NASAA Launches Online Filing System for State Form D Filings

On December 19, 2014, the North American Securities Administrators Association, Inc. (NASAA) launched its Electronic Filing Depository (EFD) for use in connection with state Form D filings required in Regulation D offerings under Rule 506 of the Securities Act of 1933, as amended.   The EFD is a multi-state electronic filing system that allows issuers to electronically submit a SEC Form D “Blue Sky” notice filing, and related filing fees, to participating state securities regulators to satisfy state securities law requirements related to Regulation D, Rule 506 offerings.

Rule 506 of Regulation D is a “safe harbor” from Securities Act registration requirements that issuers rely upon when undertaking private placements.  Issuers relying on the Rule 506 exemption do not have to register their offering with the SEC or state securities regulators, but they must file a Form D with the SEC electronically through the SEC’s EDGAR system. Additionally, in an offering under Rule 506 the issuer must satisfy state Blue Sky notice filing requirements, which often require filing a hard copy of the Form D, together with any related filing fees, to the state securities administrator in each state where the offering is conducted. The EFD system is designed to streamline this process by allowing issuers to file the Form D and pay related filing fees to applicable state regulators online.

For now, many state securities regulators have indicated that they will continue to permit issuers to file in hard copy if they choose, but some will require issuers to file electronically through EFD.   In addition to filing fees required by the states, when utilizing EFD the issuer must pay a $150 system use fee per offering.  This $150 fee covers the initial Form D filing, amendments and renewal filings for a particular offering.

Currently, the newly launched EFD system has limitations :

• The EFD System is Limited to Form D Filings: Although it is anticipated that the EFD system will be able to process additional state notice filings, for now the EFD’s functionality is limited to filing a Form D and paying a filing fee in connection with a Rule 506 offering. Because the EFD system currently does not permit an issuer to upload its own documents or provide information outside of the information required by a Form D, if a state’s applicable statutes or regulations require any additional filings or information in connection with Rule 506 notice filings (such as a consent to service of process or supplemental information about the securities being sold within the state), that information will still need to be provided directly to the state in hard copy.
• The EFD System is Not Available in All States: As of January 7, 2015, 37 states (including New Jersey, Maryland and Texas), the District of Columbia, Puerto Rico and the US Virgin Islands were participating in the EFD system. New York and Delaware are currently not among the states that are accepting filings through EFD.   States that accept filings through EFD must have their state securities administrators opt in, which may involve adopting new rules or legislation. NASAA has developed model rules to assist states in implementing such rules or legislation.

While still in its infancy with many limitations, the launch of the EFD is a step towards streamlining Blue Sky state notice filings for Rule 506 Offerings.