Client Alert

SEC Eases Compliance with Form ID, Regulation A, and Regulation Crowdfunding Requirements

30 Mar 2020

As a further response to circumstances presented by the COVID-19 pandemic, on March 26, 2020, the SEC published new temporary final rules.[1] The temporary final rules ease requirements regarding applications for Form ID and extend due dates for certain ongoing reporting requirements in Regulation A and Regulation Crowdfunding under the Securities Act of 1933 (the “Securities Act”). 

The temporary final rules allow filers to obtain access to the EDGAR system on a temporary basis without initially providing the required notarization to the manually signed authentication document for Form ID from March 26, 2020 through July 1, 2020.  With regard to the Regulation A and Regulation Crowdfunding requirements to file certain ongoing reports, the temporary final rules provide issuers with extended deadlines for reports due from March 26, 2020 through May 31, 2020.

This client alert discusses some of the details pertaining to the conditional relief granted by the SEC’s temporary final rules.

Temporary Final Rule Relating to Applications for Form ID

To use the EDGAR system to make filings, an applicant must complete the Form ID application. This application is completed online.  Rule 10 of Regulation S-T requires an applicant to upload, as a PDF attachment to the Form ID filing, a notarized document including the required Form ID information and confirming the authenticity of the Form ID filing. This notarized document must be manually signed by the applicant.  The requirement to upload a notarized signed Form ID is also specified in the EDGAR Filer Manual, which is incorporated into Regulation S-T by Rule 301.

The SEC indicated that it has heard from a number of filers who are having difficulty securing the required notarization to obtain access to EDGAR because their employees are working from remote locations or are otherwise no longer in a position to obtain the services of an authorized notary public due to circumstances relating to COVID-19.

The SEC adopted, as a temporary final rule, new paragraph (c) to Rule 10 of Regulation S-T that provides filers with access to the EDGAR system on a temporary basis without initially providing the required notarization to the manually signed document.

Operation of Temporary Final Rule and Time Period for Relief

Temporary Final Rule 10(c) of Regulation S-T allows the SEC’s staff (the “Staff”) to create EDGAR accounts and issue EDGAR access codes based on a manually signed document without the required notarization. The temporary final rule requires the filer to indicate on the face of the signed document that it could not obtain the required notarization due to circumstances relating to COVID-19.

Temporary Final Rule 10(c) allows the Staff to create EDGAR accounts in this manner from March 26, 2020 through July 1, 2020.  Once the EDGAR account is created and the necessary codes are issued, the filer may commence filing on EDGAR.

The filer is required to submit as correspondence via EDGAR a PDF copy of the notarized manually signed document within 90 days of the issuance of the codes under the temporary final rule. If the filer does not do so within the stated timeframe, the Staff may inactivate the filer’s EDGAR access codes. To address potential abuse, the SEC authorized the Staff to inactivate codes when the Staff has reason to believe that a filer who gained access under the temporary final rule has made illegitimate filings that are inconsistent with the protection of investors.

Temporary Final Rule Granting Extension to Due Dates for Ongoing Reports Required by Regulation A and Regulation Crowdfunding

Due to the potential that COVID-19 will disrupt the ability of issuers and other persons to meet their filing deadlines under Regulation A and Regulation Crowdfunding, the SEC adopted temporary final rules to extend those filing deadlines, under certain conditions. The SEC reminded issuers to continue to evaluate their obligations to make materially accurate and complete disclosures in accordance with the anti-fraud provisions of the federal securities laws.

Conditions to the Extended Due Date in the Final Temporary Rules for Both Regulation A and Regulation Crowdfunding

The temporary final rules include four conditions to their availability.  These conditions are the same for the temporary final rules under each of Regulation A and Regulation Crowdfunding.  The four conditions are:

  • The issuer is not able to meet a filing deadline due to circumstances related to COVID-19;
  • A Regulation A issuer promptly discloses on its public website (or a Regulation Crowdfunding issuer promptly discloses through an intermediary’s platform) or provides direct notification to its investors that it is relying on the temporary final rules;
  • The issuer files with the SEC no later than 45 days after the original filing deadline of the report or form, the report or form required to be filed during the period from and including March 26, 2020 to May 31, 2020; and
  • In any such report or form, the issuer discloses that it is relying on the applicable temporary final rule and states the reasons why, in good faith, it could not file the report or form on a timely basis.
Regulation A Filings to Which the Extended Due Date in the Temporary Final Rules Apply

The temporary final rules conditionally provide extended deadlines for the following filings required to be filed by Regulation A during the period from and including March 26, 2020 to May 31, 2020, where the filer is unable to meet the original deadline due to circumstances relating to COVID-19:

  • Post-qualification amendments required at least every 12 months after the qualification date to include updated financial statements;
  • Annual reports on Form 1-K;
  • Semi-annual reports on Form 1-SA;
  • Special financial reports on Form 1-K or 1-SA;
  • Current reports on Form 1-U; and
  • Exit reports on Form 1-Z.

The temporary final rules do not apply to a Form 1-A that has not been qualified.

Regulation Crowdfunding Filings to Which the Extended Due Date in the Temporary Final Rules Apply

The temporary final rules conditionally provide extended deadlines for the following filings required to be filed by Regulation Crowdfunding during the period from and including March 26, 2020 to May 31, 2020, where the filer is unable to meet the original deadline due to circumstances relating to COVID-19:

  • Annual reports on Form C-AR;
  • Progress updates on Form C-U; and
  • Termination of reporting on Form C-TR.

The temporary final rules do not apply to Form C or Form C/A.

Conclusion

The SEC’s temporary final rules significantly ease compliance with the logistics of applying for a Form ID. Persons applying for a Form ID under the temporary final rules should be aware of and comply with the conditions to their use, including the authorization of the Staff to inactivate codes to address potential abuse of the temporary process. The SEC’s temporary final rules also extend due dates for specified filings under Regulation A and Regulation Crowdfunding. Issuers relying on these extended due dates are required to comply with the conditions of the extensions, including the requirement that the failure to comply with the original due date relates to circumstances arising due to COVID-19. Further, an issuer relying on the exemption from Securities Act registration provided by Regulation A or Regulation Crowdfunding will have to continue to evaluate its satisfaction of the obligations to make materially accurate and complete disclosures in accordance with the anti-fraud provisions of the federal securities laws.


[1] Relief for Form ID Filers and Regulation Crowdfunding and Regulation A Issuers Related to Coronavirus Disease 2019 (COVID-19), Release No. 33-10768 (Mar. 26, 2020).

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