LEGAL NEWS & INSIGHT

SEC Eases Path to Regulatory Compliance for Fundraising

Raising capital is an important endeavor for many businesses during normal times. It can become vital during extremely challenging times like this. Those businesses that are in the midst of that endeavor now must remember that regulatory compliance is an essential component. For those raising capital for the first time, that compliance usually involves at least one filing with the Securities and Exchange Commission (most typically a ‘Form D’ in connection with a ‘Regulation D’ offering). But, before a business can submit a filing to the SEC, it first must register as a filer by submitting a ‘Form ID’, which ordinarily must be signed and notarized.


In normal times, getting a document notarized is a fairly simple matter. Most banks have a notary on premises. Amidst the Covid-19 pandemic, however, this has become a lot more challenging. Many banks have limited or no branch operations, other known notaries may not be working, and company officers may be unable or unwilling to leave their homes.


Many states have enacted or are in the process of enacting legislation to permit remote online notarization (“RON”), and a bill is currently pending in the United States Senate (Senate Bill 3533) to authorize and establish minimum standards for RON nationwide (for matters affecting interstate commerce). However, it may take time for notaries to get up to speed and to implement the necessary technology to provide RON in a compliant manner.


In the meantime, companies raising capital still must meet their filing deadlines to ensure their offerings are compliant and don’t expose them or their officers to claims down the road (e.g. from regulatory agencies and/or disgruntled investors). Fortunately, the SEC recently adopted a rule (which may be found here: https://www.sec.gov/rules/interim/2020/33-10768.pdf) that provides temporary relief from the Form ID notarization process in circumstances where the Covid-19 pandemic has made it impracticable or impossible to obtain notarization in a timely manner.


The relief took effect March 26, 2020 and continues until July 1, 2020. During this relief period, anyone submitting a Form ID may do so without notarization if they indicate on the face of the signed document that they were not able to obtain notarization due to circumstances relating to Covid-19 (and if such statement is in fact true). SEC staff may request supplemental documentation or information to validate appropriate reliance on this relief, but other than that filers will be allowed to register and then proceed with their substantive filings (e.g. Form D). They will then have 90 days to obtain notarization and submit it to the SEC before the SEC may de-activate filing credentials for purposes of future filings. To be clear, this is a deferral of the notarization requirement, not a waiver.


For further information about filing a Form ID, assistance with other aspects of raising capital, or for help with other business law matters, email me at brian@leventhallegal.co. For more information about my practice, visit www.leventhallegal.co.


This article is intended for general information purposes only and should not be construed as legal advice with respect to any particular set of facts or circumstances. It is not intended to create, nor does any reading of this article create, an attorney-client relationship.

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