 
to avoid filing the separate forms, if permitted by state law.
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    \54\ See letter from Pennsylvania.
    \55\ See letter from ABA.
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    One commenter asked that Form D require the name of a contact 
person for the primary issuer and any other issuers in a multiple-
issuer offering.\56\ The commenter stated that contact might be 
necessary in connection with the filing itself or in regard to 
litigation or enforcement or for other purposes. We believe, however, 
that address and telephone number information would be sufficient to 
make an initial contact and that it should be possible to proceed from 
that point to locate the most appropriate person based on the nature of 
the contact.
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    \56\ See letter from NASAA.
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    Item 3, similar to current Form D, requires information about 
related persons (executive officers, directors, and promoters).\57\ As 
proposed, however, we are deleting the current requirement that issuers 
identify as ``related persons'' owners of 10 percent or more of a class 
of their equity securities.\58\ In so proposing, we reasoned that
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    \57\ The instructions to Item 3 clarify that disclosure will be 
required of each person who has functioned as a promoter of the 
issuer within the past five years of the later of the first sale of 
securities or the date upon which the Form D filing was required to 
be made.
    \58\ We also are revising Item 3 to enable an issuer to clarify 
its response. This change is discussed more fully in Part II.C 
below.
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     Investors should continue to have access to this 
information, if it is material, in the private placement memorandum 
customarily supplied to them or in other information made available 
through the issuer; \59\
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    \59\ Under some circumstances, an issuer must provide, rather 
than merely make available, beneficial holder information. For 
example, an issuer that offers securities to non-accredited 
investors without registration under the Securities Act in reliance 
on an exemption provided by Rule 505 [17 CFR 230.505] or 506 [17 CFR 
230.506] must provide beneficial holder information under the 
circumstances specified by Rule 502(b) [17 CFR 230.502(b)].
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     We believe we can collect sufficient information to 
satisfy the regulatory objectives of Form D by requiring only the 
identification of executive officers, directors, and promoters; and
     Issuers that are not reporting companies have raised 
privacy concerns with respect to the requirement to identify 10 percent 
equity owners who are not executive officers, directors, or promoters 
because they do not already have to disclose this information, and the 
widespread availability of the information on our Web site may raise 
additional privacy concerns for these companies as they seek to raise 
capital through a private offering.\60\
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    \60\ As we stated in the proposing release, from time to time 
issuers have asked us to grant confidential treatment to this 
information under Securities Act Rule 406 [17 CFR 230.406], but we 
have denied such requests consistently because the information 
currently is required by Form D. We estimated in the proposing 
release that about 95 percent of the companies filing Form D notices 
in 2006 were private companies, which frequently are not required to 
make public the names of their equity owners in accordance with the 
laws of the state or other jurisdiction of their organization.
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    Two commenters explicitly supported the proposal to delete the 
requirement to report publicly the names and addresses of 10 percent or 
greater equity holders.\61\ Both commenters cited privacy concerns. One 
of the commenters also stated that individual investors would have 
access to the information to the extent relevant and omitting the 
information would save time and eliminate filing burdens.\62\
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    \61\ See letters from ABA and MFA.
    \62\ See letter from ABA.
---------------------------------------------------------------------------

    Four commenters objected to the proposal to delete the requirement 
to disclose 10 percent or greater holders, citing the usefulness of the 
information and, in some cases, questioning the validity of privacy 
concerns.\63\ These commenters asserted, in essence, that the 
information is useful to:
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    \63\ See letters from Chris Evans (claiming to represent the 
views of the vast majority of news organizations), Massachusetts, 
NASAA and Pennsylvania.
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     State regulators because, for example, it enables them to 
determine whether the specified persons are disqualified from 
conducting an offering or have an enforcement history that warrants 
additional information and disclosure; \64\
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    \64\ See letters citing one or more of these examples from 
Massachusetts, NASAA and Pennsylvania.
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     The general public because it reveals the investment 
activity of public sector entities; \65\ and
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    \65\ See letter from Chris Evans.
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     Investors because this degree of ownership control is 
material and it cannot be assumed this information will be provided 
even if material, especially where disclosure or fraud may be an 
issue.\66\
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    \66\ See letters from Massachusetts and NASAA.
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    We have considered the differing views on whether to retain the 
requirement to report publicly the names and addresses of 10 percent or 
greater equity holders. We still believe it is appropriate to delete 
the requirement for the reasons discussed above and in the proposing 
release. In this regard, we note that Item 3 will continue the current 
Form D requirement to report executive officers and directors based on 
the functions people perform rather than their titles. Issuers are 
required to report the names and addresses of promoters whether they 
act directly or indirectly.\67\ We have modified the instructions to 
Item 3 slightly from the language proposed to clarify these 
requirements. As a result, the requirements should result in public 
reporting of all of a company's principal policymakers.
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    \67\ The words ``directly or indirectly'' are used in the 
applicable definition of the term ``promoter'' in Rule 405.
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    As proposed, we are deleting the requirement that issuers provide 
the name of the offering in Form D if the offering has a name. In so 
proposing, we stated that naming offerings reported on Form D is not as 
common today as it was before the 1986 tax reforms,\68\ when the 
current Form D requirement was adopted. We understand that some issuers 
have found this requirement to be unclear. For these reasons, we are 
deleting the requirement.
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    \68\ Tax Reform Act of 1986, Pub. L. 99-514, 100 Stat. 2085 
(Oct. 22, 1986).
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2. Additional Information About Issuer
    Item 4 of the new Form D requires issuers to identify their 
industry group from a specified list. The requirement to provide 
industry group information replaces the current requirement in Form D 
to provide a description of the issuer's business.\69\ We believe 
simply selecting an industry group classification from a pre-
established list is less burdensome for issuers and more useful for the 
regulatory purposes underlying the Form D filing requirement. The 
industry group classifications will provide us better, and more easily 
retrievable, information about industries and offerings where we may 
have identified policy issues.\70\ As proposed, if a company selects 
the ``Pooled Investment Fund'' option, pop-up or other data fields will 
require the issuer also to select from among lower level options 
designating a specific type

[[Page 10598]]

of pooled investment fund and to select between ``yes'' and ``no'' as 
to whether the issuer is registered as an investment company under the 
Investment Company Act.
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    \69\ The industry group list in the new form differs from the 
one in the proposing release primarily in two ways. First, the new 
form's list provides for additional choices under the heading 
``Energy'' in order to reduce the number of issuers that would need 
to choose the less helpful alternative of ``Other Energy.'' Second, 
the new form's list omits the specific choices that had been under 
the heading ``Business Services'' because we believe greater 
specificity is not necessary for issuers in that industry group.
    \70\ The instruction to Item 4 provides that an issuer or 
issuers that can be categorized in more than one industry group 
should be categorized based on the industry group that most 
accurately reflects the use of the bulk of the offering proceeds. 
The instruction also provides that, for purposes of responding to 
Item 4, the issuer should ``use the ordinary dictionary and commonly 
understood meanings of the terms identifying the industry groups.''
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    We proposed that Item 5 would require all issuers, regardless of 
industry group, to either include revenue range information in the Form 
D filing or choose the ``Decline to Disclose'' option, which might be 
used if a private company considered its revenue range to be 
confidential information.\71\ We further proposed that, if the business 
were not intended to produce revenue, such as a fund that seeks asset 
appreciation, it could select the ``Not Applicable'' option. We 
continue to believe that this information will help us to determine the 
types and sizes of most issuers that rely on the Regulation D and 
Section 4(6) exemptions. For instance, as noted in the proposing 
release, this information will increase significantly the effectiveness 
of the data collected as a tool for assessing the use of the Regulation 
D exemptions for small businesses and other different sizes of issuers.
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    \71\ The revenue range will be for the most recently completed 
fiscal year. Where an issuer has been in existence for less than a 
year, it will identify its revenues to date.
---------------------------------------------------------------------------

    We are adopting Item 5, as proposed, except as it will apply to 
issuers that classify themselves in Item 4 in the industry group 
``hedge funds'' or as pooled investment funds other than venture 
capital and private equity funds. In order to obtain information on the 
size of these issuers, Item 5 will request them to provide aggregate 
net asset value range information.\72\ Consistent with the revenue 
range requirement applicable to other issuers, however, these issuers 
will be given the option to ``Decline to Disclose'' that information or 
to specify that such information is ``Not Applicable.'' This addition 
responds to a comment letter stating that ``assets under management'' 
is a more meaningful measure of the size of such issuers than 
revenues.\73\ We believe we can obtain adequate size information about 
venture capital and private equity funds from the information on the 
total offering amount supplied in response to Item 13, because these 
types of funds typically do not engage in continuous offerings of 
indefinite amount, unlike hedge funds and some other types of pooled 
investment funds.
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    \72\ The aggregate net asset value will be requested as of the 
most recent practicable date.
    \73\ See letter from MFA. Similarly, in commenting on Rel. No. 
33-8766 (Dec. 27, 2006) [72 FR 399], another commenter stated that 
it believed it would be useful to the Commission and investors if 
Form D would require information on pooled investment funds' assets 
under management. See letter from CPIC.
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    One commenter suggested that we eliminate the ``Decline to 
Disclose'' option from the proposed revenue range requirement \74\ and 
another suggested that we eliminate the revenue range requirement 
entirely.\75\ The commenter that suggested we eliminate the ``Decline 
to Disclose'' option reasoned that elimination would be necessary to 
make the requirement effective as an information collection tool. The 
commenter that suggested that we eliminate the requirement entirely 
reasoned that many companies will opt out, reducing the integrity of 
the information collected and possibly causing people to draw negative 
inferences about the company. The commenter went on to state that 
revenue information is not necessary for a notice filing, and requiring 
it is inconsistent with the prohibition on general solicitation and 
general advertising that applies to many offerings required to be 
reported on Form D.\76\ We recognize that adopting the ``Decline to 
Disclose'' option will reduce the amount of information that we 
receive. We also recognize, however, that some companies may regard 
this type of information as confidential. Weighing these countervailing 
considerations in light of the importance of the information, we 
believe that, on balance, it is best to provide filing companies the 
option to decline to disclose their revenue range. Commenters did not 
specify any negative consequences that a company may suffer if it 
chooses to decline to disclose its revenue range. We believe the 
information will be useful for the reasons described above. Finally, we 
believe that revenue information in range form would not likely itself, 
or in combination with the other information the new form requires, 
raise general solicitation or general advertising issues.
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    \74\ See letter from NASAA.
    \75\ See letter from ABA.
    \76\ See id. The ABA also stated that the form should not 
require asset value information for essentially the same reasons. A 
third commenter asked whether most private companies would decline 
to disclose, ``thus calling into question the purpose of [the 
item].'' The commenter did not suggest deleting the option to 
decline or deleting the entire requirement. See letter from 
Connecticut.
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3. Identification of Claimed Exemptions and Exclusions
    Item 6 requires the issuer to identify the exemption or exemptions 
being claimed for the offering, from among Rule 504's \77\ paragraphs 
and subparagraphs, Rule 505, Rule 506, and Section 4(6), as applicable. 
This requirement, in general, is carried over from the current Form D 
requirement with added specificity, requiring the issuer to identify 
the specific paragraph or subparagraph of any Rule 504 exemption being 
claimed as well as any specific paragraph of Investment Company Act 
Section 3(c) \78\ that the issuer claims for an exclusion from the 
definition of ``investment company'' under the Investment Company 
Act.\79\ We are requiring this increased level of specificity and 
additional type of information in order to assist our policymaking and 
rulemaking efforts in various areas. Identification of a claimed 
exemption or exclusion often is key to analysis of the appropriateness 
of the claim. State securities regulators also use this information to 
determine the extent of their jurisdiction over the offering under 
NSMIA. Unlike the requirement in current Form D, however, Item 6 does 
not enable the issuer to check a box to indicate a claim to the Uniform 
Limited Offering Exemption (ULOE) from state securities law 
requirements. We believe that the ULOE box causes confusion and burdens 
for companies completing Form Ds without resulting in a significant 
amount of useful information. Most, if not all, companies claiming a 
ULOE exemption also will check the Rule 505 box, because Rule 505 is 
the Commission's companion exemption to the ULOE exemption.\80\ 
Similarly, revised Form D omits all other references to ULOE and the 
provisions that, in general, require specified information on a state-
by-state basis in an appendix to the form and require specified 
representations and undertakings. We believe that this information is 
burdensome to provide without sufficient benefits in terms of 
furthering the purposes of Form D.\81\
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    \77\ 17 CFR 230.504.
    \78\ 15 U.S.C. 80a-3(c).
    \79\ The issuer will be able to select all the exclusions on 
which it relies. Regulation D provides an exemption from the 
Securities Act and not an exclusion from the definition of the term 
``investment company'' under the Investment Company Act. Some 
companies that use a Regulation D exemption, however, also are 
excluded from the definition of investment company under the 
Investment Company Act.
    \80\ See Release No. 33-7644 (Feb. 25, 1999) [64 FR 11090].
    \81\ One commenter expressed general agreement with our views 
regarding ULOE. See letter from ABA.
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    One commenter supported our proposal to delete the appendix portion 
of current Form D, asserting that it is burdensome and without 
sufficient benefits, but two other commenters objected.\82\ Another 
commenter, without

[[Page 10599]]

expressly addressing the appendix, suggested that the form require 
related information.\83\ One commenter objected to deleting any part of 
the appendix, claiming that the information required provides macro-
level ownership information valuable to the Commission and other 
regulators in analyzing fund flows and capital sources in an otherwise 
opaque area.\84\ One commenter stated that it did not advocate 
retaining the appendix in its current form but that the appendix 
requires information such as the amount of securities sold by state and 
the number and type of investors (accredited/non-accredited) that is 
useful to state regulators for enforcement purposes.\85\ Finally, one 
commenter offered the related suggestion that the form should require 
issuers to specify the states in which they propose to offer or sell 
securities because that would provide useful information to state 
regulators in their efforts to uncover notice filing violations and 
other problems.\86\
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    \82\ See letters from ABA, Chris Evans and Connecticut, 
respectively.
    \83\ See letter from Massachusetts.
    \84\ See letters from Chris Evans.
    \85\ See letter from Connecticut.
    \86\ See letter from Massachusetts.
---------------------------------------------------------------------------

    We believe the burden that would be imposed by a requirement to 
provide all information called for by the appendix or similar 
information is not justified by the value of the information in 
furthering the purposes of Form D. In this regard, under appropriate 
circumstances, state regulators still would be able to require this 
type of information.\87\ At present, the Commission does not require 
filing of information called for by the appendix, and most Form D 
filers do not file the appendix with us. They file appendix information 
only with those states that require it. We assume that states that 
require filing of appendix information that they are entitled to 
require may continue to do so. We also assume that the one-stop filing 
system that we are exploring with NASAA may facilitate the filing of 
this information with state regulators.
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    \87\ We note that, even where NSMIA applies, Section 18(c)(2)(A) 
of the Securities Act [15 U.S.C. 77r(c)(2)(A)] generally provides as 
to the offer and sale of non-exchange-listed securities that nothing 
under Section 18 prohibits ``any State from requiring the filing of 
any document filed with the Commission [under the Securities Act], 
together with annual or periodic reports of the value of securities 
sold or offered to be sold to persons located in the State (if such 
sales data is not included in documents filed with the Commission), 
solely for notice purposes and the assessment of any fee, together 
with a consent to service of process and any required fee.''
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4. Indication of Type of Filing
a. General Requirements
    New Item 7 carries over the current Form D requirement to indicate 
whether the filing is a new filing or an amendment. Including 
identification of a filing as new or an amendment is appropriate 
because the form permits amendments and issuers may have valid reasons 
to wish to update or correct information previously provided in a Form 
D filing. In addition, as discussed in the section immediately below, 
we intend to clarify the circumstances where amendments are required. 
As proposed, Item 7 requires that a new filing specify the date of 
first sale or indicate that the first sale has yet to occur. We believe 
that this information will be useful to regulators because it relates 
to the timeliness of the filing and helps to establish a context in 
which to evaluate other information provided.
    Item 7 will differ from what we proposed in that it will not permit 
an issuer to designate the states to which the Form D is directed. As 
more fully discussed above, our system will not be capable of receiving 
filings directed to specific states when new Form D becomes effective 
for federal purposes, although we have been working actively with NASAA 
in an effort to achieve that capability.\88\ In the interim, we expect 
that filers will direct filings to the states by mail, overnight 
delivery, fax or whatever means are permitted or required by the 
respective states. We expect that some states may permit issuers to 
file a printed copy of a new Form D filed with us.
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    \88\ We had proposed to permit issuers to designate the states 
to which the Form D is directed, on the assumption that some states 
would adopt one-stop filing and allow filings that specify that they 
are directed to those states to constitute filings with those 
states.
---------------------------------------------------------------------------

    One commenter objected to adding the requirement to report date of 
first sale information.\89\ The commenter asserted that the definition 
of ``first sale'' is unclear and a failure to file in the timeframe 
Form D requires may be used by states to extract late filing penalties 
or attempt to circumvent the limits NSMIA imposes by claiming that an 
exemption under Rule 506 is unavailable due to non-compliance with the 
filing requirement of Rule 503(a), even though filing a Form D is not a 
condition to an exemption under Regulation D. We believe, however, that 
providing the date of first sale involves little burden and that it is 
not the reporting of the date that underlies the state-related concerns 
but rather the date itself in relation to the date of filing.
---------------------------------------------------------------------------

    \89\ See letter from ABA.
---------------------------------------------------------------------------

    Two commenters objected to using the date of first sale as the 
trigger for the Form D filing deadline.\90\ Both commenters based their 
objection on the Commission staff's previously stated view that, solely 
for purposes of triggering the Form D filing requirement, in a minimum-
maximum offering where the subscription funds are held in escrow 
pending receipt of minimum subscriptions, the date of first sale occurs 
when the first subscription agreement is received and first funds are 
deposited into escrow.\91\
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    \90\ See letters from ABA and Society of Corporate Secretaries 
and Governance Professionals (SCSGP).
    \91\ See Release No. 33-6455, at Question 82 (Mar. 4, 1983) [48 
FR 10045].
---------------------------------------------------------------------------

    We believe that the cited interpretation of the date of first sale 
is correct for purposes of triggering the Form D filing requirement. We 
believe the interpretation appropriately focuses on when the purchaser 
makes an investment decision and commits to purchase the securities 
offered. We also believe that it can be useful for regulatory purposes 
if an issuer files a Form D before an offering closes to enable 
regulators to consider the information provided before the offering 
process ends. If regulatory action is appropriate, earlier 
consideration potentially could cause it to be more timely and 
effective.\92\ We have added language to the instructions to Form D 
clarifying this meaning of date of first sale in accordance with this 
interpretation. Specifically, the instructions will state that the date 
of first sale is the date on which the first investor is irrevocably 
contractually committed to invest, which, depending on the terms and 
conditions of the contract, could be the date on which the issuer 
receives the investor's subscription agreement or check.
---------------------------------------------------------------------------

    \92\ For example, one commenter noted that state regulators use 
Form D information for screening purposes to help prevent offerings 
by those subject to disqualification and aid enforcement efforts. 
See letter from NASAA.
---------------------------------------------------------------------------

b. Amendment of Previously Filed Form D
    As proposed, we are clarifying Form D to address when, how, and why 
an amendment to a Form D may or must be filed. Those issues are not 
addressed expressly in the current form. While both Rule 503 and the 
instructions to the current Form D discuss the information that is 
required when an amendment is filed,\93\ neither explicitly

[[Page 10600]]

requires the filing of an amendment. In certain offerings and 
situations, however, an issuer may have made a material mistake of fact 
or committed another material error in the filed Form D. Situations 
also arise where changes occur and the initially filed Form D may not 
be an accurate expression of the current facts in an ongoing offering. 
Our staff currently interprets Rule 503 and the Form D instructions to 
require amendments in ongoing offerings where there has been a material 
change in information filed about the offering and where basic 
information previously submitted about the issuer has materially 
changed.
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    \93\ Current Rule 503(d) states that amendments to Form D ``need 
only report the issuer's name and the information required by Part C 
and any material change in the facts from those set forth in Parts A 
and B.'' The current instructions to Form D set forth the 
information required in an amendment as only ``the name of the 
issuer and offering, any changes thereto, the information requested 
in Part C, and any material changes from the information previously 
supplied in Parts A and B.''
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    The staff has received questions regarding offerings of extended 
duration, and how to determine whether and how to file Form D 
amendments. For example, when offerings are expected to continue for an 
extended period, the Commission's staff often is asked to assist 
issuers in determining how to calculate an offering's aggregate 
offering price and when an amendment to the Form D should be filed. The 
staff's practice in this regard has been to advise issuers to use a 
good faith and reasonable belief standard to calculate the aggregate 
offering price and to amend the Form D annually.
    We are revising Rule 503 and the instructions to and description of 
Form D to require amendments to the Form D notice in the following 
three instances only:
     To correct a material mistake of fact or error in the 
previously filed notice (as soon as practicable after discovery of the 
mistake or error);
     To reflect a change in the information provided in a 
previously filed notice (as soon as practicable after the change), 
except that no amendment is required to reflect a change that occurs 
after the offering terminates or a change that occurs solely in the 
following information: \94\
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    \94\ We believe the specified changes should not require an 
amendment because the burden would not justify the resulting 
benefits in terms of furthering the purposes of the form. 
Consequently, it is not necessary to report them for Form D to serve 
its primary function as a notice of an exempt offering.
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    [cir] The address or relationship to the issuer of a related person 
identified in response to Item 3 of Form D;
    [cir] An issuer's revenues or aggregate net asset value;
    [cir] The minimum investment amount, if the change is an increase, 
or if the change, together with all other changes in that amount since 
the previously filed notice, does not result in a decrease of more than 
10%;
    [cir] Any address or state(s) of solicitation shown in response to 
Item 12 of Form D;
    [cir] The total offering amount, if the change is a decrease, or if 
the change, together with all other changes in that amount since the 
previously filed notice, does not result in an increase of more than 
10%;
    [cir] The amount of securities sold in the offering or the amount 
remaining to be sold;
    [cir] The number of non-accredited investors who have invested in 
the offering, as long as the change does not increase the number to 
more than 35;
    [cir] The total number of investors who have invested in the 
offering;
    [cir] The amount of sales commissions, finders' fees or use of 
proceeds for payments to executive officers, directors or promoters, if 
the change is a decrease, or if the change, together with all other 
changes in that amount since the previously filed notice, does not 
result in an increase of more than 10%; and
     Annually, on or before the first anniversary of the filing 
of the Form D or the filing of the most recent amendment, if the 
offering is continuing at that time.
    Rule 503 also will require an issuer that files an amendment to 
provide current information in response to all requirements of Form D 
regardless of why the amendment is filed. We believe it will be 
relatively easy to provide such current information in most instances 
due to the form's streamlined information requirements, the likelihood 
that much of the information would not require change, and the fact 
that the new online filing system will make available to the issuer the 
version of the Form D to be amended to enable the issuer to respond 
only to the changed items.
    The amendment requirements differ from what we proposed in that 
they will:
     Provide expressly that a mistake of fact or error in the 
information provided in a previously filed notice only requires an 
amendment when material;
     Provide exceptions for changes in:
    [cir] The address or relationship to the issuer of a related person 
identified in response to Item 3 of Form D;
    [cir] An issuer's aggregate net asset value; \95\
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    \95\ We had proposed an exception for changes in issuer size as 
measured by revenue consistent with proposed Item 5's requesting 
that issuers provide their revenue range. We are adopting an 
exception for changes in issuer size that relates to both revenue 
and aggregate net asset value to conform the exception to new Item 
5. As previously discussed, new Item 5, as adopted, requests that 
issuers provide either their revenue range or aggregate net asset 
value, depending on their industry group.
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    [cir] The minimum investment amount, if the change is an increase, 
or if the change, together with all other changes in that amount since 
the previously filed notice, does not result in a decrease of more than 
10%;
    [cir] Any address or state(s) of solicitation shown in response to 
Item 12 of Form D;
    [cir] The total offering amount, if the change is a decrease; \96\
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    \96\ We had proposed an exception for a change in the total 
offering amount, if the change, together with all other changes in 
that amount since the previously filed notice of sales on Form D, 
would not result in an increase of more than 10%. We believe that 
decreases in the total offering amount need not trigger an amendment 
requirement.
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    [cir] The amount of securities in the offering that remain to be 
sold; \97\
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    \97\ We had proposed an exception for a change in the amount of 
securities sold in the offering. An exception is similarly 
appropriate for the amount of securities that remain to be sold 
because that amount varies inversely with changes in the amount of 
securities sold.
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    [cir] The total number of investors who have invested in the 
offering; \98\
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    \98\ We had proposed an exception for changes in the number of 
accredited investors who have invested in the offering consistent 
with proposed Item 14's requiring a report of the number of 
accredited investors who have invested in the offering. We are 
adopting the exception relating to the total number of investors 
rather than the number of accredited investors to conform the 
exception to new Item 14. New Item 14, as adopted, requires 
disclosure of the total number of investors rather than the number 
of accredited investors who have invested in the offering.
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    [cir] The amount of sales commissions, finders' fees or use of 
proceeds for payments to executive officers, directors or promoters, if 
the change is a decrease, or if the change, together with all other 
changes in that amount since the previously filed notice, does not 
result in an increase of more than 10%; \99\
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    \99\ We believe that the additional specified exceptions should 
not require an amendment because, similar to the other exceptions 
proposed and adopted, the burden would not justify the resulting 
benefits in terms of furthering the purposes of the form. 
Consequently, it is not necessary to report them for Form D to serve 
its primary function as a notice of an exempt offering.
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     Require amendments to report the addition of executive 
officers, directors and promoters in all offerings, and not provide an 
exception from this requirement for offerings that last more than a 
year in some circumstances; and
     Prescribe that annual amendments are due on or before the 
first anniversary of the most recently filed Form D filing or 
amendment, if the offering is continuing at that time, rather than each 
year between January 1 and February 14.

[[Page 10601]]

    We have expressly subjected the mistake of fact or error in 
information amendment requirements to a materiality standard in 
response to comments received to make explicit what we intended.\100\ 
We have required amendments upon the addition of related persons 
(executive officers, directors and promoters) without exception in 
order to limit the ability to circumvent the purpose of the Form D 
notice. We have adopted the one calendar year amendment requirement to 
clarify the due date in response to a comment \101\ and provide 
flexibility.\102\
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    \100\ Three commenters suggested that we clarify that only a 
material mistake of fact or change can trigger an amendment 
requirement. See letters from ABA, MFA and SCSGP. We did not add a 
materiality reference to the amendment provision regarding changes 
in the information reported. We believe that such a reference would 
be inappropriate because any changes other than those specified as 
not requiring an amendment would be information regulators need to 
perform their regulatory functions.
    \101\ One commenter stated that the due date for the proposed 
annual amendment was unclear. See letter from ABA.
    \102\ The omission of a January/February filing window from the 
adopted annual amendment requirement will provide flexibility by, 
for example, permitting a series of issuers to be placed on the same 
administratively convenient annual amendment schedule in which they 
file outside of the January/February window proposed to be mandated.
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    One commenter supported the amendment provisions as proposed,\103\ 
one commenter objected to the requirement that every amendment contain 
current information,\104\ one commenter both objected to the annual 
amendment requirement and suggested changes in the other amendment 
requirements \105\ and one commenter said that it would be helpful to 
state regulators to add a requirement to file an amendment to report 
termination of offerings that last over a year.\106\
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    \103\ The commenter stated that the amendment requirements would 
ensure that available information would be relatively current and 
enable state regulators to screen, and provide responses to the 
public regarding, offerings conducted in their states more 
effectively. See letter from NASAA.
    \104\ See letter from SCSGP.
    \105\ See letter from ABA.
    \106\ See letter from Connecticut.
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    The commenter that objected to the requirement to provide current 
information in every amendment stated that the requirement seems 
unnecessary, might cause inadvertent errors in re-entering unchanged 
information and make it difficult to determine what had changed.\107\ 
The commenter suggested that, instead, amendments only should require 
information that has changed materially. As discussed above, we believe 
it will be relatively easy to provide such current information in most 
instances due to the form's streamlined information requirements, the 
likelihood that much of the information would not require change, and 
the fact that the new online filing system will make available to the 
issuer the version of the Form D to be amended to enable the issuer to 
respond only to the changed items. We also believe that it will be 
relatively easy to determine what has changed due to the limited amount 
of information required by the form and the ability to use the data 
tagging features to help determine changes. We believe that 
presentation only of those items that have changed materially would 
result in information being presented out of context and might 
transform a relatively light burden on the issuer to a relatively 
heavier burden on each user who accesses the information.
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    \107\ See letter from ABA.
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    The commenter that objected to the annual amendment requirement did 
so primarily based on the commenter's assertions that it would be 
inconsistent with efforts to ease burdens and simplify. We believe the 
annual amendment requirement viewed in the context of the online filing 
system generally is consistent with efforts to ease burdens and 
simplify. We believe it will be relatively easy to file annual 
amendments in most instances for the reasons discussed above. We also 
believe that the express annual amendment requirement is clear and, to 
that extent, will serve to simplify the form.
    The commenter that objected to the annual amendment requirement 
also stated that amendments should not be required when an issuer adds 
recipients of sales compensation or related persons.\108\ Consistent 
with the requirements of the current form, we believe that requiring 
the names of additional recipients of sales compensation and related 
persons is appropriate for a notice form and provides important 
information about the offering for regulatory purposes.
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    \108\ See letter from ABA.
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    The same commenter essentially asked that that the proposed 
exception from the amendment requirements for additions of related 
persons be broadened.\109\ As proposed, in offerings that last more 
than a year, a change in information on related persons would not 
trigger an amendment, if the change was due solely to the filling of a 
vacant position upon the death or departure in the ordinary course of 
business of the previous occupant of the position.\110\ Upon further 
consideration, we believe the exception for offerings that last more 
than a year may permit easy circumvention of the intent of the 
requirement. As adopted, the rule amendments will require a Form D 
amendment upon the addition of any related person, but will not require 
amendments to report changes of addresses of related persons.
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    \109\ See letter from ABA.
    \110\ For example, a change in information regarding related 
persons that occurs in connection with a change in control would not 
be in the ordinary course of business.
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    The same commenter stated that an amendment should not be needed 
for an issuer to file with an additional state or states during an 
ongoing offering.\111\ The amendment provisions would not require an 
amendment solely because an issuer wished to file with an additional 
state or states.
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    \111\ See letter from ABA.
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    Finally, one commenter suggested that the new annual and other 
amendment rules not apply to paper Form D filings, asserting that, as 
to such filings, filing amendments would be overly burdensome because 
there would be no existing electronic version on the system to use as a 
starting point.\112\ As further discussed below, there will be a period 
during which the amendments we adopt in this release would be effective 
except that electronic filing would be optional rather than mandatory 
for a period of time after the electronic system becomes available. 
During that time, in general, an issuer will be able to file new Form D 
in either paper or electronic format or file current Form D in paper 
format. Also during that time, the new annual and other amendment rules 
will apply to all new Form D filings regardless of format and the 
current amendment requirements will apply to all current Form D filings 
in paper format. We believe that during the transition period this 
approach will provide adequate flexibility to issuers and consistency 
between the current and new versions of Form D and their respective 
amendment requirements. Once the transition period ends, all federal 
filings will be required to be on new Form D in electronic format and, 
accordingly, the new amendment rules will apply. We believe that 
applying the new amendment rules at that time even as to prior filings 
of current Form D in paper format would not create a significant 
additional burden due to the lack of a previous electronic version on 
the system and that confusion likely would result from the lack of a 
uniform approach to post-transition period amendments that itself could 
impose a burden.
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    \112\ Id.

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[[Page 10602]]

5. Information About Offering
    Items 8 through 16 will require factual information about the 
offering itself. Most of the information sought currently is required 
by Sections B and C of Form D.
    Duration of Offering. Item 8 will require the issuer to indicate 
whether it intends that the offering will last over a year. Such 
information currently is not specifically required by Form D. The 
absence of an information requirement of this type has presented 
compliance questions because regulators may not know whether an 
offering may span an extended period of time based on the information 
currently required by Form D.
    Type of Securities Offered. Item 9 will carry over the current 
requirement to specify the type of securities being offered, such as 
debt or equity, with additional categories of securities added. Some of 
the additional categories will provide more clarity. The rest of the 
additional categories will identify types of securities, the 
specification of which we believe will help facilitate our rulemaking 
efforts.\113\ The issuer will be required to specify all categories 
that apply to the securities that are the subject of the exemption(s) 
specified in response to Item 6.
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    \113\ The new categories would be ``Security to be Acquired Upon 
Exercise of Option, Warrant or Other Right to Acquire Security,'' 
``Pooled Investment Fund Interests,'' ``Tenant-in-Common 
Securities,'' and ``Mineral Property Securities.''
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    Business Combination Transaction. Form D currently requires that 
the issuer indicate only whether the offering is an exchange offer. New 
Item 10 will require the issuer to indicate whether the offering is 
being made in connection with a business combination such as an 
exchange (tender) offer, a merger or acquisition, regardless of the 
type of offering.\114\ We believe that, for purposes of Form D, it is 
important to identify whether an offering is being made in connection 
with a business combination transaction, whether structured as an 
exchange or in some other manner, because such transactions sometimes 
give rise to policy concerns.\115\
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    \114\ We also are revising Item 10 to enable an issuer to 
clarify its response. We discuss this change more fully in Part II.C 
below.
    \115\ For example, business combination transactions may raise 
some of the types of policy concerns we intended to address in 
adopting rules and rule amendments relating to filings by reporting 
shell companies. Release No. 33-8587 (July 15, 2005) [70 FR 42234].
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    Minimum Investment Amount. Item 11 will, as proposed, carry over 
the requirement in Form D to specify the minimum investment amount per 
investor. We are maintaining this requirement because offerings that 
have low minimum investment amounts have presented particular 
enforcement challenges in the past. We have changed Item 11 from what 
we proposed to require specification of the minimum investment for 
outside investors only, so as not to affect employee stock ownership 
incentive plans adversely. Investors will be considered outside 
investors if they are not employees, officers, directors, general 
partners, trustees (where the issuer is a business trust), consultants, 
advisors or vendors of the issuer, its parents, its majority-owned 
subsidiaries, or majority-owned subsidiaries of the issuer's 
parent.\116\ We believe that low investment amounts are more likely to 
present enforcement challenges when offered to outside investors, and 
have changed the requirement as a result.
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    \116\ The standard for determining who is an ``outside 
investor'' is similar to the standard in Securities Act Rule 701 [17 
CFR 230.701] and Securities Act Form S-8 [17 CFR 239.16b] for 
determining who is an eligible investor, except that for Form D 
purposes vendors are included and certain family members are 
excluded.
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    Sales Compensation. Item 12 generally will carry over but simplify 
the response to the requirements in Form D related to information on 
sales compensation, as we proposed. In addition, also as proposed, it 
will add a requirement to provide the CRD number of each person that is 
a compensation recipient named in response to Item 12, provided the 
person has a CRD number.\117\ In addition and as a complement to what 
we proposed, Item 12 also will require that when both a person that 
receives sales compensation and the person's associated broker-dealer 
are reported, the issuer must provide the CRD number, if any, for both. 
Also in addition to what we proposed, the instruction to Item 12 will 
clarify that the compensation that can result in a reporting 
requirement can be cash or other consideration; a finder or other 
person that does not have a CRD number need not obtain one in order to 
be listed; and, conversely, a finder or other person is required to be 
listed where called for, regardless whether the finder or other person 
has a CRD number.\118\ A CRD number corresponds to a broker or broker-
dealer's record located in the Central Registration Depository, a 
computer database of brokers and broker-dealers that FINRA maintains. 
It should be relatively easy for an issuer to obtain the CRD numbers 
from the brokers and broker-dealers it retains. We have added 
instructions to Form D informing filers where to obtain CRD numbers on 
the Internet.\119\ Requiring reporting of the CRD numbers will 
facilitate checking a broker's or broker-dealer's records. Requiring 
reporting of the CRD numbers of listed persons as well as any 
associated broker-dealers will enhance the informational value of the 
item.
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    \117\ The instruction to new Item 12 uses the term ``person'' 
rather than the proposed term ``individual'' to describe the sales 
compensation recipients that an issuer must list. The term 
``person'' is used in order to clarify that, as intended in the 
proposed instruction, new Item 12 carries over the requirement in 
current Form D that references the term ``person'' to identify 
recipients of sales compensation regardless of whether the recipient 
is a natural person.
    \118\ We believe this clarification generally would be 
responsive to several comments related to Item 12. One commenter 
suggested that the form clarify that cash and non-cash compensation 
could trigger a reporting requirement and not every person has a CRD 
number. See letter from Connecticut. Another commenter suggested 
that the form clarify that issuers must report the names of persons 
regardless whether they have CRD numbers. See letter from NASAA.
    \119\ Anyone with access to the Internet can check a broker's 
CRD number and record by visiting http://brokercheck.finra.org. CRD 
numbers also can be obtained by calling a state regulator or FINRA's 
public disclosure hotline at 800-289-9999. See http://www.nasaa.org/
Investor_Education/Investor_AlertsTips/292.cfm.
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    Two commenters supported requiring CRD numbers in particular,\120\ 
while one commenter objected to Item 12 as proposed, stating that the 
item could discourage users from using Regulation D, should not require 
the names of individual recipients of sales compensation and, if it did 
require their names, it should not require their CRD numbers.\121\ 
Consistent with current Form D's requirement to name up to five persons 
associated with a particular broker-dealer that receive compensation in 
connection with sales of securities in an offering and any associated 
broker-dealer, we continue to believe that such information is 
important. Also consistent with current Form D's requirements, we 
continue to believe that it is useful to have the names of individuals 
regardless of whether they are associated with a broker-dealer. Once 
more than five individuals associated with the same broker-dealer 
otherwise would be named, however, the burden of listing additional 
names does not justify the benefit and it is sufficient in that case to 
have the name of the associated broker-dealer alone.
---------------------------------------------------------------------------

    \120\ See letters from Massachusetts and NASAA.
    \121\ See letter from ABA.
---------------------------------------------------------------------------

    We believe that the new sales compensation disclosure requirements 
will not discourage issuers from using Regulation D any more than the 
current sales compensation reporting requirements do. The concern about 
discouraging issuers from using Regulation D appears to be rooted in a

[[Page 10603]]

concern about regulator background checks on named persons. In this 
regard, we note that background checks are possible under the 
requirements of current Form D, and the only additional sales 
compensation requirement under the new form, CRD numbers, merely would 
facilitate that check.
    Finally, one commenter asked us to clarify the extent to which new 
Item 12's sales compensation recipient disclosure requirement will 
apply to foreign sales.\122\ Consistent with Preliminary Note 7 to 
Regulation D, Regulation D's requirements and, as a result, Form D's 
requirements, including new Item 12, will apply to foreign sales to the 
extent the issuer seeks to rely on an exemption under Regulation D for 
such foreign sales.\123\
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    \122\ See letter from ABA.
    \123\ Preliminary Note 7 to Regulation D provides as follows: 
``Securities offered and sold outside the United States in 
accordance with Regulation S need not be registered under the 
[Securities] Act. See Release No. 33-6863. Regulation S may be 
relied upon for such offers and sales even if coincident offers and 
sales are made in accordance with Regulation D inside the United 
States. Thus, for example, persons who are offered and sold 
securities in accordance with Regulation S would not be counted in 
the calculation of the number of purchasers under Regulation D. 
Similarly, proceeds from such sales would not be included in the 
aggregate offering price. The provisions of this note, however, do 
not apply if the issuer elects to rely solely on Regulation D for 
offers or sales to persons made outside the United States.''
---------------------------------------------------------------------------

    Offering and Sales Amounts. Item 13 will carry over the current 
requirements to provide the amount of total sales and the total 
offering amount, but in a restructured, simplified format. Instructions 
have been added to clarify interpretive issues that have arisen in 
completing the form, such as how to respond to this requirement if the 
amount of an offering is undetermined when the Form D filing is 
made.\124\ One commenter suggested that the form require a final report 
of actual sales results and be due not later than 15 business days 
after the close of the offering.\125\ The commenter asserted that this 
would better meet the practical needs of issuers in terms of 
determining the trigger date for the Form D filing requirement, 
coordinating the filing of Form D with the Commission with state filing 
and fee calculation requirements, and determining the need for 
amendments as the sales process proceeds. As previously noted, we 
believe that it can be useful for regulatory purposes if an issuer 
files a Form D before an offering closes to enable regulators to 
consider the information provided before the offering process ends. If 
regulatory action is appropriate, earlier consideration potentially 
could cause it to be more timely and effective. We also believe that 
issuers have been and will continue to be able to coordinate their 
federal Form D and state filings without requiring Form D to contain 
final sale information rather than offering information as of an 
earlier time. Finally, we believe that any uncertainties as to when to 
amend will be substantially resolved by the provisions we are adding to 
the form requirements.
---------------------------------------------------------------------------

    \124\ We also are revising Item 13 to enable an issuer to 
clarify its response. We discuss this change more fully in Part II.C 
below.
    \125\ See letter from Stephen A. Marcus.
---------------------------------------------------------------------------

    Investors. Item 14 will elicit information on whether the issuer 
intends to sell securities to persons who do not qualify as accredited 
investors and the number of such persons who already have invested. It 
will elicit information on the total number of investors who already 
have purchased securities in the offering. The form currently requires 
this information because it affects how we and state securities 
regulators evaluate claimed exemptions and allocate enforcement 
resources. We have modified Item 14 slightly from the proposed version 
by requiring the issuer to specify the total number of investors in the 
offering, rather than the number of accredited investors, so that 
examiners can readily see that number, rather than being required to 
add the numbers of accredited and non-accredited investors, as was the 
case in the proposed version.
    Expenses and Use of Proceeds of Offering. We proposed to eliminate 
the items requiring information on expenses and use of proceeds of the 
offering. The current requirements frequently do not yield information 
necessary for an evaluation of the claimed exemption or for enforcement 
or rulemaking efforts. Many, if not most, Form D filings do not provide 
use of proceeds information that serves the form's purposes, because 
they specify only that the majority of proceeds will be used for 
``working capital'' or ``general corporate purposes.'' In addition, 
because of the diversity in use of proceeds in Regulation D offerings, 
attempting to standardize responses to provide searchable data may be 
challenging and not worthwhile.
    Commenters expressed mixed views on eliminating the requirements 
for information on expenses and use of proceeds of the offering. One 
commenter agreed with the Commission's view that the information is not 
necessary and stated that providing the information is problematic 
because of issuer burden, lack of applicable accounting standards and 
category definitions, and estimated amounts.\126\ Commenters that 
objected to deleting the requirements essentially stated that the 
information helps to enable state regulators to screen offerings for 
potential problems.\127\ One of these commenters addressed the issues 
of burden and lack of specificity as to use of proceeds information by 
suggesting that the form provide more checkboxes but exclude from those 
checkboxes one that provides for general corporate purposes.\128\
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    \126\ See letter from ABA.
    \127\ See letters from Connecticut, Massachusetts, NASAA and 
Pennsylvania.
    \128\ See letter from NASAA.
---------------------------------------------------------------------------

    We have considered the comments and, as a result, rather than 
deleting the current expenses and use of proceeds requirements in their 
entirety, we are deleting most of them and adopting the rest of them in 
new Items 15 and 16. New Item 15 will require the issuer to provide 
only the amounts paid for sales commissions and, separately stated, 
finders' fees in connection with the offering. New Item 16 will require 
reporting of the amount of the gross proceeds the issuer used or 
proposes to use for payments to related persons.\129\ New Items 15 and 
16 will permit clarification where necessary to prevent the information 
supplied from being misleading.\130\ Both items will require 
substantially less information relating to offering expenses and use of 
proceeds and, thereby, result in a substantially reduced burden. The 
information new Items 15 and 16 will require is limited to expenses in 
connection with the offering process and payments to related persons. 
We believe that these types of expenses and payments are most likely to 
be of regulatory interest. Consequently, we believe the benefits from 
providing this information will justify the burdens in relation to 
information necessary for regulatory purposes.
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    \129\ For purposes of new Item 15, ``Related Persons'' are those 
persons new Item 3 requires the issuer to report in the Form D 
notice.
    \130\ We discuss the ability to clarify items in Part II.C 
below.
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6. Signature and Submission
    We are combining the federal and state signature requirements 
currently in Sections D and E of Form D into one signature requirement. 
This will simplify the filing and make it consistent with other 
signature requirements of Commission forms. We are incorporating into 
the signature block a consent to service of process similar to the one 
currently in Form U-2, which is required to be filed separately but 
simultaneously with a Form D by many states. Our intention in

[[Page 10604]]

making these changes is to maintain the usefulness of the signature 
block to regulators in a manner that is consistent with easing burdens 
on filers.
    The combined signature requirement, in general, provides that each 
issuer signing the revised Form D \131\ has read the Form D, knows the 
contents to be true, has duly caused the Form D to be signed on its 
behalf by the undersigned duly authorized person, and is \132\
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    \131\ Each issuer in a multiple-issuer offering will be required 
to sign the Form D. If all issuers authorize the same person to sign 
on their behalf, however, only that person will need to sign.
    \132\ Both the current federal and state signature requirements 
expressly provide that the issuer has duly caused the Form D to be 
signed on its behalf by the undersigned duly authorized person. Only 
the current state signature requirement, however, expressly provides 
that the issuer has read the Form D and knows the contents to be 
true.
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     Notifying the Commission and the states in which the Form 
D is filed of the offering and undertaking to furnish to them, on 
written request, the information provided by each issuer to offerees in 
accordance with applicable law;
     Consenting to service of process on individuals holding 
specified positions; and
     Certifying that, if the issuer is claiming a Rule 505 
exemption, it is not disqualified from relying on Rule 505 for one of 
the reasons stated in Rule 505(b)(2)(iii).
    In undertaking to furnish to the states in which the Form D is 
filed, on written request, the information provided to offerees, the 
issuer will not be affecting any legal limits on the ability of these 
states to require information.\133\
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    \133\ See Section 18 under the Securities Act as discussed in 
Part I.B.3.
---------------------------------------------------------------------------

    The signature requirement will be more extensive than the current 
federal signature requirement and will differ in various ways from the 
current state signature requirement. The proposed signature requirement 
will be more extensive than the current state signature requirement, 
for example, by including a consent to service of process. The 
signature requirement also will be less extensive than the current 
state signature requirement in several ways.\134\
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    \134\ The new signature requirement, unlike the current state 
signature requirement, will omit both an undertaking to provide a 
Form D to specified state administrators and a representation 
regarding ULOE. As noted above, however, under the new signature 
requirement, issuers will undertake to furnish to the states in 
which the Form D filing is made, on written request, the information 
provided by each issuer to offerees. Also as noted above, revised 
Form D will omit all references to ULOE and the provisions that, in 
general, require specified information on a state-by-state basis in 
an appendix to the form and require specified representations and 
undertakings.
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    The signature requirement also will differ in several ways from the 
Form U-2 signature requirement. The principal difference between the 
signature requirement and the Form U-2 signature requirement is that 
Form U-2 requires the notarized signature of a corporate officer (or 
that person's equivalent in the case of other entities) and requires a 
consent to jurisdiction and venue as well as a consent to service of 
process.\135\
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    \135\ The new signature requirement's addressing consent to 
service but not consent to jurisdiction or venue is consistent with 
the signature requirement in Form ADV [17 CFR 279.1], which can 
satisfy both federal and state filing requirements for investment 
adviser registration.
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    Some commenters expressly supported a combined signature 
requirement,\136\ but they and other commenters expressed concerns. Two 
commenters expressed the concern that the undertaking to provide 
offering materials could be read in a manner inconsistent with 
NSMIA,\137\ one commenter asked for clarification regarding the 
application of NSMIA,\138\ and two commenters expressed the concern 
that the combined signature requirement was too narrow because it did 
not contain all that is contained in the current state signature 
requirement and Form U-2.\139\
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    \136\ See letters from ABA and NASAA.
    \137\ See letters from ABA and MFA.
    \138\ See letter from ABA.
    \139\ See letters from Connecticut and NASAA.
---------------------------------------------------------------------------

    The commenters that expressed the concern that the undertaking to 
provide offering materials could be read in a manner inconsistent with 
NSMIA stated that the undertaking could be misunderstood to mean that, 
as a result of the undertaking, states could require the offering 
materials in all instances regardless of the limits NSMIA otherwise 
would impose on their ability to do so.\140\ Both of these commenters 
suggested that the Commission could resolve the concern by omitting the 
undertaking, and one of these commenters \141\ suggested that, in the 
alternative, the Commission could clarify that the undertaking would be 
inapplicable to offerings under Rule 506. In response to these 
concerns, the new form will clarify in the context of the offering 
materials undertaking that where securities that are the subject of the 
Form D are covered securities under NSMIA, whether in all instances or 
due to the nature of the offering that is the subject of the Form D, 
the states cannot routinely require the offering materials under the 
undertaking or otherwise and can require the offering materials only to 
the extent Section 18(c)(1) permits them to do so under its 
preservation of their anti-fraud authority. Also, we have added 
language to the undertaking specifying that it only applies to written 
requests made ``in accordance with applicable law.''
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    \140\ See letters from ABA and MFA.
    \141\ See letter from ABA.
---------------------------------------------------------------------------

    The commenter that requested the NSMIA-related clarification asked 
that we clarify the relationship between Section 18(c)(2)(A) and the 
new signature requirement's consent to service provision in particular 
and between Section 18(b)(4)(D) and new Form D in general. Section 
18(c)(2)(A) generally provides, in relevant part, that the states 
retain the right under NSMIA to obtain a consent to service of process 
from an issuer engaged in an offering under Rule 506 of Regulation D. 
Section 18(b)(4)(D) generally provides that the states retain the right 
under NSMIA to impose on an issuer engaged in an offering under Rule 
506 ``notice filing requirements that are substantially similar to 
those required by rule or regulation under section 4(2) that are in 
effect on September 1, 1996.'' Similarly to what we noted above in 
regard to the undertaking to provide offering materials, neither the 
consent to service provision nor anything else related to new Form D 
affects any legal limits on the ability of the states to require 
information.
    Both commenters that expressed the narrowness concern addressed the 
consent to service provision. One commenter stated that the consent to 
service should be broadened to include consents to jurisdiction and 
venue as are contained in Form U-2 to eliminate fully the need to file 
Form U-2 and enable investors to avoid needing to plead and prove 
jurisdiction as an issuer should that wants to offer or sell in a 
state.\142\ The other commenter stated that the consent to service 
provision should be broadened to apply to a broader array of acts, as 
does Form U-2, and to include the Rule 262 disqualification provision 
we proposed to delete.\143\ The commenter reasoned that the form should 
include the Rule 262 disqualification provision because state bad actor 
provisions might apply to offerings under Rule 504 or 505.
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    \142\ See letter from NASAA.
    \143\ See letter from Connecticut.
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    We believe that the consent to service provision as proposed and 
adopted strikes the right balance between regulatory benefit and issuer 
burden. We acknowledge that the consent to service will not be as broad 
in effect as Form U-2 because that form's consent to service applies to 
a somewhat broader array of acts and that form also contains

[[Page 10605]]

consents to jurisdiction and venue. We believe, however, that the Form 
D consent provision's application to a somewhat narrower array of facts 
is appropriate because the facts it applies to are tailored to the 
subject matter of Form D. The Form D consent to service provision 
generally applies to ``any activity in connection with the offering of 
securities that is the subject of this [Form D].'' In contrast, the 
Form U-2 consent to service provision generally applies to actions 
relating to ``the sale of securities.'' Finally, although Form D will 
not require consents to jurisdiction and venue, we note that under 
appropriate circumstances, state regulators still would be able to 
require this type of information.

B. Electronic Filing of Form D

    We are amending Regulation S-T,\144\ Rule 503 of Regulation D, and 
Form D to implement the requirement for issuers to file the information 
required by Form D with us electronically through an online filing 
system.\145\ A large majority of commenters supported electronic 
filing, but some expressed concern about whether electronic filing 
would impose more burdens on issuers \146\ or raise general 
solicitation issues.\147\ The concerns regarding burdens generally 
related to the operation of the online system, and we address those 
concerns below where we discuss the operation of the system in more 
detail.\148\
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    \144\ Regulation S-T is the Commission's general regulation 
governing electronic filing.
    \145\ The online filing system will automatically capture and 
tag data items and is discussed in further detail in Part III of 
this release.
    \146\ See letters from ABA, Stephen A. Marcus and SCSGP.
    \147\ See letters from Connecticut, Massachusetts and NASAA.
    \148\ We address the concerns relating to general solicitation 
issues in Part II.C below.
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    One commenter expressed the concern that, even though Forms D 
currently are publicly accessible, their increased public accessibility 
as a result of mandated electronic filing would encourage third parties 
to use Form D for purposes beyond its original intent or current use 
and might result in issuers making less use of Form D than they do now 
and, thereby, deprive them of the benefits of the use of Regulation D 
and cause the Commission to receive less information than it does 
now.\149\ The commenter suggested that, as an alternative, the 
Commission permit Form D filings to be confidential for a specified 
amount of time, such as a year, if the issuer has made no public 
disclosure of the offering. The Form D would, however, be available to 
the Commission and states with which it was filed during that time. We 
acknowledge the commenter's concerns. As we discussed in the proposing 
release and above, however, public availability of Form D provides a 
measure of investor disclosure and serves other useful purposes. In 
addition, as a practical matter, even if we were to permit confidential 
filing, Forms D would be subject to requests under the Freedom of 
Information Act (``FOIA'').\150\
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    \149\ See letter from ABA.
    \150\ 5 U.S.C. 552 et seq. The Commission's regulations that 
implement that statute are at 17 CFR 200.80 et seq.
---------------------------------------------------------------------------

    Rule 101(c)(6) of Regulation S-T \151\ currently requires the 
information required by Form D to be filed in paper format. The 
amendments will delete the reference to Form D from Rule 101(c)(6) and 
will revise subparagraph (a)(1) of Rule 101 \152\ to add a new 
subparagraph (xiii) that will add Form D to the rule's list of 
documents required to be filed electronically.
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    \151\ 17 CFR 232.101(c)(6).
    \152\ 17 CFR 232.101(a)(1).
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    Rule 100 of Regulation S-T,\153\ which specifies the persons or 
entities subject to the electronic filing requirements of Regulation S-
T, expressly includes, among others, Exchange Act reporting companies 
whose filings (such as Form D) are subject to review by the Division of 
Corporation Finance. In order to assure that Rule 100 also will apply 
to non-reporting companies that file Form D, the amendments revise 
paragraph (a) of Rule 100 of Regulation S-T \154\ to add a reference to 
entities that are not Exchange Act reporting companies but whose 
filings are subject to review by the Division of Corporation Finance.
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    \153\ 17 CFR 232.100.
    \154\ 17 CFR 232.100(a).
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    We also are amending Regulation S-T, as proposed, to make hardship 
exemptions unavailable for Form D filings.\155\ The amendments revise 
subparagraph (a) of Rules 201 \156\ and 202 \157\ to exclude Form D 
from the filings for which hardship exemptions are available. We 
believe hardship exemptions should not be available for Form D filings 
because of the relative ease of electronic filing, the limited value of 
paper filings and the utility of a uniform, comprehensive database. In 
adopting the conversion of the Form D filing from a paper system to an 
electronic system, we assume that issuers will have access to a 
computer and the Internet. In the absence of an issuer's having a 
personal or office computer and Internet access, public libraries 
around the country often have computer and Internet access that an 
issuer could use. We therefore do not envision the need for a hardship 
exemption to permit paper filing.\158\
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    \155\ We note, however, that a filer may request a filing date 
adjustment under Rule 13(b) of Regulation S-T [17 CFR 232.13(b)]. 
This rule addresses circumstances where an electronic filer attempts 
in good faith to file a document with the Commission in a timely 
manner but the filing is delayed due to technical difficulties 
beyond the filer's control. In those instances, the filer may 
request an adjustment of the document's filing date. The staff may 
grant the request if it appears that the adjustment is appropriate 
and consistent with the public interest and the protection of 
investors.
    \156\ 17 CFR 232.201(a).
    \157\ 17 CFR 232.202(a).
    \158\ We also are adopting an amendment to Rule 104(a) of 
Regulation S-T [17 CFR 232.104(a)] to make it clear that unofficial 
PDF copy submissions are unavailable for Form D notices. The new 
online filing system, further described below, will make filed Form 
D information available on our Web site in what we believe will be 
an easy-to-read format similar to that which could be provided 
through an unofficial PDF copy.
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    The amendments revise Rule 503 of Regulation D and Form D in 
several ways related to electronic filing. The amendments delete from 
Rule 503 references to the paper-based concept of copies in 
subparagraphs (a) and (b) and a manual signature in subparagraph (b). 
Subparagraph (a) will continue to specify when a notice on Form D 
initially must be filed and will be revised to specify also when an 
amendment to a Form D filing must or could be filed.\159\
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    \159\ Subparagraph (a) will continue to provide that an issuer 
must file the Form D no later than 15 calendar days after the first 
sale of securities in the offering. As currently, an issuer could 
file the Form D at any time before that if it has determined to make 
the offering. Also as currently, a mandatory capital commitment call 
would not constitute a new offering, but would be made under the 
original offering, so no new Form D filing would be required solely 
as a result. See Part II.A.4.b of this release for a discussion of 
when an amendment must or could be filed.
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    One commenter \160\ suggested that we ease burdens by extending the 
filing deadline to at least 30 days from the date of first sale,\161\ 
defining the date of first sale as the consummation of the first 
closing of a sale of securities in the offering, extending the cut-off 
time for electronic filing from 5:30 to 10 p.m. Eastern time \162\ and 
providing that

[[Page 10606]]

when a Form D otherwise would be due on a weekend or holiday it be 
deemed due on the next business day. We are not aware of the current 
deadline's having been difficult to meet in the past and believe that 
carrying it forward is not likely to cause problems in the future. For 
the same reasons, we believe that it is not necessary to extend the 
cut-off time from 5:30 to 10 p.m. In this regard, we note that filings 
under Rule 462(b) and Section 16(a) to which the extended cut-off time 
applies typically must be made much more quickly than a filing on Form 
D.\163\ We are, however, further revising Rule 503(a)(1) to provide 
that when a Form D filing otherwise would be due on a weekend or 
holiday it will be deemed due on the next business day. This approach 
is consistent with the way Exchange Act Rule 0-3(a) \164\ generally 
treats filing deadlines under the Exchange Act.\165\
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    \160\ See letter from ABA.
    \161\ As discussed above in connection with Item 13 in Part 
II.A.5, another commenter suggested that the form require a final 
report of actual sales results and be due not later than 15 business 
days after the close of the offering.
    \162\ Rule 13 of Regulation S-T [17 CFR 232.13] generally 
provides that a filing by direct transmission beginning on or before 
5:30 p.m. Eastern time on a business day is deemed filed that day 
and, if such a filing were to begin after that time, it would be 
deemed filed on the next business day. Rule 13 also provides, 
however, that a 10:00 p.m. deadline applies for registration 
statements and post-effective amendments filed under Rule 462(b) [17 
CFR 230.462(b)] and beneficial ownership reports filed under Section 
16(a) [15 U.S.C. 78p(a)], in general, by officers, directors and 
principal security holders of reporting companies that have a class 
of equity securities registered under Section 12 [15 U.S.C. 78l] of 
the Exchange Act.
    \163\ For example, Section 16(a)(2)(C) [15 U.S.C. 78p(a)(2)(C)] 
generally requires that insiders file reports of changes in 
beneficial ownership within two business days of the change.
    \164\ 17 CFR 240.0-3(a).
    \165\ As the commenter that raised the weekend/holiday issue 
pointed out, current Rule 503(e)(2) addresses the issue by providing 
that a Form D we do not physically receive by the end of the 15-day 
period is deemed filed on the date it is sent by certified or 
registered U.S. mail. Consequently, an issuer currently may send a 
Form D as late as the end of the 15-day period. In proposing to 
delete Rule 503(e)(2), it was not our intention to shorten the Form 
D filing deadline.
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    Subparagraph (b) of Rule 503 will continue to require a signature. 
Rule 302 of Regulation S-T,\166\ which governs the manner of signature 
for electronic filings, will apply to Form D.\167\ The amendments also 
add to subparagraph (b) a statement that electronic Form D filing 
through our new online filing system is mandatory. In addition, the 
amendments delete subparagraphs (c), (d), and (e). Subparagraph (c) 
requires an issuer that makes sales under Rule 505 to provide an 
undertaking on its Form D to provide specified information to the 
Commission upon the staff's written request. This paragraph no longer 
will be necessary because, as noted above, the revised signature 
requirement will provide that each issuer signing the Form D will be 
undertaking to furnish to the Commission and the states with which the 
Form D is filed, on written request, the information provided by each 
issuer to offerees. Subparagraph (d), regarding amendments, no longer 
will be necessary because subparagraph (a) will address when to file 
amendments and the new online filing system will make available to the 
issuer the version of the Form D to be amended to enable the issuer to 
key in only the changes. Subparagraph (e), regarding the date a Form D 
filing is considered filed, no longer will be necessary because Rule 13 
of Regulation S-T will specify the way to determine the filing date for 
a Form D filing as it does for electronic filings generally and new 
Rule 503(a)(1) will provide that when a Form D otherwise would be due 
on a weekend or holiday it will be deemed due on the next business 
day.\168\ Finally, the amendments similarly will revise the General 
Instructions of Form D regarding copies required, manual signatures, 
amendments, mandatory electronic filing and filing date.
---------------------------------------------------------------------------

    \166\ 17 CFR 232.302.
    \167\ Rule 302 requires, in general, that electronic filings 
contain typed signatures, that each signer manually sign a signature 
page or other document confirming the typed signature by the time 
the filing is made, and that the issuer maintain the manually signed 
document for five years and make it available to the Commission and 
its staff upon their request. We also are adding to Form D's 
signature instruction a summary of Rule 302's requirements as a 
convenience.
    \168\ The description of Form D at 17 CFR 239.500 is similar to 
Rule 503 and is being amended similarly.
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C. General Solicitation and General Advertising Issues Presented by 
Electronic Filing of Form D

    Rule 502(c) of Regulation D \169\ sets forth the prohibition on 
general solicitation and general advertising applicable to most 
Regulation D offerings. Specifically, issuers and persons acting on the 
issuer's behalf are prohibited from offering or selling securities by 
any form of general solicitation or general advertising. Information 
filed using Form D has up to now been available to the general public. 
The electronic filing and availability of Form D information, however, 
may present the concern that the filing could be used as a marketing 
document to generate interest in offerings because the information 
would be easily and broadly available. This, in turn, may raise 
concerns regarding compliance with Regulation D's prohibition on the 
use of general solicitation and general advertising. To address these 
compliance concerns, we are revising Rule 502(c) to include a safe 
harbor from the prohibition on ``general solicitation'' and ``general 
advertising'' for information provided in a Form D filed with the 
Commission if the information is provided in good faith and the issuer 
makes reasonable efforts to comply with the requirements of Form D. An 
issuer that complies with the terms of the safe harbor is assured that 
the electronic availability of its Form D filing would not, in and of 
itself, cause the issuer to have violated this prohibition.
---------------------------------------------------------------------------

    \169\ 17 CFR 230.502(c).
---------------------------------------------------------------------------

    Such a safe harbor would not be warranted if it merely shielded 
activity that is, in fact, intended to generate interest in the 
offering in violation of law. Accordingly, we are limiting the amount 
of information submitted on the form and limiting the application of 
the safe harbor to where the information is provided with a good faith 
and reasonable effort to comply with the requirements of Form D.\170\ 
Limiting the safe harbor to information provided with a good faith and 
reasonable effort to comply with the requirements of Form D would be 
consistent with Preliminary Note 6 \171\ to Regulation D, Rule 
508,\172\ and the ``notification'' nature of Form D's requirements.
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    \170\ Similarly, current Rule 502(c) includes a safe harbor from 
the prohibition on general solicitation and general advertising for 
a notification in compliance with Rule 135c of an unregistered 
offering by an issuer required to file reports under Section 13 or 
15(d) of the Exchange Act. The information allowed to be included in 
a Rule 135c notification is limited to very basic identifying 
information about the issuer and the offering.
    \171\ Preliminary Note 6 to Regulation D provides, in part, that 
``Regulation D is not available to any issuer for any transaction or 
chain of transactions that, although in technical compliance with 
the these rules, is part of a plan or scheme to evade the 
registration provisions of the [Securities] Act.''
    \172\ 17 CFR 230.508. Rule 508 provides, in part, that ``A 
failure to comply with a term, condition or requirement of 
[specified rules under Regulation D] will not result in the loss of 
[an] exemption * * * if the person relying on the exemption shows * 
* * [a] good faith and reasonable attempt was made to comply with 
all applicable terms, conditions and requirements of [such rules].''
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    As proposed, electronic Form D would not have contained any place 
where ``free writing'' could occur.\173\ When submitting a paper 
filing, filers may insert information that is not required by the form, 
but that could be a vehicle for soliciting investors illegally. 
Prohibiting free writing in the electronic form would prevent such 
misuse. One commenter favored the total bar against free writing as 
necessary to safeguard against this misuse.\174\ Another commenter, 
however, favored allowing issuers to clarify responses, asserting that 
permitting issuers to do so would avoid a disincentive to filing by 
enabling issuers to present more accurate information that would be 
more

[[Page 10607]]

useful.\175\ The commenter also asserted that permitting clarification 
to ensure accuracy would not transform the Form D into a marketing 
document and would be consistent with the proposed safe harbor because 
the information would be provided with a good faith and reasonable 
effort to comply with the requirements of Form D.
---------------------------------------------------------------------------

    \173\ As proposed and adopted, however, Form D will require an 
issuer to provide further detail in a textual response if the issuer 
must choose ``Other'' in response to Item 1 regarding legal entity 
type or Item 9 regarding security type.
    \174\ See letter from NASAA.
    \175\ See letter from ABA.
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    We are persuaded that, on balance, it is appropriate to permit 
issuers to engage in a limited amount of free writing to the extent 
necessary to clarify responses as consistent with the safe harbor. In 
order to limit the amount of free writing, however, we are reducing the 
need for it by offering additional response choices for some items 
\176\ and permitting free writing to clarify responses in separate 
fields using a limited number of characters only for those items for 
which it seems appropriate. Accordingly, and as noted above in the 
context of discussing particular items of new Form D, we will permit 
free writing to clarify responses to the following items:
---------------------------------------------------------------------------

    \176\ For example, we have modified the proposed version of Item 
1 to permit an issuer to choose ``yet to be formed'' instead of 
providing a year of organization in response to that item.
---------------------------------------------------------------------------

     Item 3--Related Persons;
     Item 10--Business Combination Transactions;
     Item 13--Offering and Sales Amounts;
     Item 15--Sales Commissions and Finders' Fee Expenses; and
     Item 16--Use of Proceeds.\177\
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    \177\ The commenter that suggested that we permit free writing 
cited Items 1, 3, 9, 10 and 13 as examples of items for which it may 
be appropriate to permit free writing. See letter from ABA. As 
noted, we have added an additional response choice to the proposed 
version of Item 1 and Items 3, 10 and 13 all will permit free 
writing to clarify responses. In that regard, we choose not to 
revise further Item 9, regarding security type, because it already 
requires an issuer to provide further detail in a textual response 
if the issuer must choose ``Other'' as its initial response.
---------------------------------------------------------------------------

    Two commenters urged that we provide additional safeguards to 
support the ban on general solicitation and general advertising.\178\ 
Both commenters suggested prominent warnings in connection with the 
display of Form D information. One of them also favored limiting public 
access to some types of information, clarifying in connection with 
adopting the amendments that electronic filing does not eliminate the 
ban and amending Regulation D to require companies to return any 
unsolicited payments submitted to purchase securities.\179\ We believe 
that limiting the types and amount of information in Form D filings and 
providing a carefully tailored safe harbor should prevent the 
electronic availability of Form D filings from undermining the ban.
---------------------------------------------------------------------------

    \178\ See letters from Connecticut and NASAA.
    \179\ See letter from NASAA.
---------------------------------------------------------------------------

III. Electronic Filing Procedure

    We are mandating electronic filing of the Form D notice through an 
online filing system in development that will be accessible from any 
computer with Internet access. The information filed will be available 
on our Web site and, because the online filing system will 
automatically capture and tag data items, the data will be interactive 
and searchable. Our Web site will enable users to view the information 
in an easy-to-read format, download the information into an existing 
application, or create an application to use the information. As 
discussed above, our objectives in converting Form D filings to an 
electronic format include lessening the burden on issuers of filing the 
Form D notice, enhancing federal and state coordination, increasing the 
information available regarding the effectiveness of our Securities Act 
exemptions and increasing the information available to researchers 
using Form D data to conduct empirical research aimed at improving the 
efficiency and effectiveness of our private markets.
    We believe our approach to filing and dissemination formats will 
make it relatively easy to file, access and analyze Form D information. 
As discussed in the proposing release, using this system will result in 
the Form D information being filed in the standard format of eXtensible 
Markup Language (XML) and we would disseminate the information in a 
format that provides normal text for reading and XML-tagged data for 
analysis. Three commenters suggested that the system tag the Form D 
information with the eXtensible Business Reporting Language (XBRL) 
system rather than the standard format of XML.\180\ XBRL is an XML-
based language that is intended to tag a wide range of business data. 
Because Form D information consists of relatively simple facts, XML is 
a sufficient technological solution, and we expect the information 
tagged in XML will be compatible with systems designed for more 
sophisticated XBRL reporting. The Commission can also take advantage of 
its experience in developing data tags for information filed under 
Section 16, which is currently filed with the Commission using XML 
technology.
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    \180\ See letters from Center for Audit Quality, EDGAR Online, 
Inc. and XBRL US, Inc.
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A. Mechanics

    The new online filing system for Form D information will be 
accessible from any computer with Internet access. An issuer will be 
able to both submit and amend its Form D filing through this 
system.\181\ The Form D itself will include guidance functions to 
assist in completing the form.\182\
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    \181\ In the proposing release, we stated our expectation that 
the system would permit an issuer, in Item 7, to designate the 
states to which the Form D is directed on the assumption that some 
states would adopt one-stop filing and allow filings that specify 
that they are directed to those states to constitute filings with 
them. As discussed above in more detail in Part I.B.3, we have been 
working actively with NASAA to achieve one-stop filing capability 
but it would not be available when electronic filing of Form D 
begins.
    \182\ For example, the system might use drop-down menus as a 
guidance function.
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    In order to file, issuers will need the same codes as are required 
to file on our electronic filing system, EDGAR, today. An issuer that 
does not already have EDGAR filing codes, and to which the Commission 
has not previously assigned a user identification number, which we call 
a ``Central Index Key (CIK)'' code, will obtain the codes by filing 
electronically a Form ID \183\ at https://
www.filermanagement.edgarfiling.sec.gov and filing, in paper by fax 
within two business days before or after filing the Form ID, a 
notarized authenticating document. The authenticating document will be 
manually signed by the applicant over the applicant's typed signature, 
include the information contained in the Form ID, confirm the 
authenticity of the Form ID \184\ and, if filed after electronically 
filing the Form ID, include the accession number assigned to the 
electronically filed Form ID as a result of its filing.\185\ Under the 
online system, if the Form D filing is made on behalf of multiple 
issuers, each issuer will be required to have its own CIK code and a 
confirming code, which we call a ``CIK Confirmation Code (CCC),'' for 
validation.
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    \183\ 17 CFR 239.63, 249.446, 269.7 and 274.402.
    \184\ An issuer could confirm the authenticity of a Form ID by, 
for example, stating that ``[name of issuer] hereby confirms the 
authenticity of the Form ID [filed] [to be filed] on [specify date] 
containing the information contained in this document.''
    \185\ 17 CFR 232.10(b). An ``accession number'' is a unique 
number generated by EDGAR for each electronic submission. Assignment 
of an accession number does not mean that EDGAR has accepted a 
submission.
---------------------------------------------------------------------------

    Two commenters expressed concern about the need for an issuer to 
obtain access codes through the Form ID process in order to file 
through the new online system.\186\ We plan to consider

[[Page 10608]]

ways to simplify the authentication process in order to replace the 
requirement to fax the notarized authenticating document, and expect 
that a more simplified process may be available by the time electronic 
Form D filing is mandated.\187\
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    \186\ See letters from ABA (focusing particularly on the burden 
on non-reporting companies) and Stephen A. Marcus.
    \187\ In the proposing release, we solicited comment on whether 
issuers that only file Form D with the Commission should be able to 
authenticate a Form ID by providing to the Commission a copy of a 
local business license rather than by faxing the otherwise required 
notarized authenticating document. We received no responses to this 
question.
---------------------------------------------------------------------------

    To access and file a Form D through the new online system, issuers 
will begin by having a valid identification number, confirming code and 
separate password, which we call a ``Password'' and logging on to the 
system. The identification number, confirming code and password, 
together with a password modification authorization code, are referred 
to as ``EDGAR access codes.'' Data entry will be required to be 
performed quickly enough to avoid time-outs that end the session. A 
time-out most likely will occur no less than one hour following the 
user's last activity on the system. Time-outs will be implemented due 
to cost and technical limitations, but it would be possible to extend a 
session with any keystroke.\188\
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    \188\ The new online filing system technically will be part of 
EDGAR but likely in some respects will be similar to the online 
filing system for Forms 3 [17 CFR 249.103 and 274.202], 4 [17 CFR 
249.104 and 274.203], and 5 [17 CFR 249.105] filed under Section 
16(a) of the Exchange Act, in general, by officers, directors and 
principal security holders of reporting companies that have a class 
of equity securities registered under Section 12 of the Exchange 
Act. Form D filers will access the online filing system and, 
essentially, prepare the filing by responding to questions and 
filling in blanks. The online filing system for Forms 3, 4 and 5 
does not provide a way to save an incomplete form, but does provide 
the alternative of preparing filings before accessing the system and 
then submitting them through, rather than preparing them on, the 
online system.
---------------------------------------------------------------------------

    Two commenters suggested that the system provide a way to save an 
incomplete form and one of them stated that it would be desirable as a 
practical matter for the system to enable an issuer to prepare a filing 
offline and then access the system to submit it.\189\ One commenter 
stated that a saving feature was needed to avoid time-outs.\190\ The 
other commenter stated that the absence of a saving feature would 
virtually require that a careful filer prepare a Form D offline on a 
specially created template and then input all the information again 
online and, as a result, would risk inputting incorrect information and 
waste time and money.\191\
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    \189\ See letters from ABA and SCSGP.
    \190\ See letter from SCSGP.
    \191\ See letter from ABA.
---------------------------------------------------------------------------

    We agree that it would be useful to filers to be able to avoid the 
need to provide all of the required information both online and in a 
single session. Contrary to our earlier expectation, we anticipate that 
the system will provide a way to avoid the need to provide all of the 
required information both online and in a single session. For example, 
the system may permit the issuer to prepare the filing offline and 
submit it online or to save an incomplete form online from session to 
session for a short period of time, such as six calendar days, between 
sessions.\192\
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    \192\ Some information provided by the filer in the course of 
obtaining EDGAR access codes or updating such information will 
automatically appear in appropriate places when the filer accesses 
the new online filing system. As a result, in order to make changes 
to such information, it generally will be necessary to do so through 
an updating process through the main EDGAR system rather than the 
Form D online filing system. The updating process is a well-
established typically online process applicable to EDGAR filers 
generally that would be relatively easy to complete.
---------------------------------------------------------------------------

    An issuer will be able to prepare an amendment based on the content 
of a previously filed form.\193\ The system will validate as many 
fields as possible for data type and required fields while the filer 
fills in the fields on the screen. Issuers will have an opportunity to 
correct errors and verify the accuracy of the information before 
submitting the filing. Links will be available to enable issuers to 
access information, such as the instructions to Form D.
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    \193\ When an issuer files an amendment to a Form D filing, it 
will access its Form D filing on the online filing system and type 
over the inaccurate information. In that case, the online filing 
system will replace the inaccurate information with the new 
information, save the revised version of the Form D filing in its 
amended state causing it to be an amendment and a new filing, and 
record the date of amendment. The information in the Form D that was 
accessed for purposes of the amendment will, however, remain 
unchanged on the system accessible to the public.
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    The issuer will be able to download and print the filing before and 
after submission.\194\ Once the filing is submitted, the system will 
indicate receipt of the filing. In many cases, the system will display 
a unique number assigned to the submission, which we call an 
``accession number'' but, in any event, the accession number will 
follow in an e-mail notification to the filer. A filer will be able to 
see the filing on our Web site shortly after filing.
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    \194\ We believe the ability to download and print the filing 
before and after submission meets the concerns of the commenter that 
asked that the system allow the user to view the information before 
submission and print an as-filed version after submission. See 
letter from ABA.
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    Upon filing of the Form D notice with the Commission, state 
securities regulators will be able to identify on our Web site Form D 
filings that specify their states.\195\ Filers generally would specify 
one or more states in response to proposed Items 1 (jurisdiction of 
incorporation or organization), 2 (principal place of business and 
contact information), 3 (related person addresses) and 12 (addresses of 
recipients of sales compensation) of Form D.\196\ State specification 
information will be interactive and searchable because the new online 
filing system will automatically capture and tag that information as it 
will other Form D filing information.
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    \195\ In Release No. 33-6339 (Aug. 18, 1981) [46 FR 41791], the 
Commission stated the following in its discussion of Rule 503: ``It 
should be noted that, although the revised filing requirements do 
not require that the user also file a notice with the state(s) in 
which the offering is to be sold, it is anticipated that the 
Commission will routinely furnish copies of the notice forms to the 
appropriate state commissions.''
    \196\ As discussed above in more detail, we no longer 
contemplate effectuating a one-stop filing system by giving filers 
an opportunity to direct their filings to designated states as 
provided by proposed Item 7, but we have been working actively with 
NASAA in an effort to accomplish this in a different manner. 
Consequently, Item 7 does not provide for designation of states.
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    Most Form D filings currently are made by law firms on behalf of 
issuers.\197\ We expect that the simplification and restructuring of 
Form D and the conversion of Form D filings to an electronic system may 
decrease legal fees to make Form D filings and perhaps allow more 
issuers to file a Form D notice themselves without the assistance of a 
law firm.
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    \197\ Our Division of Corporation Finance conducted a one-month 
review of Form D filings and determined that, based primarily on the 
cover letters that accompany most paper Form D filings, about 75% of 
the filings were made by law firms on behalf of issuers.
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B. Database Capabilities of Electronic Form D Repository

    A review of Form D filings by our Division of Corporation Finance 
uncovered errors and omissions in the information provided.\198\ In an 
effort to enhance the quality of the data collected by the proposed 
electronic Form D, we are including internal checks in the new online 
system that should decrease the number of errors and omissions in Form 
D filings. The system will prevent an issuer from submitting Form D 
information electronically unless all necessary data fields are 
completed in a manner consistent with the nature of

[[Page 10609]]

each field \199\ and the logical relationships between or among the 
fields.\200\ This will not only promote the integrity of the data 
collected by the Form D repository, but also will make it easier for 
issuers to complete or amend their filings.
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    \198\ Some of the most frequent errors were failures to indicate 
whether a filing is an amendment or a new filing and claims that do 
not match the facts described (for example, issuers claiming that an 
offering is limited to accredited investors and then including 
information regarding participation of non-accredited investors in 
the offering).
    \199\ The system will check, for example, to make sure that 
number characters are used in responding to the field in proposed 
Item 13 for the offering and sales amounts.
    \200\ Where, for example, the filer claims a Rule 505 or Rule 
506 exemption in response to Item 6 and specifies that more than 35 
non-accredited investors have invested in response to Item 14, a 
pop-up or other feature will warn that only 35 non-accredited 
investors are permitted in these types of offerings and require the 
filer to select ``OK'' before proceeding.
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C. System Implementation

    The new online system is expected to be available to receive 
filings on a voluntary basis on September 15, 2008. Electronic filing 
will be required for all filings on or after March 16, 2009. We are 
treating the period between the two dates as a transition period during 
which electronic filing of Form D information with us using the new 
online filing system will be voluntary. Issuers may also file a paper 
version of the new Form D with us during the transition period, without 
using the online filing system.
    The transition period serves several purposes. It should both 
enable issuers to become familiar with the new Form D and online filing 
system and help alert us to any problems. One commenter suggested that 
we permit voluntary filing for a period of at least a year to work out 
any issues that arise and provide time to allow states to adopt 
conforming one-stop filing rules and set up a central payment 
system.\201\ We believe that a shorter period of time should be 
adequate for discovering and addressing any issues in the new form or 
system that might arise. We also believe mandating electronic filing of 
Form D as soon as feasible even without a one-stop filing capability in 
place is preferable, in order to realize without unnecessary delay the 
many benefits we believe mandated electronic filing will provide 
separate and apart from the benefits that one-stop filing would 
provide. In this regard, we believe that beginning to mandate 
electronic filing without one-stop filing in place will not delay, and 
in fact will facilitate, the development of one-stop filing on which we 
are working actively with NASAA.
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    \201\ See letter from ABA.
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    Issuers that choose not to file electronically during the 
transition period may use either the current paper form or a paper 
version of the new Form D. Although the information in new Form D is 
somewhat different from that in current paper Form D, we believe a 
short period when either version of the form can be used is 
appropriate. Similarly, we will permit an amendment to be filed in 
paper format using either version of the form until electronic filing 
becomes mandatory. As previously discussed, however, the new annual and 
other amendment rules will apply to all new Form D filings regardless 
of format and the current amendment requirements will apply to all 
current Form D filings in paper format. By the time electronic filing 
is mandated, however, we believe an adequate amount of time will have 
passed since electronic filing will have become voluntary for Form D 
filings that it would be appropriate to require electronic filing using 
new Form D of initial filings and all amendments applying the new 
amendment rules regardless whether the filing being amended was filed 
on current or new Form D.
    We are establishing the transition period by delaying until the end 
of the period the effective date of new Item 101(a)(1)(xiii), which 
mandates electronic filing of new Form D, and adopting temporary 
provisions that will apply only during the transition period.\202\ We 
are adopting temporary Item 101(b)(10) of Regulation S-T to permit but 
not require electronic filing of new Form D during the period. We are 
adopting temporary Rule 503T and Temporary Form D, which are similar to 
current Rule 503 and Form D, respectively, and, in general, will enable 
filers to file current or new Form D in paper format during the 
transition period.\203\
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    \202\ Most of the provisions we adopt today will be effective on 
September 15, 2008 when the transition period begins. We are, 
however, providing earlier effective dates for the changes to Items 
101(c)(6) and 201(a) of Regulation S-T. The change to Item 101(c)(6) 
will remove Form D from the list of documents that cannot be filed 
electronically and the change to Item 201(a) will add Form D to the 
list of documents for which a temporary hardship exemption from 
electronic filing will not be available. The earlier effective date 
will have no practical effect on the Form D filing requirements but 
will facilitate the Commission's consideration and potential 
adoption of other revisions to Items 101(c)(6) and 201(a) that it 
proposed in Release No. 33-8859 (Nov. 1, 2007) [72 FR 63513].
    \203\ Among the differences between the current and temporary 
versions of Rule 503 and Form D is a reduction in the number of 
paper copies required to be filed from five to two (one of which, in 
each case, must be a manually signed original).
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    Two commenters addressed the question in the proposing release as 
to whether, in the future, public companies should be exempted from the 
Form D filing requirement in Rule 503 and instead be required to file 
Form D information as part of a periodic or current report.\204\ Both 
commenters suggested that we defer consideration of such an exemption. 
One commenter cited concerns with the potential for confusion and 
problems with differing formats and retrieval.\205\ The other commenter 
cited risks to uniformity between federal and state requirements, 
additional costs and potential inadvertent violations.\206\ We intend 
to consider in the future the issues that these comments raise.
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    \204\ See letters from Connecticut and NASAA.
    \205\ See letter from Connecticut.
    \206\ See letter from NASAA. .
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IV. Paperwork Reduction Act Analysis

A. Background

    The amendments will affect two forms that contain ``collection of 
information'' requirements within the meaning of the Paperwork 
Reduction Act of 1995 (``PRA'').\207\ The titles of the affected 
information collections are Form D (OMB Control No. 3235-0076) and Form 
ID (OMB Control No. 3235-0328). The purposes of the amendments are, in 
general, to clarify, simplify and update the information requirements 
of Form D and modernize the related information capture process. We 
published a notice requesting comment on the collection of information 
requirements in the proposing release, and submitted a request to the 
Office of Management and Budget (``OMB'') for review under 44 U.S.C. 
3507(d) and 5 CFR 1320.11. As we discuss in more detail below, we have 
withdrawn that request and plan to replace it in order to reflect a new 
estimate based on the most recently ended fiscal year that had not yet 
ended at the time we submitted the original request to OMB. When we 
receive OMB clearance, we will publish notice in the Federal Register. 
An agency may not conduct or sponsor, and a person is not required to 
respond to, a collection of information requirement unless it displays 
a currently valid control number. Compliance with the collections of 
information as revised will be mandatory. The information required by 
the collection of information in Form D as revised will not be kept 
confidential by the Commission; the information required by Form D will 
be kept non-public, subject to a request under FOIA.
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    \207\ 44 U.S.C. 3501 et seq.
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    Form D is filed by issuers as a notice of sales without 
registration under the Securities Act based on claims of exemption 
under Regulation D or Section 4(6) of the Securities Act.
    Form ID is filed by registrants, individuals, transfer agents, 
third-party

[[Page 10610]]

filers or their agents to request the assignment of access codes that 
permit the filing of securities documents on EDGAR. This form enables 
the Commission to assign an identification number (CIK), confirmation 
code (CCC), password and password modification authorization code to 
each EDGAR filer, each of which is designed to protect the security of 
the EDGAR system.

B. Estimated Collection of Information Burdens

    As we previously expected and discussed in the proposing release as 
to the proposed amendments, we expect that the adopted amendments will 
not affect the overall collection of information burden of Form D but 
will cause additional respondents to file a Form ID each year and, as a 
result, will increase the annual collection of information burden. We 
have, however, as further discussed below, refined and updated the 
information we used to arrive at our estimate of the effect of the 
amendments. As a result, we have revised our estimate of the current 
number of respondents that file Form ID each year without the effect of 
the amendments and the additional number of respondents that will file 
Form ID each year as a result of the amendments.
    We expect that the amendments will not affect the number of Form D 
filings made and, on balance, will obligate issuers to report on Form D 
essentially the same amount of information as they are required to 
report on Form D today. As previously noted, we are adopting the 
amendments substantially as proposed. We expect nearly all of the 
variations between what we expressly proposed and what we adopted to 
lessen the collection of information burden or not affect it. We expect 
a small minority of variations to increase the collection of 
information burden. On balance, however, we expect the variations will 
not increase the collection of information burden.
    We expect that the following variations from the proposals will 
lessen the collection of information burden of Form D:
     Provide that if a Form D filing otherwise is due on a 
Saturday, Sunday or holiday, it will be due on the first business day 
following;
     Eliminate the proposed requirement to provide the issuer's 
Commission file number (if any);
     Provide additional exceptions from the requirement to 
amend Form D for changes in:
    [cir] The address or relationship to the issuer of a related person 
identified in response to Item 3 of Form D;
    [cir] The minimum investment amount, if the change is an increase, 
or if the change, together with all other changes in the amount since 
the previously filed notice, does not result in a decrease of more than 
10%;
    [cir] Any address or state(s) of solicitation shown in response to 
Item 12 of Form D;
    [cir] The total offering amount (if the change is a decrease); and
    [cir] The amount of securities in the offering that remain to be 
sold; and
     Prescribe that annual amendments are due on or before the 
first anniversary of the most recently filed Form D filing or 
amendment, if the offering is continuing at that time, rather than each 
year between January 1 and February 14.
    We expect that the following variations from the proposals will not 
affect the collection of information burden of Form D:
     Provide clarifications;
     Permit issuers to provide information that is not 
required;
     Permit issuers to clarify information;
     Request but not require that issuers in specified industry 
groups provide their aggregate net asset value range (and provide an 
additional exception from the requirement to amend Form D for changes 
in aggregate net asset value);
     Eliminate the ability to specify states to which the Form 
D is directed;
     Prescribe that the minimum investment amount relates to 
outside investors rather than all investors;
     Prescribe disclosure of the total number of investors 
rather than the number of accredited investors; and
     Provide temporary rules that, in conjunction with varied 
effective dates, establish the transition period during which 
electronic filing of Form D proceeds from prohibited to optional to 
mandated.
    Finally, we expect that the following variations from the proposals 
will increase the collection of information burden of Form D:
     Require amendments to report the addition of executive 
officers, directors and promoters in all offerings, and not provide an 
exception from this requirement for offerings that last more than a 
year in some circumstances;
     Require that when both an individual and the individual's 
associated broker-dealer are disclosed, the issuer must present the CRD 
number, if any, for both rather than just one; and
     Require disclosure of the following amounts or, if not 
known, an estimate:
    [cir] Expenses for amounts paid for sales commissions and, 
separately stated, finders' fees; and
    [cir] Use of proceeds but only as to the amount used to make 
payments to executive officers, directors and promoters.\208\
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    \208\ While we expect the requirement to disclose these expense 
and use of proceeds amounts will increase the collection of 
information burden of Form D, we also expect that our adoption of an 
additional exception from the requirement to amend Form D for 
specified changes in these amounts will limit the increase.
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    As noted above, we expect that, on balance, the variations from the 
proposals will not increase the collection of information burden. 
Consequently, we continue to believe that the overall information 
collection burden of Form D will remain approximately the same as it is 
today.\209\
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    \209\ We estimate the burden of Form D to be 4.0 hours per 
response of which one hour is borne internally and three hours are 
borne externally.
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    In the proposing release, we stated our then current estimate that, 
without the effect of the amendments, 196,800 respondents file Form ID 
each year at an estimated burden of .15 hours per response, all of 
which is borne internally by the respondent for a total annual burden 
of 29,520 hours. We later refined the estimate to the extent that we 
reduced from 196,800 to 46,400 the estimated number of respondents that 
file Form ID each year resulting in a total annual burden of 6960 
hours. We reduced the estimate primarily based on the actual number of 
Forms ID per year we recently have received. We reflected the new 
estimate in the request we submitted to OMB rather than the estimate 
used in the proposing release.
    Also in the proposing release, we stated our then current estimate 
that an additional 18,600 respondents would file Form ID each year and, 
as a result, would cause an additional annual burden of 2790 hours. We 
now are revising that estimate as a result of using updated information 
for our most recently ended fiscal year that ended after we issued the 
proposing release and submitted the related request to OMB.\210\ Our 
new estimate is that, as a result of the amendments, an additional 
19,300 respondents will file a Form ID each year and, consequently, 
will cause

[[Page 10611]]

an additional burden of 2895 hours.\211\ Accordingly, we have withdrawn 
the request we submitted to OMB and plan to replace it with a new 
request.
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    \210\ Also after we issued the proposing release and submitted 
the related request to OMB, we obtained slight corrections to the 
fiscal year 2006 data we provided in the proposing release and 
request. The corrected data for fiscal year 2006 is that 16,879 
companies made 25,717 Form D filings and, of these companies, 15,969 
(94.6%) did not report under the Exchange Act and 910 (5.4%) did 
report under the Exchange Act. If we had calculated the estimate in 
the proposing release using the corrected figures for fiscal year 
2006, we would have estimated that, as a result of the proposed 
amendments, an additional 18,700 respondents would file a Form ID 
each year and, as a result, would cause an additional burden of 2805 
hours.
    \211\ We arrived at our revised estimate that an additional 
19,300 respondents would file a Form ID each year based on the 
following information and analysis. In fiscal year 2007, 17,519 
companies made 27,843 Form D filings. Of these companies, 16,655 
(95.1%) did not report under the Exchange Act and 864 (4.9%) did 
report under the Exchange Act. The annual number of Form D filings 
rose from 17,390 in fiscal year 2002 to 27,843 in fiscal year 2007 
for an average increase of approximately 2100 Form D filings per 
year. Assuming the number of Form D filings continues to increase by 
2100 filings per year for each of the next three years, the average 
number of Form D filings in each of the next three years would be 
about 32,100. Assuming that the ratio of the number of companies 
that make a Form D filing to the number of Form D filings in fiscal 
year 2007 remains constant over the next three years, an average of 
about 20,200 companies would make Form D filings in each of the next 
three years. Assuming also that the ratio between the number of non-
reporting and reporting companies under the Exchange Act that made 
Form D filings in fiscal year 2007 remains constant over the next 
three years, an average of about 19,300 non-reporting and 900 
reporting companies would make Form D filings in each of the next 
three years. Assuming further that all non-reporting companies that 
would make a Form D filing would not already have EDGAR access codes 
and, as a result, would be required to file a Form ID, the number of 
companies that would need to file a Form ID as a result of the 
amendments would on average be about 19,300 per year over the next 
three years. Because each Form ID filing is estimated to require .15 
hours, the total additional burden would, on average, be about 2895 
hours per year over the next three years (19,300 Forms ID x .15 
hours per Form ID). We consider the average number of Form ID 
filings expected to be made per year over the next three years 
because the PRA requires that our estimates represent the average 
yearly burden over a three-year period.
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    Consistent with our belief that the variations between what we 
expressly proposed and what we adopted will not affect the number of 
Forms D filed, we believe that the variations will not affect our 
estimate of the Form ID collection of information burden.

C. Comments on Collection of Information Burdens

    We solicited comment in the proposing release on the PRA estimates 
we provided there and we solicit comment on the revised estimates we 
now provide in this release.
    One commenter expressly addressed our PRA estimate of the amount of 
the estimated burden per response for Form ID and that commenter \212\ 
and another commenter \213\ expressed concern about the potential 
burdens resulting from the requirement to file Form ID in order to 
obtain the access codes necessary to file a Form D on EDGAR. The 
commenter that expressly addressed our PRA estimate of .15 hours per 
response for Form ID stated that the estimate is not consistent with 
the experiences of several members of the committees that together 
provided the comment. We are not aware of respondents generally 
incurring response time in excess of our estimate of .15 hours per 
response for Form ID and continue to believe the estimate to be 
appropriate. We acknowledge the general concerns with the Form ID 
process but we believe it should be required for Form D filers as it is 
for other filers on EDGAR.
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    \212\ See letter from ABA (focusing particularly on the burden 
on non-reporting companies).
    \213\ See letter from Stephen A. Marcus.
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    We believe that the new online system should be as secure as our 
EDGAR system in general because it will be a part of the EDGAR system 
and, as such, its filings will be disseminated on EDGAR and displayed 
on the Commission's public Web site. In order to achieve that uniform 
degree of security, we believe it is appropriate to require issuers 
that seek to file Form D to complete the same Form ID authentication 
process to obtain the same access codes as those persons or entities 
who seek to file with the Commission for many other reasons.
    We solicit comment on the expected PRA effects of the amendments, 
including the following:
     The accuracy of our estimates of the additional burden 
hours that will result from adoption of the amendments;
     Whether the adopted changes to the collections of 
information are necessary for the proper performance of the functions 
of the Commission, including whether the information will have 
practical utility;
     Ways to enhance the quality, utility and clarity of the 
information to be collected;
     Ways to minimize the burden of the collections of 
information on those who respond, including through the use of 
automated collection techniques or other forms of information 
technology; and
     Any effects of the amendments on any other collections of 
information not previously identified.
    Any member of the public may direct to us any comments concerning 
these burden estimates and suggestions for reducing the burdens. 
Persons submitting comments on the collection of information 
requirements should direct their comments to the OMB, Attention: Desk 
Officer for the Securities and Exchange Commission, Office of 
Information and Regulatory Affairs, Washington, DC 20503, and send a 
copy of the comments to Nancy M. Morris, Secretary, Securities and 
Exchange Commission, 100 F Street, NE., Washington, DC 20549-9303, with 
reference to File No. S7-12-07. Requests for materials submitted to OMB 
by the Commission with regard to these collections of information 
should be in writing, refer to File No. S7-12-07, and be submitted to 
the Securities and Exchange Commission, 100 F Street, NE., Washington, 
DC 20549. OMB is required to make a decision concerning the collection 
of information between 30 and 60 days after publication of this 
release. Consequently, a comment to OMB is best assured of having its 
full effect if OMB receives it within 30 days of publication.

V. Cost-Benefit Analysis

A. Background

    As proposed, the adopted amendments restructure the information 
required by Form D and mandate the electronic filing of Form D 
information after a period of time during which electronic filing is 
voluntary. Currently, much of the information required by Form D 
appears to be useful and justified in the interests of investor 
protection and capital formation. It also appears that some useful 
information that could be required by Form D is not required currently. 
On the other hand, Form D currently requires some information that may 
no longer be useful. Our staff receives many inquiries from market 
participants suggesting that Form D could be clarified and simplified. 
Moreover, the absence of an electronic system for filing Form D 
information prevents issuers from filing through efficient modern 
methods and limits the usefulness of the information collected on Form 
D. The rules we adopt today address deficiencies in the Form D data 
collection requirements and process. We expect that the amendments, in 
general, will provide benefits by clarifying, simplifying and updating 
the information requirements of Form D and modernizing the related 
information capture process.
    We solicited comment on the expected benefits and costs and on any 
others that may result from adoption of the proposed changes as well as 
suggested alternatives. We also requested that commenters provide 
empirical data and other factual support for their views to the extent 
possible. No commenter expressly addressed the cost-benefit analysis in 
the proposing release but some commenters cited benefits consistent 
with those described immediately above in the course of making a 
variety of suggestions and observations. We discuss these comments 
throughout the release as applicable.\214\
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    \214\ As to benefits, for example, we noted that one commenter 
stated that if one-stop filing were implemented properly, it would 
reduce significantly the costs and burdens of preparing and filing 
Form D with the Commission and the states. See letter from ABA. As 
to costs, for example, we noted that the same commenter stated that 
the absence of a saving feature in the Form D filing system would 
virtually require that a careful filer prepare a Form D offline on a 
specially created template and then input all the information online 
and, as a result, would risk inputting incorrect information and 
waste time and money.

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[[Page 10612]]

B. Benefits

    We expect the amendments to benefit issuers, regulators and members 
of the public. In particular, the amendments should:
     Ease filing burdens;
     Result in better public availability of Form D 
information;
     Enhance the utility of Form D as a means to promote 
federal and state uniformity and coordination; and
     Improve collection of data for Commission enforcement and 
rulemaking efforts.
    The amendments should ease filing burdens because filers should 
find it easier to respond to the revised information requirements of 
Form D.\215\ It should be easier to respond to the revised information 
requirements of Form D because they would be clarified, simplified and 
updated. It should be easier to file the responsive information because 
issuers will be able to use efficient modern methods of information 
transfer through electronic filing. Issuers will provide the 
information in data fields by responding to a series of discrete 
requests for information. The fields will be checked automatically for 
appropriate characters and consistency with other fields and the 
questions will be accompanied by links to clear instructions, 
definitions, and other helpful information. These system features, 
among others, should help to facilitate a relatively easy-to-use filing 
process that will deliver accurate information quickly, reliably, and 
securely.
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    \215\ Although we believe it will be easier to respond to the 
revised information requirements of Form D, as discussed in Part IV 
regarding the PRA, we believe the overall collection of information 
burden of Form D will remain approximately the same as it is today.
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    Electronic filing of Form D information will result in increased 
availability of Form D information for regulators and members of the 
public. The information will be available on our Web site and, because 
the Form D filing system will automatically capture and tag data items, 
the data will be interactive and searchable. Our Web site will enable 
users to view the information in an easy-to-read format, download the 
information into an existing application, or create an application to 
use the information. Unlike information filed with us electronically, 
paper filings are available from us only in person in our Public 
Reference Room or by means of a mail request. We charge a nominal fee 
for copies of Form D filings. Some Form D filings are available at 
higher cost through private vendors over the Internet and through 
telephone requests.
    For over 20 years, Form D has served as a means to promote federal 
and state uniformity and coordination in securities regulation by 
providing a uniform notification form that can be filed with the 
Commission and with state securities regulators. The contemplated 
electronic filing system for Form D information will continue that 
tradition and can enhance the utility of Form D as a means to promote 
uniformity and coordination between federal and state securities 
regulation.
    The availability of Form D information filed with us through a 
searchable electronic database will enable both federal and state 
securities regulators to monitor the exempt securities transaction 
markets more effectively. The system also will permit improved 
coordination among federal and state regulators, which is essential to 
efficient and effective capital formation through exempt transactions, 
especially by smaller companies, and to investor protection. State 
securities regulators will be able to access the information on our Web 
site to learn if new Form D information of interest to them has been 
filed.
    The system will enhance uniformity and coordination even more if it 
results in ``one-stop filing,'' as we and NASAA are exploring. One-stop 
filing will enable companies to file Form D information both with us 
and with the states they designate in one electronic transaction. While 
that capability will not be available when Form D electronic filing 
with the Commission begins, we have been working actively with NASAA to 
achieve that capability as soon as practicable. We understand that 
NASAA is considering establishing its own new electronic system that 
would interface with our system and would receive filings and collect 
fees on behalf of participating state securities regulators.\216\ One-
stop filing will reduce significantly the costs and burdens of 
preparing and filing Form D information with the Commission and with 
state securities regulators. This could represent a substantial savings 
for small businesses and others filing Form D information.
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    \216\ The Commission's electronic filing system will not collect 
fees on behalf of any states.
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    The conversion to electronic filing of Form D information through 
the Internet in an interactive data format will result in creation of a 
database of Form D information that will allow us and others to better 
aggregate data on the private and limited offering securities markets 
and the use of the various Regulation D exemptions. Further, the 
software we will use for the Form D electronic filings will require 
that filers address each required data field in the form, thus reducing 
incomplete filings. Because of these and other features, our Form D 
electronic filing system should assist in our enforcement efforts and 
ease our ability to make use of filed Form D information. The Form D 
information database will allow us to better evaluate our exemptive 
schemes on a continuing basis in order to facilitate capital formation 
in a manner consistent with investor protection. The evaluation could 
lead to improvements that would result in significant benefits to 
companies that rely on the Regulation D exemptions, especially smaller 
companies, as well as benefits to investors.

C. Costs

    We expect that the amendments will result in some initial and 
ongoing costs to issuers. We also expect, however, that many issuers 
will not bear the full range of costs that may result from the 
amendments for the reasons described below.
    Initial costs will be associated with filing a Form ID in order to 
obtain the access codes needed to file Form D information 
electronically and otherwise preparing to make an initial filing of 
Form D information.\217\ To file a Form ID, an issuer must learn the 
related electronic filing requirements, obtain access to a computer and 
the Internet, use the computer to access the Commission's EDGAR Filer 
Management Web site, respond to Form ID's information requirements and 
fax to the Commission a notarized authenticating document.\218\ 
Similarly,

[[Page 10613]]

in order otherwise to prepare to make an initial electronic filing of 
Form D information, an issuer must learn about the revised Form D 
information content and electronic filing requirements, obtain access 
to a computer and the Internet, use the computer to access the Form D 
filing system and respond to Form D's information requirements.
---------------------------------------------------------------------------

    \217\ Issuers that already have EDGAR access codes would not 
need to file a Form ID. As further discussed in Part IV, however, we 
assume that about 95% of Form D filers do not already have the 
codes.
    \218\ As discussed in Part IV regarding the PRA, the Commission 
estimates that approximately 46,400 respondents file Form ID each 
year at an estimated burden of .15 hours per response, all of which 
is borne internally by the respondent, for a total annual burden of 
6960 hours. As also discussed in Part IV, we expect that the 
amendments will cause an additional 19,300 respondents to file a 
Form ID each year and, as a result, cause an additional annual 
burden of 2895 hours. Assuming a cost of $175 per hour for in-house 
professional staff, we estimate the current Form ID burden cost at 
$1,218,000 per year (6960 hours per year x $175 per hour), the 
additional Form ID burden cost resulting from adoption of the 
amendments at $506,625 per year (2895 hours per year x $175 per 
hour) and the total Form ID burden cost that will result from adding 
the estimated additional Form ID burden cost to the estimated 
current Form ID burden cost will be $1,724,625 per year ((6960 hours 
per year + 2895 hours per year) = 9855 hours per year; 9855 hours 
per year x $175 per hour = $1,724,625 per year).
---------------------------------------------------------------------------

    Ongoing costs are those associated with maintaining the framework 
developed through the initial costs (for example, updating information 
required by Form ID) and additional costs arising from each subsequent 
filing of Form D information.
    We expect that the vast majority of issuers will incur few, if any, 
additional costs related to obtaining computer and Internet access. We 
believe that the vast majority of issuers already will have access to a 
computer and the Internet.\219\
---------------------------------------------------------------------------

    \219\ A person from an issuer that does not already own a 
computer with Internet access may, for example, go to a public 
library to use its computer and obtain Internet access.
---------------------------------------------------------------------------

VI. Consideration of Impact on Competition and Promotion of Efficiency, 
Competition and Capital Formation

    Section 23(a)(2) of the Exchange Act \220\ requires us, when 
adopting rules under the Exchange Act, to consider the impact that any 
new rule would have on competition. In addition, Section 23(a)(2) 
prohibits us from adopting any rule that would impose a burden on 
competition not necessary or appropriate in furtherance of the purposes 
of the Exchange Act. Furthermore, Section 2(b) of the Securities 
Act,\221\ Section 3(f) of the Exchange Act,\222\ and Section 2(c) of 
the Investment Company Act \223\ require us, when engaged in rulemaking 
where we are required to consider or determine whether an action is 
necessary or appropriate in the public interest, to consider, in 
addition to the protection of investors, whether the action will 
promote efficiency, competition and capital formation.
---------------------------------------------------------------------------

    \220\ 15 U.S.C. 78w(a)(2).
    \221\ 15 U.S.C. 77b(b).
    \222\ 15 U.S.C. 78c(f).
    \223\ 15 U.S.C. 80a-2(c).
---------------------------------------------------------------------------

    The amendments will restructure and mandate the electronic filing 
of the information required by Form D after a period of time during 
which electronic filing is voluntary. We believe the amendments, in 
general, will provide benefits by clarifying, simplifying and updating 
the information requirements of Form D and modernizing the related 
information capture process. In particular, as discussed in further 
detail above, the amendments should:
     Ease filing burdens;
     Result in better public availability of Form D 
information;
     Enhance the utility of Form D as a means to promote 
federal and state uniformity and coordination; and
     Improve collection of data for Commission enforcement and 
rulemaking efforts.
    We understand that private sector businesses currently make Form D 
information available to the public for a fee. Although the ready 
accessibility of this information at no cost will affect these 
businesses, we believe that the interactive online system used for Form 
D information will not discourage the development by private sector 
businesses of additional features that the new online system will not 
provide. Consequently, we believe that the amendments will not have a 
burden on competition that is not necessary or appropriate and might 
promote competition in providing Form D information through additional 
features including those related to the tagged data aspect of the 
system.
    Eased filing burdens and better public availability of Form D 
information should promote efficiency. For example, the online system 
will enable issuers to provide Form D information with modern, rapid 
and accurate methods and will enable users of the system to access Form 
D information more quickly and easily than through a review of paper 
documents.
    Improved collection of data for Commission enforcement and 
rulemaking efforts resulting from the amendments will create a Form D 
information database that will allow us to better evaluate our 
exemptive schemes on a continuing basis in order to facilitate capital 
formation in a manner consistent with investor protection and the 
evaluation may lead to improvements that will promote our capital 
markets. Similarly, the enhanced utility of Form D as a means to 
promote federal and state uniformity and coordination resulting from 
the amendments, and in the future, ``one-stop'' filing as we and NASAA 
are exploring, should lead to improved coordination which will promote 
capital formation.
    In the proposing release, we considered the amendments in light of 
the standards set forth in the above statutory sections. We requested 
comment on whether the proposed amendments, if adopted, would impose a 
burden on competition or promote efficiency, competition and capital 
formation. No commenter expressly addressed competition. Commenters 
generally addressed issues relating to the content and mandated 
electronic filing of information required by Form D. As a result, the 
comments generally related to efficiency and capital formation. We 
discuss these comments throughout this release, as applicable.

VII. Final Regulatory Flexibility Act Analysis

    This Final Regulatory Flexibility Analysis has been prepared in 
accordance with 5 U.S.C. 603. It relates to amendments regarding the 
content and mandated electronic filing of information required by Form 
D.

A. Reasons for, and Objectives of, the Adopted Amendments

    The primary purpose of the amendments adopted is to clarify, 
simplify and update the information requirements of Form D and 
modernize the related information capture process. Currently, much of 
the information required by Form D appears to be useful and justified 
in the interests of investor protection and capital formation. It also 
appears that some useful information that could be required by Form D 
is not required currently. On the other hand, Form D currently requires 
some information that may no longer be useful. Our staff receives many 
inquiries from market participants suggesting that Form D could be 
clarified and simplified. Moreover, the absence of an electronic system 
for filing Form D information prevents issuers from filing through 
efficient modern methods and limits the usefulness of the information 
collected on Form D. We believe the amendments, in general, will 
address the deficiencies in the Form D data collection process by 
clarifying, simplifying and updating the information requirements of 
Form D and modernizing the related information capture process.

B. Significant Issues Raised by Public Comment

    The Initial Regulatory Flexibility Act Analysis (``IRFA'') appeared 
in the proposing release. We requested comment on any aspect of the 
IRFA, including the number of small entities that would be affected by 
the proposals, the nature of the impact, and how to

[[Page 10614]]

quantify the impact of the proposals. No commenter responded to the 
request.

C. Small Entities Subject to the Amendments

    The amendments will affect issuers that are small entities. 
Exchange Act Rule 0-10(a) \224\ defines an issuer, other than an 
investment company, to be a ``small business'' or ``small 
organization'' for purposes of the Regulatory Flexibility Act if it had 
total assets of $5 million or less on the last day of its most recent 
fiscal year.\225\ Investment Company Act Rule 0-10(a) defines an 
investment company as a ``small business'' or ``small organization'' 
for purposes of the Regulatory Flexibility Act if it, together with 
other investment companies in the same group of related investment 
companies, had net assets of $50 million or less as of the end of its 
most recent fiscal year.\226\ The amendments will apply to all issuers 
that file Form D.
---------------------------------------------------------------------------

    \224\ 17 CFR 240.0-10(a).
    \225\ Securities Act Rule 157(a) [17 CFR 230.157(a)] generally 
defines an issuer, other than an investment company, to be a ``small 
business'' or ``small entity'' for purposes of the Regulatory 
Flexibility Act if it had total assets of $5 million or less on the 
last day of its most recent fiscal year and it is conducting or 
proposing to conduct a securities offering of $5 million or less. 
For purposes of our analysis of issuers other than investment 
companies in this Part VII of the release, however, we use the 
Exchange Act definition of ``small business'' or ``small entity'' 
because that definition includes more issuers than does the 
Securities Act definition and, as a result, assures that the 
definition we use would not itself lead to an understatement of the 
impact of the amendments on small entities.
    \226\ 17 CFR 270.0-10(a).
---------------------------------------------------------------------------

    As previously noted, in fiscal year 2007, 17,519 issuers made Form 
D filings. We believe that many of these issuers are small entities but 
currently we do not collect information on total assets to determine if 
they are small entities for purposes of this analysis.

D. Projected Reporting, Recordkeeping and Other Compliance Requirements

    Before the effective date of the rule and form amendments adopted 
in this release, issuers must file Form D information in paper. The 
amendments will require all issuers, including small entities, to 
submit somewhat different Form D information online using the Internet 
after a phase-in period during which electronic filing is optional. All 
issuers filing electronically will need to file a Form ID 
electronically to obtain the access codes needed to use the Form D 
filing system if they do not already have the codes.\227\ The only 
additional professional skills required will be those required to file 
electronically.\228\
---------------------------------------------------------------------------

    \227\ As further discussed in Part IV, however, we assume that 
about 95% of Form D filers will not already have the codes.
    \228\ Although we believe it will be easier to respond to the 
revised information requirements of Form D, as discussed in Part IV, 
we believe the overall collection of information burden of the form 
will remain approximately the same.
---------------------------------------------------------------------------

    We expect that filing electronically will increase initial and 
ongoing costs incurred by some small entities. We also expect, however, 
that many small entities will not bear the full range of costs that 
will result from the amendments for the reasons described below.
    Initial costs are those associated with filing a Form ID in order 
to obtain the access codes needed to file Form D information 
electronically and otherwise preparing to make an initial filing of 
Form D information. To file a Form ID, an issuer must learn the related 
electronic filing requirements, obtain access to a computer and the 
Internet, use the computer to access the Commission's EDGAR Filer 
Management Web site, respond to Form ID's information requirements and 
fax to the Commission a notarized authenticating document.\229\ 
Similarly, in order otherwise to prepare to make an initial electronic 
filing of Form D information, an issuer must learn about the revised 
Form D information content and electronic filing requirements, obtain 
access to a computer and the Internet, use the computer to access the 
Form D filing system and respond to Form D's information requirements.
---------------------------------------------------------------------------

    \229\ As discussed in Part IV, the Commission has estimated the 
collection of information burden of Form ID as .15 hours per 
response, all of which is borne internally by the respondent.
---------------------------------------------------------------------------

    Ongoing costs are those associated with maintaining the framework 
developed through the initial costs (for example, updating information 
required by Form ID) and additional costs arising from each subsequent 
filing of Form D information.
    We expect that the vast majority of small entities will need to 
incur few, if any, additional costs related to obtaining computer and 
Internet access. We believe that the vast majority of small entities 
already will have access to a computer and the Internet.\230\
---------------------------------------------------------------------------

    \230\ A person from a small entity that does not already own a 
computer with Internet access can, for example, go to a public 
library to use its computer and obtain Internet access.
---------------------------------------------------------------------------

E. Agency Action To Minimize Effect on Small Entities

    The Regulatory Flexibility Act directs us to consider significant 
alternatives that would accomplish our stated objectives, while 
minimizing any significant adverse impact on small entities. In 
connection with the amendments, we considered the following 
alternatives:
     Establishing different compliance or reporting 
requirements or timetables that take into account the resources 
available to small entities;
     Further clarifying, consolidating or simplifying the 
requirements;
     Using performance rather than design standards; and
     Providing an exemption from the adopted requirements, or 
any part of them, for small entities.
    We believe that, as to small entities, differing compliance, 
reporting or timetable requirements, a partial or complete exemption 
from the requirements or the use of performance rather than design 
standards would be inappropriate because these approaches would detract 
from the completeness and uniformity of the Form D database and, as a 
result, reduce the expected benefits of better public availability of 
Form D information, enhanced utility of Form D as a means to promote 
federal and state uniformity, and improved collection of data for 
Commission enforcement and rulemaking efforts. Further, we believe the 
adopted Form D filing system will be relatively easy to use.
    We considered further clarifying, consolidating or simplifying the 
adopted Form D information and electronic filing requirements. During 
2003, the Commission's Office of Small Business Policy (OSBP) reviewed 
the types of errors, omissions, and misstatements more commonly found 
in Form D filings as well as the types of questions typically received 
through phone calls from the public associated with the form. We also 
have considered the electronic filing requirements related to Exchange 
Act Forms 3, 4 and 5, the manner in which their online filing system 
has operated and the suitability of that system as a model for the 
online system for Form D information. Based in part on OSBP's review 
and our consideration of the electronic filing of Forms 3, 4 and 5, we 
believe that the adopted Form D information and electronic filing 
requirements are clear and straightforward.
    We solicited comment on whether differing compliance, reporting or 
timetable requirements, a partial or complete exemption, or the use of 
performance rather than design standards would be consistent with our 
described main goal of addressing deficiencies in the Form D data 
collection process. We also solicited comment on the availability of 
technology to complete Form D online and whether public companies 
should

[[Page 10615]]

be phased in to mandated electronic Form D filing sooner than private 
companies. No commenter responded to these requests. As discussed 
previously in this release, however, we are providing a period during 
which issuers, regardless of size, will have the option of filing 
electronically or in paper.

VIII. Statutory Basis and Text of Amendments

    We are adopting the amendments this release describes under the 
authority in sections 2(a), 3(b), 4(2), 19(a), 19(d), and 28 of the 
Securities Act,\231\ sections 3(b), 23(a), and 35A of the Exchange 
Act,\232\ section 319(a) of the Trust Indenture Act,\233\ and section 
38 of the Investment Company Act.\234\
---------------------------------------------------------------------------

    \231\ 15 U.S.C. 77b(a), 77c(b), 77d(2), 77s(a), 77s(d), and 77z-
3.
    \232\ 15 U.S.C. 78c(b), 78w(a), and 78ll.
    \233\ 15 U.S.C. 77sss(a).
    \234\ 15 U.S.C. 80a-37.
---------------------------------------------------------------------------

List of Subjects in 17 CFR Parts 230, 232 and 239

    Reporting and recordkeeping requirements, Securities.

Text of Amendments

0
For the reasons set out in the preamble, we amend Title 17, Chapter II 
of the Code of Federal Regulations as follows:

PART 230--GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933

0
1. The authority citation for Part 230 continues to read in part as 
follows:

    Authority: 15 U.S.C. 77b, 77c, 77d, 77f, 77g, 77h, 77j, 77r, 
77s, 77z-3, 77sss, 78c, 78d, 78j, 78l, 78m, 78n, 78o, 78t, 78w, 
78ll(d), 78mm, 80a-8, 80a-24, 80a-28, 80a-29, 80a-30, and 80a-37, 
unless otherwise noted.
* * * * *

0
2. Amend Sec.  230.502 by revising paragraph (c) to read as follows:


Sec.  230.502  General conditions to be met.

* * * * *
    (c) Limitation on manner of offering. Except as provided in Sec.  
230.504(b)(1), neither the issuer nor any person acting on its behalf 
shall offer or sell the securities by any form of general solicitation 
or general advertising, including, but not limited to, the following:
    (1) Any advertisement, article, notice or other communication 
published in any newspaper, magazine, or similar media or broadcast 
over television or radio; and
    (2) Any seminar or meeting whose attendees have been invited by any 
general solicitation or general advertising; Provided, however, that 
publication by an issuer of a notice in accordance with Sec.  230.135c 
or filing with the Commission by an issuer of a notice of sales on Form 
D (17 CFR 239.500) in which the issuer has made a good faith and 
reasonable attempt to comply with the requirements of such form, shall 
not be deemed to constitute general solicitation or general advertising 
for purposes of this section; Provided further, that, if the 
requirements of Sec.  230.135e are satisfied, providing any journalist 
with access to press conferences held outside of the United States, to 
meetings with issuer or selling security holder representatives 
conducted outside of the United States, or to written press-related 
materials released outside the United States, at or in which a present 
or proposed offering of securities is discussed, will not be deemed to 
constitute general solicitation or general advertising for purposes of 
this section.
* * * * *

0
3. Add Sec.  230.503T to read as follows:


Sec.  230.503T  Filing of notice of sales.

    Note to Rule 503T: This is a special temporary section that 
applies instead of Sec.  230.503 only to issuers that file with the 
Commission a notice on Temporary Form D (17 CFR 239.500T) or Form D 
(17 CFR 239.500) or an amendment to such a notice in paper format on 
or after September 15, 2008 but before March 16, 2009.

    (a) An issuer offering or selling securities in reliance on Sec.  
230.504, Sec.  230.505, or Sec.  230.506 shall file with the Commission 
at its principal office at 100 F Street, NE., Washington, DC 20549 two 
copies in paper format of a notice on Temporary Form D (17 CFR 
239.500T) or Form D (17 CFR 239.500) in paper format no later than 15 
days after the first sale of securities.
    (b) One copy of every notice on Form D shall be manually signed by 
a person duly authorized by the issuer.
    (c) If sales are made under Sec.  230.505 and the issuer files 
Temporary Form D (17 CFR 239.500T), the filing shall contain an 
undertaking by the issuer to furnish the Commission, upon the written 
request of its staff, the information furnished by the issuer under 
Sec.  230.502(b)(2) to any purchaser that is not an accredited 
investor.
    (d) Amendments in paper format:
    (1) To the notices described in paragraphs (d)(1)(i) and (ii) of 
this section, must use Temporary Form D (17 CFR 239.500T) but need only 
report the issuer's name and the information required by Part C and any 
material change in the facts from those set forth in Parts A and B:
    (i) Notices filed before September 15, 2008; and
    (ii) Notices filed on or after September 15, 2008 in paper format 
under paragraph (a) of this Sec.  230.503T using Temporary Form D (17 
CFR 239.500T).
    (2) To a notice filed in paper or electronic format on or after 
September 15, 2008 using Form D (17 CFR 239.500), must use Form D (17 
CFR 239.500) and comply with Sec.  230.503 regarding when an amendment 
can or must be filed and what an amendment must contain.
    (e) A notice on Form D shall be considered filed with the 
Commission under paragraph (a) of this section:
    (1) As of the date on which it is received at the Commission's 
principal office in Washington, DC; or
    (2) As of the date on which the notice is mailed by means of United 
States registered or certified mail to the Commission's principal 
office in Washington, DC, if the notice is delivered to such office 
after the date on which it is required to be filed.
    (f) This temporary Sec.  230.503T and accompanying note will expire 
on March 16, 2009.

0
4. Revise Sec.  230.503 to read as follows:


Sec.  230.503  Filing of notice of sales.

    (a) When notice of sales on Form D is required and permitted to be 
filed.
    (1) An issuer offering or selling securities in reliance on Sec.  
230.504, Sec.  230.505, or Sec.  230.506 must file with the Commission 
a notice of sales containing the information required by Form D (17 CFR 
239.500) for each new offering of securities no later than 15 calendar 
days after the first sale of securities in the offering, unless the end 
of that period falls on a Saturday, Sunday or holiday, in which case 
the due date would be the first business day following.
    (2) An issuer may file an amendment to a previously filed notice of 
sales on Form D at any time.
    (3) An issuer must file an amendment to a previously filed notice 
of sales on Form D for an offering:
    (i) To correct a material mistake of fact or error in the 
previously filed notice of sales on Form D, as soon as practicable 
after discovery of the mistake or error;
    (ii) To reflect a change in the information provided in the 
previously filed notice of sales on Form D, as soon as practicable 
after the change, except that no amendment is required to reflect a 
change that occurs after the offering terminates or a change that 
occurs solely in the following information:
    (A) The address or relationship to the issuer of a related person 
identified in

[[Page 10616]]

response to Item 3 of the notice of sales on Form D;
    (B) An issuer's revenues or aggregate net asset value;
    (C) The minimum investment amount, if the change is an increase, or 
if the change, together with all other changes in that amount since the 
previously filed notice of sales on Form D, does not result in a 
decrease of more than 10%;
    (D) Any address or state(s) of solicitation shown in response to 
Item 12 of the notice of sales on Form D;
    (E) The total offering amount, if the change is a decrease, or if 
the change, together with all other changes in that amount since the 
previously filed notice of sales on Form D, does not result in an 
increase of more than 10%;
    (F) The amount of securities sold in the offering or the amount 
remaining to be sold;
    (G) The number of non-accredited investors who have invested in the 
offering, as long as the change does not increase the number to more 
than 35;
    (H) The total number of investors who have invested in the 
offering; or
    (I) The amount of sales commissions, finders' fees or use of 
proceeds for payments to executive officers, directors or promoters, if 
the change is a decrease, or if the change, together with all other 
changes in that amount since the previously filed notice of sales on 
Form D, does not result in an increase of more than 10%; and
    (iii) Annually, on or before the first anniversary of the filing of 
the notice of sales on Form D or the filing of the most recent 
amendment to the notice of sales on Form D, if the offering is 
continuing at that time.
    (4) An issuer that files an amendment to a previously filed notice 
of sales on Form D must provide current information in response to all 
requirements of the notice of sales on Form D regardless of why the 
amendment is filed.
    (b) How notice of sales on Form D must be filed and signed.
    (1) A notice of sales on Form D must be filed with the Commission 
in electronic format by means of the Commission's Electronic Data 
Gathering, Analysis, and Retrieval System (EDGAR) in accordance with 
EDGAR rules set forth in Regulation S-T (17 CFR Part 232).
    (2) Every notice of sales on Form D must be signed by a person duly 
authorized by the issuer.

PART 232--REGULATION S-T--GENERAL RULES AND REGULATIONS FOR 
ELECTRONIC FILINGS

0
5. The authority citation for Part 232 continues to read in part as 
follows:

    Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s(a), 77z-3, 
77sss(a), 78c(b), 78l, 78m, 78n, 78o(d), 78w(a), 78ll, 80a-6(c), 
80a-8, 80a-29, 80a-30, 80a-37, and 7201 et seq.; and 18 U.S.C. 1350.
* * * * *

0
6. Amend Sec.  232.100 by revising paragraph (a) to read as follows:


Sec.  232.100  Persons and entities subject to mandated electronic 
filing.

* * * * *
    (a) Registrants and other entities whose filings are subject to 
review by the Division of Corporation Finance;
* * * * *

0
7. Amend Sec.  232.101 by:
0
a. Removing the word ``and'' at the end of paragraph (a)(1)(xi);
0
b. Removing the period and adding ``; and'' at the end of paragraph 
(a)(1)(xii);
0
c. Adding paragraph (a)(1)(xiii);
0
d. Removing the word ``and'' at the end of paragraph (b)(8)(ii);
0
e. Removing the period and adding ``; and'' at the end of paragraph 
(b)(9);
0
f. Adding paragraph (b)(10); and
0
g. Removing ``, Regulation D (Sec. Sec.  230.501-230.506 of this 
chapter)'' from paragraph (c)(6).
    The added paragraphs read as follows:


Sec.  232.101  Mandated electronic submissions and exceptions.

    (a) * * *
    (1) * * *
    (xiii) Form D (Sec.  239.500 of this chapter).
* * * * *
    (b) * * *
    (10) Form D (Sec.  239.500 of this chapter) but this temporary 
Sec.  232.101(b)(10) will expire on March 16, 2009.
* * * * *

0
8. Amend Sec.  232.104 by revising paragraph (a) to read as follows:


Sec.  232.104  Unofficial PDF copies included in an electronic 
submission.

    (a) An electronic submission, other than a Form 3 (Sec.  249.103 of 
this chapter), a Form 4 (Sec.  249.104 of this chapter), a Form 5 
(Sec.  249.105 of this chapter), a Form ID (Sec. Sec.  239.63, 249.446, 
269.7 and 274.402 of this chapter), a Form TA-1 (Sec.  249.100 of this 
chapter), a Form TA-2 (Sec.  249.102 of this chapter), a Form TA-W 
(Sec.  249.101 of this chapter) or a Form D (Sec.  239.500 of this 
chapter), may include one unofficial PDF copy of each electronic 
document contained within that submission, tagged in the format 
required by the EDGAR Filer Manual.
* * * * *

0
9. Amend Sec.  232.201 by revising paragraph (a) introductory text to 
read as follows:


Sec.  232.201  Temporary hardship exemption.

    (a) If an electronic filer experiences unanticipated technical 
difficulties preventing the timely preparation and submission of an 
electronic filing, other than a Form 3 (Sec.  249.103 of this chapter), 
a Form 4 (Sec.  249.104 of this chapter), a Form 5 (Sec.  249.105 of 
this chapter), a Form ID (Sec. Sec.  239.63, 249.446, 269.7 and 274.402 
of this chapter), a Form TA-1 (Sec.  249.100 of this chapter), a Form 
TA-2 (Sec.  249.102 of this chapter), a Form TA-W (Sec.  249.101 of 
this chapter) or a Form D (Sec.  239.500 of this chapter), the 
electronic filer may file the subject filing, under cover of Form TH 
(Sec. Sec.  239.65, 249.447, 269.10 and 274.404 of this chapter), in 
paper format no later than one business day after the date on which the 
filing was to be made.
* * * * *

0
10. Amend Sec.  232.202 by revising paragraph (a) introductory text to 
read as follows:


Sec.  232.202  Continuing hardship exemption.

    (a) An electronic filer may apply in writing for a continuing 
hardship exemption if all or part of a filing or group of filings, 
other than a Form ID (Sec. Sec.  239.63, 249.446, 269.7 and 274.402 of 
this chapter) or a Form D (Sec.  239.500 of this chapter), otherwise to 
be filed in electronic format cannot be so filed without undue burden 
or expense. Such written application shall be made at least ten 
business days prior to the required due date of the filing(s) or the 
proposed filing date, as appropriate, or within such shorter period as 
may be permitted. The written application shall contain the information 
set forth in paragraph (b) of this section.
* * * * *

PART 239--FORMS PRESCRIBED UNDER THE SECURITIES ACT OF 1933

0
11. The authority citation for Part 239 continues to read in part as 
follows:

    Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77z-2, 77z-3, 
77sss, 78c, 78l, 78m, 78n, 78o(d), 78u-5, 78w(a), 78ll, 78mm, 80a-
2(a), 80a-3, 80a-8, 80a-9, 80a-10, 80a-13, 80a-24, 80a-26, 80a-29, 
80a-30, and 80a-37, unless otherwise noted.
* * * * *

0
12. Add Sec.  239.500T and Temporary Form D (referenced in Sec.  
239.500T) to read as follows:


Sec.  239.500T  Temporary Form D, notice of sales of securities under 
Regulation D and section 4(6) of the Securities Act of 1933.

    Note to Sec.  239.500T: This is a special temporary section that 
applies instead of Sec.  239.500 only to issuers that file with the 
Commission a notice on Temporary Form D (17 CFR 239.500T) or an 
amendment to such

[[Page 10617]]

a notice in paper format on or after September 15, 2008 but before 
March 16, 2009. During that period, an issuer also may file in paper 
format an initial notice using Form D (17 CFR 239.500) but, if it 
does, the issuer must file amendments using Form D (17 CFR 239.500) 
and otherwise comply with all the requirements of Sec.  230.503T.

    (a) Two copies of a notice on this form shall be filed with the 
Commission no later than 15 days after the first sale of securities in 
an offering under Regulation D (Sec. Sec.  230.501-230.508 of this 
chapter) or under section 4(6) of the Securities Act of 1933.
    (b) One copy of every notice on Form D shall be manually signed by 
a person duly authorized by the issuer.
    (c) When sales are made under Sec.  230.505, the notice shall 
contain an undertaking by the issuer to furnish to the Commission, upon 
the written request of its staff, the information furnished to non-
accredited investors.
    (d) Amendments to notices filed under paragraph (a) need only 
report the issuer's name and the information required by Part C and any 
material change in the facts from those set forth in Parts A and B.
    (e) A notice on Form D shall be considered filed with the 
Commission under paragraph (a) of this section:
    (1) As of the date on which it is received at the Commission's 
principal office in Washington, DC; or
    (2) As of the date on which the notice is mailed by means of United 
States registered or certified mail to the Commission's principal 
office in Washington, DC, if the notice is delivered to such office 
after the date on which it is required to be filed.
    (f) This temporary Sec.  239.500T and accompanying note will expire 
on March 16, 2009.

    Note: The text of Temporary Form D (referenced in Sec.  
239.500T) does not and this amendment will not appear in the Code of 
Federal Regulations.

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BILLING CODE 8011-01-C

0
13. Revise Sec.  239.500 and Form D (referenced in Sec.  239.500) to 
read as follows:


Sec.  239.500  Form D, notice of sales of securities under Regulation D 
and section 4(6) of the Securities Act of 1933.

    (a) When notice of sales on Form D must be filed.
    (1) An issuer offering or selling securities in reliance on Sec.  
230.504, Sec.  230.505, or Sec.  230.506 of this chapter or section 
4(6) of the Securities Act of 1933 must file with the Commission a 
notice of sales containing the information required by this form for 
each new offering of securities no later than 15 calendar days after 
the first sale of securities in the offering, unless the end of that 
period falls on a Saturday, Sunday or holiday, in which case the due 
date would be the first business day following.
    (2) An issuer may file an amendment to a previously filed notice of 
sales on Form D at any time.
    (3) An issuer must file an amendment to a previously filed notice 
of sales on Form D for an offering:
    (i) To correct a material mistake of fact or error in the 
previously filed notice of sales on Form D, as soon as practicable 
after discovery of the mistake or error;
    (ii) To reflect a change in the information provided in the 
previously filed notice of sales on Form D, as soon as practicable 
after the change, except that no amendment is required to reflect a 
change that occurs after the offering terminates or a change that 
occurs solely in the following information:
    (A) The address or relationship to the issuer of a related person 
identified in response to Item 3 of the notice of sales on Form D;
    (B) An issuer's revenues or aggregate net asset value;
    (C) The minimum investment amount, if the change is an increase, or 
if the change, together with all other changes in that amount since the 
previously filed notice of sales on Form D, does not result in a 
decrease of more than 10%;
    (D) Any address or state(s) of solicitation shown in response to 
Item 12 of the notice of sales on Form D;
    (E) The total offering amount, if the change is a decrease, or if 
the change, together with all other changes in that amount since the 
previously filed notice of sales on Form D, does not result in an 
increase of more than 10%;
    (F) The amount of securities sold in the offering or the amount 
remaining to be sold;
    (G) The number of non-accredited investors who have invested in the 
offering, as long as the change does not increase the number to more 
than 35;
    (H) The total number of investors who have invested in the 
offering;
    (I) The amount of sales commissions, finders' fees or use of 
proceeds for payments to executive officers, directors or promoters, if 
the change is a decrease, or if the change, together with all other 
changes in that amount since the previously filed notice of sales on 
Form D, does not result in an increase of more than 10%; and
    (iii) Annually, on or before the first anniversary of the filing of 
the notice of sales on Form D or the filing of the most recent 
amendment to the notice of sales on Form D, if the offering is 
continuing at that time.
    (4) An issuer that files an amendment to a previously filed notice 
of sales on Form D must provide current information in response to all 
requirements of the notice of sales on Form D regardless of why the 
amendment is filed.
    (b) How notice of sales on Form D must be filed and signed.
    (1) A notice of sales on Form D must be filed with the Commission 
in electronic format by means of the Commission's Electronic Data 
Gathering, Analysis, and Retrieval System (EDGAR) in accordance with 
EDGAR rules set forth in Regulation S-T (17 CFR Part 232).
    (2) Every notice of sales on Form D must be signed by a person duly 
authorized by the issuer.

    Note The text of Form D (referenced in Sec.  239.500) does not 
and this amendment will not appear in the Code of Federal 
Regulations.

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    Dated: February 6, 2008.

    By the Commission.
Nancy M. Morris,
Secretary.
 [FR Doc. E8-3545 Filed 2-26-08; 8:45 am]

BILLING CODE 8011-01-C
