In our continuing effort to expand our hedge fund law resources on this blog, we will be posting statutes and other legal resources from each of the states. Because each state has different laws and enforces those laws differently, hedge fund lawyers often discuss state specific hedge fund issues with the securities division prior to providing advice to clients. The post below provides information on Alabama’s regulation D requirements. Please contact us if you would like to establish an Alabama hedge fund or have questions on Alabama investment advisory issues. Continue reading
As we noted in a previous post about filing Form D online, Form D has been changed and I believe that the new Form D is a great improvement and is more appropriate for hedge fund offerings. As we’ve noted before, many of the securities laws were drafted in the 1930s and 1940s and have not been overhauled to accommodate the current practices within the securities industry. With the new Form D, we see a giant step forward and commend the SEC on producing a form which asks questions which are appropriate for both operating businesses and hedge funds.
The new Form D is cleaner and easier to read. There is plenty of space for explanations if a hedge fund’s structure does not exactly fit the parameters of a specific question. The new Form D also has great instructions on how to complete the various items.
Please note that hedge fund managers should have a hedge fund lawyer or compliance person complete and submit Form D on their behalf. The SEC expects that each Form D will take approximately 4 hours to complete. Please click to view a copy of the new Form D .
Items by Item run through of the new Form D is below:
Item 1. Issuer’s Identity – background information on the issuer including name, entity type, year of organization.
Item 2. Principal Place of Business and Contact Information
Item 3. Related Persons – should include the hedge fund manager; additionally there is a continuation page where the manager will include key members of the management entity.
Item 4. Industry Group – there is a specific box for hedge or other investment funds. This is a significant improvement over the old Form D which did not include anything like this.
Item 5. Issuer Size – hedge funds will now provide an aggregate net asset value range, which is a more appropriate inquiry.
Item 6. Federal Exemptions and Exclusions Claimed – here most hedge funds will check at least a couple of boxes, your attorney or compliance professional will be able to help you with this.
Item 7. Type of Filing – you will provide information on whether this is a new filing or an amendment to a previous filing. The instructions to the Form D provide a list of times when it is necessary to file an amendment.
Item 8. Duration of Offering – generally hedge fund interests are offered on a continual bases and the hedge fund will accordingly indicate that the offering will last greater than one year.
Item 9. Type(s) of Securities Offered – the hedge fund will typically check two boxes here.
Item 10. Business Combination Transaction
Item 11. Minimum Investment – old Form D also required this information
Item 12. Sales Compensation – if a hedge fund uses a broker or a third party marketer to raise money then the hedge fund will need to provide certain information on the broker or third party marketer.
Item 13. Offering and Sales Amounts – here hedge funds will typically check “Indefinite” where appropriate.
Item 14. Investors – the SEC requests information on whether there have been sales to persons who are not accredited investors (typically referred to as non-accredited investors)
Item 15. Sales Commissions and Finders’ Fees Expenses – here the hedge fund will provide more information on the transactions discussed in Item 12.
Item 16. Use of Proceeds
Other related articles of interest: