32. What is the requirement to file “Form D”?
To claim an exemption from registering a securities issuance, the issuer must provide notice to the SEC of the issuance and claimed exemption. The entrepreneur provides notice by filing Form D with the SEC. Form D is currently filed in electronic format and must be filed within 15 days of the first sale of securities in the offering. The Form D is generally available through the SEC website (EDGAR). Form D makes basic disclosure about the issuance. This information includes the amount or value of the issuance and the names of company officers and directors.
• Note: The SEC disclosure requirement is less stringent than it sounds, as failure to file the Form D prior to the issuance will not hinder the ability of the issuer to claim an exemption. The negative side of failing to file is that, in the event of a challenge to the sale of securities, the SEC may stop the sale and deny the future use of exemptions due to the failure to file. Failure to file a Form D may also make it difficult for the issuer to comply with state securities laws.
• Discussion: Why do you think the SEC requires notification of a claimed exemption from registering a securities issuance? Based upon your conclusions, why do you think the failure to file Form D has very little negative repercussions?