Tilden Moschetti: Hi, this is Tilden Moschetti of the
Moschetti syndication Law Group. In order to have a Reg D
offering that's truly underneath Reg D, we need to file with the
SEC a form that's known as Form D, we're going to go through the
four pages of that form. Today, it's four pages long plus
instructions. So stay tuned.
In this video, I'm going to do something I don't think any
attorney has ever done before, I'm going to walk you through
step by step, the Form D that gets filed with the SEC
ultimately lives in their EDGAR database. I don't think it's
been done before. And so we are going to do it right now. So
let's do it. It's helpful to have the form in front of us so
we know exactly what we're talking about. So you can see
here this is indeed formed the Securities and Exchange
Commission. Item one is the issuers identity, what the
issuer identity is, is what is that entity that's ultimately
filing this security with the SEC. So this isn't the sponsor
information. This is the the investment entities information.
So it has the name of the issuer, the jurisdiction of
incorporation. So if it's a Delaware, LLC, or a Nevada LLC,
or wherever it is, that's the the jurisdiction that it's in.
If it's ever been in existence before, there's some previous
names that go here. And then here's we choose entity type,
almost all of my clients choose LLC. Occasionally, for business
clients, we choose a corporation that might make sense, it really
depends on your specific situation. Year of
incorporation, most of mine are fairly new that I file, so it's
almost always within the last five years. And then they want
you to put in the year that it was formed. So we do that like
that. Then we get to the principal place of business and
contact information. Now this most of the time is you as the
sponsor your information, or really whoever it means to get
in touch in contact with. So this is going to be just the
address for notifications and a phone number. Item three, this
is the related persons. Now this is where 99.9% of the times I'm
looking for who's going to be the executive officer that's
going to be involved now the executive officer could be the
manager of an LLC, or it could be the manager of the manager of
the LLC, it's that person who's probably the key contact the key
decision maker, one person is identified. If you're doing it
as part of a team, it might be there might be more than one.
But we only need for this form one one person identified. So
there it's just last name, first name, middle name, street
address contact information. And almost always I use executive
officer, though could be director or promoter in specific
circumstances, there's never really a need in my experience
for clarification of that responses. The item four is the
industry group. Now this is mostly so that the SEC can keep
track of what industries are generally using Reg D and so
that they can get a better gauge on how to control what they're
trying to control. So most of mine are either in this real
estate area, either construction residential commercials down
there, other real estate if it's land, but then a lot of times
I'll have technology, if I'm working for a technology
business, or in business services, I may choose that if
it's a specific business service that's raising money,
occasionally, but not too often. We'll use a private equity fund
really, that's more if it truly is a private equity fund, or
venture capital fund. We'll use those exemptions. Just to let
the SEC that's the kind of organization it is. issuer size
here they're looking for revenue range or the aggregate net asset
value. Now, a lot of times you can choose and a lot of people
do declined to disclose, I don't see necessarily a reason to
choose declined to disclose. Certainly if I had a was
starting a real estate syndication company for example
or a fun, I might want to put what is revenue range or what
the asset value ranges just as a small token of promoting myself.
If it was a business and a small, closely held business I
probably would always choose declined to disclose Sometimes
there's no revenues at all. And sometimes there's no aggregate
value, or sometimes both. So sometimes, depending on on my
particular client, I'll choose either no revenues or declined
to disclose. Now the exemption, so we've got several exemptions
for rule 504. 504 is pretty out of favor at this point, I don't
do any Rule 504 filings, I find it unnecessary and not
applicable to really any of my clients. Really, my world is
rule of 506b and rule 506c. Those are the two rules that are
most used by us. And they can that's where we fill those out.
Now over here is the Investment Company Act section, I have an
article on my website for the Investment Company Act that can
walk you through that, if you're doing real estate specific, it
doesn't apply. Under 3(c)7 is an exemption that automatically
makes it so that you are not counted in under the Investment
Company Act. There are other rules and feel free to give us a
call if you want to discuss the Investment Company Act and
whether you qualify. They're most often my clients do not.
Occasionally there is and occasionally, very occasionally,
there will be another opportunity where there needs to
be a filing. Under the Investment Company Act as well.
type of filing most of my clients are doing new notice.
But if there was a mistake or something changed, we might do
an amendment. And then the date of first sale in this offering
would be that first day when money exchanged hands from your
investor to you and deposited into your bank account. Or that
point at which that amount of money became so that you
couldn't get it back quickly to the investor. The duration of
the offer, generally Reg D offerings are valid for only one
year. But if it is more than one year, you would choose no and
you would need to make sure to stay on top of it to file. The
renewals on that types of securities offer is equity is
generally self explanatory. You know, it's generally an interest
in the business itself into the assets. And so it's it's that
ownership interest, whereas a debt may look completely
different than equity, where it's a contract level
relationship to the the LLC itself. And that money is owed
back to the the investor upon certain guidelines. There are
other more unique things like options or warrants. That's
never really applicable to my clients. But it certainly is
available there as well. Security to be acquired about
exercise of the option, again, not generally used by any of my
clients, or it's probably not used by you. Nor is pooled
investment fund interests. Mineral property securities or
an other tenant in common securities, I suppose could be
slightly of use. Generally, that's not used, except in the
rare instance where I have a 1031 Exchange being done. I
might be doing tenant and common security in that, in that
context. business combination transaction for contemplated for
a merger acquisition or exchange offer is almost always a no, it
would really be is if there was a security sale being taken
place that was in connection with a merger acquisition or
exchange offer, then we might say yes. On page three, now, we
have the minimum investment amount. So almost always you say
you set forward in your private placement memorandum, a minimum
investment that's required from the investor. So that is
oftentimes 25,000 50,000 100,000, sometimes even up to a
million as the minimum investment amount. That's what
they're looking for here. If an investor came to you and said,
I'd like to invest, what's that minimum that you're advertising
or not advertising but that you're putting in your PPM that
you would accept? Sales Compensation, if you're paying a
broker dealer to represent you, this is where that would go. If
you were doing excuse me, if you were doing anything else, you
would not complete sales compensation, you cannot pay
sales compensation to a non licensed broker dealer. So this
part you would always leave place unless you specifically
had a broker dealer or in your transaction item 13 offerings
and sales amount. So
line A is really looking for the total amount of the offering. So
if it is a $5 million, that you're raising 5 million goes
there in line B is the total amount that's currently sold as
of the date of this filing. By sold again, we mean those monies
that you've received from an investor and are currently
either in your account or already have been deployed. And
then the total amounts to be sold is simply this line a minus
line B gives you the total amount that remains to be done.
Now you can have this be indefinite, and if it is
indefinite, you would just choose this amount of indefinite
but lying be still will have an entry, you'll still have $1
amount there. Investors section so this is looking for the
number of in first line is looking for if it's possible,
that there are non accredited investors. So to you This means
if you're doing a rule 506b offering, then you would check
this box, and then you would put the number of non accredited
investors who have already invested with you, you have up
to 35 in any 90 day period, so it's probably less than 35. My
guess is that if you put in a number that was 36, when you and
you did this and you filed it with Edgar, I would suspect it
would probably kick it back to you. The second line is
regardless of whether there are non accredited investors or not
how many investors have already invested. So this is the sum of
accredited and non accredited investors who have invested. Now
obviously, if it's a rule 506c, this is the only part you're
filling out, it's just the number of investors. Law line 15
Is sales commissions and finder fees much like up here sales
compensation, you're going to leave this blank unless there is
a broker dealer involved. Now I know it's very tempting to see
this line here and say finders fees. Okay, so that means I can
pay finders fees, the fastest way to get in trouble here is to
pay finders fees, the rules are very, very strict on the use of
finders, and I would highly recommend that you just not use
them at all, the fastest way for a house of cards to come
tumbling down is for somebody to use finders have an issue come
up with one investor and the investor say to their
plaintiff's attorney, I've got this guy told me to invest in
this, it was really great, and then it all fell apart, this
will kill you, I would not spend my time at all using finers.
Item 16 use of proceeds, this is really the amount that's being
used to pay you. And this is the amount that's being paid you
typically as like an acquisition fee, or as a marketing fee. So
it is used for payments to these persons in risk. That is being
used, right. So and that is to market the security or so a lot
of times that will also be counted as the acquisition fee.
So I would put always put the amount that's there. If you
don't know, if you've already read if you're starting to raise
the money, and it's a 1% acquisition fee, then you may be
choosing an estimate based on what it is. And that's totally
acceptable. The last section really is for signing the form d
and that is we again, we put the name of the issuer, the name of
the signer, the signature of the person signing, and their title.
If you are doing it yourself and you marked in the box as you
were the executive officer, I would always put as that you
were the executive officer here and have you sign it. And that
is the end of the majority of the forms for Form D. Now on
pages five, we have instructions. Six we have more
instructions. Seven we have more instructions. And now we get to
pages eight through these are continuation pages. They do not
need to be filed if they're not applicable if you've already
answered everything. So if there's multiple issuers, which
sometimes there is we need to fill out these pages as well.
And then also If there are multiple related persons that
you're reporting, they would go here on page nine. And then if
there were multiple people paying sales compensation, which
I think I've beaten now that I would not recommend it unless
you have a broker dealer, then I then this page would be used.
And then signatures go here on page 11. I hope that you found
that helpful to walk through form D give you an idea about
what to expect when you're filing it. Now it all gets filed
with the SEC on the EDGAR database using your own issuers
see ik, for more information about what that means and how to
get this done. If you need help getting it done, my law firm
will certainly be happy to help you. We represent people doing
offerings under Regulation D rule 506b and 506c that is all
we do is work on Reg D offerings, so feel free to give
us a call or visit our website for more information.