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SEC Form D for Private Real Estate Offerings

Dealing with the SEC can be intimidating, but knowing what to expect when filing a Form D Notice can make the process a little easier.


[Updated: Apr 15, 2021 ] Nov 22, 2020 by Kevin Vandenboss
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Crowdfunding has become one of the most common ways for real estate investors to raise capital for their deals. Depending on which rule in the securities laws an investor uses for their crowdfunding campaign, there are specific forms that must be filed with the Securities and Exchange Commission (SEC).

One of the most popular types of real estate equity crowdfunding, aRegulation D Exemption, requires the issuer to file SEC Form D. We'll take a look at what's included in Form D and when an investor is required to file it.

What is SEC Form D?

Form D is used to notify the SEC of an exempt offering of securities. Companies that have sold securities without registration under the Securities Act of 1933 by using a Regulation D exemption are required to file a notice with the SEC. This notice is filed with SEC Form D after the first sale of securities.

The Form D notice provides basic information on the company, the company's executive officers, the offering, and the types of securities being sold.

Filing SEC Form D

The SEC requires the Form D filing process to be done online through the EDGAR system. Companies that have not previously filed with the SEC have to apply for a central index key (CIK) number. This involves filling out and signing an application, having it notarized, then submitting it online.

Once you have your CIK number and EDGAR access code, you can begin the electronic filing process for your Form D notice. Your CIK number will also be used for any SEC filing you make for the company in the future.

Completing Form D

You'll need to gather some specific details when completing Form D. You should be fully prepared to complete the notice once you begin, because the process will time out after one hour of inactivity. We'll go through the information you'll be required to provide so you'll be ready once you start.

Issuer's Identity

Item 1 requires the name of the issuing company, the type of entity, any previous names, the jurisdiction where it's incorporated or organized, and when the company was organized.

Principal Place of Business and Contact Information

Item 2 asks for the company's physical address and telephone number. The address should be for the principal place of business. P.O. boxes or "in care of" addresses are not allowed. The phone number should be the best one to be able to reach the issuer.

Item 3 requires the names of each person with an executive or director role in the company. This can be any executive officer, director, general partner, managing member, or any person that plays a similar role. It also requires the names of anyone promoting the securities being offered.

Industry Group

Item 4 provides a list of industry groups to choose from. For real estate, the list includes commercial, construction, real estate investment trusts (REITs), and finance, residential, and other real estate. If your company falls into multiple categories, choose the one that accounts for the majority of the proceeds for the offering.

Issuer Size

Item 5 asks for the size of the issuing company to be provided in terms of revenue or net asset value range. Companies that chose "Hedge Fund" or "Other Investment Fund" in Item 4 will state their size based on net asset value. All other companies will use a revenue range.

Federal Exemption(s) and Exclusion(s) Claimed

Item 6 asks for the exemptions and exclusions in the issuer is claiming under Regulation D.

Type of Filing

Item 7 is where the issuer will state whether they are filing a new Form D notice or amending a previously filed notice.

Duration of Offering

Item 8 asks whether the issuer intends for the offering to last for more than one year. A specific time frame doesn't have to be provided here.

Type(s) of Securities Offered

Item 9 requires the issuer to select the type(s) of securities they're offering. The choices include:

  1. Equity
  2. Debt
  3. Option, Warrant, or Other Rights to Acquire Another Security
  4. Security to be Acquired Upon Exercise of Option, Warrant, or Other Right to Acquire Security
  5. Pooled Investment Fund Interests
  6. Tenant-in-Common Securities
  7. Mineral Property Securities
  8. Other (describe)

Business Combination Transaction

Item 10 asks if the securities being offered are related to a merger, acquisition, or exchange offer. If so, a clear description of the transaction must be provided.

Minimum Investment

Item 11 asks for the minimum investment accepted from any outside investors.

Sales Compensation

Item 12 requires the names of any individuals or companies being compensated for selling securities on behalf of the issuer. It also asks which states investors will be solicited in.

Offering and Sales Amounts

Item 13 asks for the total amount of the offering, the amount already sold, and how much remains to be sold. If there isn't a predetermined amount for the offering, you can also choose "Indefinite."

Investors

Item 14 requests information on the investors. It first asks if there will be any non-accredited investors participating and, if so, how many. It then asks how many investors have already invested in the offering.

Sales Commissions and Finders' Fees Expenses

Item 15 requires the amount of sales commissions and finders' fees to be disclosed. If the exact amount isn't known, an estimate should be provided and may be given as subject to future contingencies.

Use of Proceeds

Item 16 requires that the amount of the proceeds from the offering to be paid to any of the related persons listed in Item 3 be disclosed. A description of what the payments are for should also be provided.

When does Form D have to be filed?

The SEC requires the filer to submit their Form D notice once they sell their first security under their offering. This means that if the issuer isn't successful in raising any investments, they never have to file their notice.

However, it's wise to be prepared to file Form D immediately. Many issuers choose to have the same securities lawyer that prepared their private placement memorandum also handle the EDGAR application process and Form D Notice filing. When it comes to federal securities laws, it's important to be well-prepared and thorough. You don't want to blow your entire deal from a mistake in the filing process.

The bottom line

It's important to pay very close attention to detail when it comes to soliciting investments for a real estate deal. Not only do you want to be very clear and transparent in your offering documents for your investors, you also want to do the same in your SEC Form D Notice.

Companies raising money through Regulation D Exemptions are given a lot of leeway when it comes to how they handle their private offering. However, the SEC's job is to protect investors, so the less guesswork you leave for them, the easier it will be for you to work with them on all of your future offerings.

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