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South Dakota Proposes Reg. D and Other Exemption, Registration Changes

By Jim Hamilton

Rule amendments proposed by the South Dakota Securities Division include the following:

* For Reg. D Rule 504, 505 and 506 offerings, an electronically or manually signed copy of Form D could be filed; the appendix and Form U-2 requirement would be eliminated. For 506 offerings, the initial fee would remain $250 but any filing made beyond the "15-days after the first sale requirement" would subject issuers to a late filing fee of $25, making the total filing fee $275. Note also that paying the late fee does not prevent civil liability or regulatory action from being taken against the issuer.

* The rule clarifying the statutory 25-purchaser exemption {no more than 25 purchasers present in South Dakota during a 12-month consecutive period not including designated institutional investors/financial institutions} would be fleshed out by eliminating the sentence that it only covers issuers having a principal place of business in South Dakota. The text would go on to list the types of purchasers, e.g., relatives, spouses, corporations, etc. that are excluded from the count of 25 purchasers, and end with two tests that determine whether separate securities issuances can be integrated in the offering.

* The statutory isolated nonissuer exemption would be further explained by a new rule defining "isolated" as "standing alone, detached, or separate as opposed to repeated or successive," and "nonissuer transaction" as "a transaction or distribution not directly or indirectly for the issuer's benefit."

* Rules registering securities by coordination or qualification would eliminate a sentence stating that a broker-dealer registered under the SD Uniform Securities Act may omit Form U-2. Also, quarterly, annual and final sales reports on the State Quarterly Report of Sales Form
would need to be filed by issuers that have not paid the maximum registration fee. Lastly, these registration rules would clarify that any request to extend the offering beyond its one-year effective date must be in writing.

* An advertising rule would be created indicating that for purposes of securities registration only issuers or selling security holders that publish notice of a proposed to-be-registered offering using any medium will not be considered to have offered the securities for sale through that notice, provided the notice meets the requirements of Reg. 230.135 of the Securities Act of 1933. The advertisement would not need to be filed with the South Dakota Securities Division.

* The broker-dealer/agent rules would be amended to add a rule prohibiting senior-specific certifications or designations, add a rule for "business brokers," slightly modify the agent exam requirement and substitute the term "FINRA" for "NASD" to reflect the current name of that organization combining the former NASD and New York Stock Exchange.

* The investment adviser rules would be re-ordered with new section numbers and mostly nonsubstantive text amendments.

The public hearing will be October 21, 2010 at 10:30 a.m.

For more information please see
http://www.state.sd.us/drr2/reg/securities

The main number for the Division is (605) 773-5953

Full post as published by Jim Hamilton's World of Securities Regulation on October 06, 2010 (boomark / email).