Two private companies and one registered investment adviser have been penalized by the Securities and Exchange Commission for violations involving Form D.
The SEC announced that the charges stemmed from failures to timely file the forms for several unregistered securities offerings in violation of Rule 503 of Regulation D.
Form D is used to file a notice of an exempt offering of securities with the SEC. The federal securities laws require the notice to be filed by companies that have sold securities without registration under the Securities Act of 1933 in an offering made under Rule 504 or 506 of Regulation D or Section 4 (a) (5) of the Securities Act.
The parties charged in this case are:
-GRID 202 LLC, a registered investment adviser which does business as Re-Envision Wealth;
-Pipe Technologies Inc., a privately held financial technology company; and
-Underdog Sports Holdings, Inc., a privately held corporation that operates an online fantasy sports website and mobile app.
The SEC explained that all offers and sales of securities must either be registered under the Securities Act or fall within an exemption from registration. Regulation D contains certain offering exemptions and a safe harbor from the act’s registration requirements. To protect investors and safeguard markets, an issuer offering or selling securities in reliance on one of those exemptions or the safe harbor is required to file a Form D within 15 days after the first sale of securities in the offering.
“Form D filings are crucial sources of information on private capital formation, and compliance with the requirement to make such filings in a timely manner is vital to the Commission’s efforts to promote investor protection while also facilitating capital formation, especially with respect to small businesses,” said Sanjay Wadhwa, Acting Director of the SEC’s Division of Enforcement. “Today’s orders find that the charged entities deprived the Commission and the marketplace of timely information concerning nearly $300 million of unregistered securities offerings.”
Re-Envision Wealth, Pipe Technologies, and Underdog Sports Holdings did not admit or deny the findings but agreed to cease and desist from violating the charged provisions and to pay the respective civil penalties of $60,000; $195,000; and $175,000.
The SEC said that when an issuer fails to follow the Form D requirements, it impedes the commission’s ability to fully assess the scope of the Regulation D market. This ability, the SEC said, is “key to the Commission’s understanding of whether Regulation D is appropriately balancing the need for investor protection on one hand and the furtherance of capital formation on the other, particularly as it relates to small businesses.”
The attorneys at Hyman Cotter PC include former senior attorneys at the SEC whose legal experience and industry knowledge make them uniquely qualified to provide counsel on securities regulatory, compliance and enforcement matters. Additionally, we regularly monitor SEC, FINRA and other self-regulatory organization rule-making activities to help ensure that our clients are aware of any new policies, while assisting them in implementing any recommended changes. If your firm is facing an investigation from a regulatory agency, please contact Hyman Cotter PC at 312-291-4600 or through our online contact form.
