The Ultimate Guide to SPV Security Filings: Achieving Compliance and Protecting Your Special Purpose Vehicle

by Chris Tabb in

Before you start the process of filing securities for your SPV, it's important to understand the laws and regulations that apply to your specific jurisdiction. This includes understanding the registration requirements for the securities being offered, as well as any ongoing reporting requirements for the SPV. Be sure to consult with a qualified lawyer or accountant who has experience with securities laws and regulations.

SPV's must comply with SEC filing requirements by submitting Form D for any securities offering

In the United States, an SPV that is issuing securities to raise capital must file a Form D with the Securities and Exchange Commission (SEC) under the Securities Act of 1933. Form D is a notice of exemption that is used to claim an exemption from the registration requirements under Regulation D of the Securities Act. The SPV must file Form D within 15 days of the first sale of securities.

SPV's must comply with state securities regulations by adhering to "blue sky" filing requirements

The process and cost of filing "blue sky" fees for a Special Purpose Vehicle (SPV) can vary depending on the state in which the SPV is doing business. Each state has its own securities regulator and set of rules and regulations, known as "blue sky laws," which govern the sale of securities within that state.

The general process for filing blue sky fees typically involves the following steps:

Research state requirements: Research the specific requirements for filing under the blue sky laws of the state where the SPV is doing business. This may include reviewing the state's securities laws and regulations, as well as the instructions and forms provided by the state securities regulator.

Prepare the necessary documents: Prepare all the necessary documents, which typically include a notice of exemption or registration statement, as well as any other required forms or disclosures. Be sure to include accurate and complete information about the SPV's management, financial condition, and the securities being offered to investors.

Submit the documents to the state securities regulator: Submit the necessary documents and fees to the state securities regulator. This is usually done through an online system, by mail or in person. Be sure to follow the specific instructions and deadlines provided by the state regulator.

Pay the filing fees: The cost of filing for blue sky laws varies by state, but typically includes a filing fee as well as other charges, such as an initial or annual fee. Some states may have exemptions from the filing requirements, it's important to check with a professional to know if your SPV is eligible.

Wait for approval: After submitting the documents and fees, the state securities regulator will review the submission and determine if it is in compliance with the state's securities laws and regulations. The time for approval varies depending on the state.

Keep records: It is important to keep records of all the documents submitted to the state securities regulators, as well as any other communications with investors.

SPVs navigate the private offering exemption with Regulation D, Rule 506

Regulation D, Rule 506 of the Securities Act of 1933 is a safe harbor exemption that allows private companies to raise capital by selling securities without registering the offering with the Securities and Exchange Commission (SEC).

Under Rule 506, an issuer can raise an unlimited amount of capital from an unlimited number of accredited investors, and up to 35 non-accredited investors. An accredited investor is a person who meets certain financial thresholds established by the SEC, such as having a net worth of more than $1 million or having income of more than $200,000 per year for the last two years.

One of the main requirements of the Rule 506 exemption is that the issuer must not use general solicitation or advertising to offer or sell the securities. This means that the issuer can't advertise the offering publicly or reach out to potential investors through a mass mailing or email campaign. Instead, the issuer must rely on personal connections and relationships to find investors.

Additionally, under Rule 506(b) offering issuer is required to file Form D to SEC within 15 days after the first sale of securities.

Complying with the SEC: A Step-by-Step Guide on Filing Regulation D, Rule 506 for Special Purpose Vehicles (SPVs) on the EDGAR system

You can find the Form D, which is the notice of exemption that must be filed with the SEC under Regulation D, Rule 506, on the SEC's EDGAR (Electronic Data Gathering, Analysis, and Retrieval) system. You can access the EDGAR system through the SEC's website.

Filing a Regulation D, Rule 506 offering on the EDGAR system as a Special Purpose Vehicle (SPV) involves the following steps:

Determine Eligibility: Make sure that your SPV is eligible to use the Regulation D, Rule 506 exemption. This typically requires that the SPV is a private company, that it is not subject to certain disqualifying events, such as recent bankruptcies or securities fraud convictions, and that it is not selling securities to more than 35 non-accredited investors.

Create EDGAR filer account: Create an EDGAR filer account on the SEC's EDGAR website. This account will allow you to file the Form D and any other required documents online.

Prepare Form D: Prepare the Form D, which is the notice of exemption that must be filed under Regulation D, Rule 506. The Form D includes information about the SPV's management, financial condition, and the securities being offered to investors. It is important to ensure that the Form D is accurate and complete, and that it includes all of the information that is required by the SEC.

File Form D on EDGAR: File the Form D on the EDGAR system. This is done by logging into the EDGAR filer account, and following the prompts to submit the Form D and any other required documents. Be sure to follow the specific filing requirements and deadlines for Regulation D, Rule 506.

File Blue sky with state securities regulators: As mentioned before, many states have their own securities regulations, known as "blue sky laws," which also require the filing of Form D with the state securities regulator. You must file the Form D within 15 days of the first sale of securities under the rule 506 exemption. The requirements for state-level filing vary by state, so it's important to consult with an attorney or accountant familiar with the specific requirements of the state where the SPV will be doing business.

Keep records: It is important to keep records of all the documents submitted to the SEC and state securities regulators, as well as any other communications with investors. This will be useful in case of an SEC examination or a lawsuit.

Differences between private and public securities offerings

The main difference between private and public securities offerings is the way they are regulated, the type of investors that can participate, and the level of disclosure required.

Regulation: Public securities offerings are regulated by the Securities and Exchange Commission (SEC) and are subject to strict disclosure and registration requirements. Private securities offerings, on the other hand, are typically exempt from registration with the SEC and may have fewer disclosure requirements.

Investor Participation: Public securities offerings are open to the general public, and anyone can invest in the offering. Private securities offerings, on the other hand, are typically limited to a small group of accredited investors, or to investors who meet certain net worth or income requirements.

Disclosure Requirements: Public securities offerings must provide extensive information about the company and the securities being offered to potential investors, through registration statement and prospectus. Private securities offerings have limited disclosure requirements, and the issuer is not typically required to file annual or periodic reports with the SEC.

Costs: Public securities offerings can be expensive to complete, due to the costs of preparing and filing registration statements and prospectuses, and the ongoing reporting requirements. Private securities offerings typically have lower costs associated with them, but may be more limited in terms of the amount of money that can be raised.

Liquidity: Public securities are more liquid than private securities, as they are traded on a stock exchange, and can be easily bought and sold in the secondary market. Private securities, on the other hand, may be less liquid and harder to value, as they are not traded on public exchanges and there is less information available about them.

Restrictions on resale: Public securities are not subject to restrictions on resale, but private securities may have restrictions on the timing and conditions of resale, and also these resale of these securities may be limited to a specific class of buyers.

The consequences of non-compliance with securities laws and regulations

Non-compliance with securities laws and regulations can result in a variety of consequences, including fines, penalties, and even criminal charges.

Civil penalties: The SEC and state securities regulators have the authority to impose fines on individuals and companies that violate securities laws. These fines can be substantial, and can include penalties for both the company and its officers and directors.

Cease-and-desist orders: The SEC and state securities regulators can issue orders prohibiting individuals and companies from engaging in certain activities that violate securities laws. This can include orders to stop selling securities, to correct misleading statements, or to divest assets.

Disgorgement: The SEC and state securities regulators can require companies and individuals to give up any ill-gotten gains that resulted from securities law violations. This can include the return of any money raised from illegal sales of securities, as well as any interest or dividends earned on that money.

Injunctions: The SEC and state securities regulators can seek court orders to prevent companies and individuals from engaging in securities law violations. This can include orders to prevent the sale of securities, to prevent the destruction of records, or to appoint a receiver to manage the assets of a company.

Bars and Suspensions: The SEC and state securities regulators can bar individuals from participating in the securities industry, serving as an officer or director of a public company, and engaging in other securities-related activities.

Criminal Charges: Securities fraud, insider trading, making false statements and other securities law violations are criminal offenses, punishable by fines and/or imprisonment.

Overall, the severity of the non-compliance will determine the course of action that the regulatory authorities would take, and failure to comply can result in serious consequences that can harm the reputation, financial stability and future operations of the issuer or individual.

Now you are ready to finalize the SPV investment.

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