Securities Law Blog

On December 1, 2020, the New York State Attorney General, Letitia James, announced the adoption of final rules modernizing filing requirements relating to certain securities transactions and the registration of investment adviser representatives.

This post focuses on the final rules that made fundamental changes to New York State’s notice filing requirements for certain securities transactions. The final rules streamline the State’s filing requirements and harmonize the State’s rules with federal regulations, particularly with respect to (a) offerings made under Regulation D of the Securities Act of 1933, (b) offerings made under Regulation A – Tier 2, and (c) certain offerings of registered investment company securities.

This alignment of the State’s filing requirements with federal regulations has been a long time coming for securities law practitioners and their clients. In 2002, the New York State Bar Association’s Committee on Securities Regulation published a position paper which concluded that the State’s filing requirements were inconsistent with federal securities laws, and requested that the Office of the Attorney General of New York State (“OAG”) revise the State’s filing requirements to be consistent with federal securities laws, particularly the National Securities Markets Improvement Act of 1996. Eighteen years later, the OAG has finally revised the State’s rules to be more consistent with federal law. Below is a summary of several key changes to the State’s filing requirements.

Updates Applicable to Regulation D Offerings

The final rules change the requirements for satisfying the State’s securities laws when conducting offerings of securities under Regulation D. The final rules require persons conducting Regulation D offerings within or from New York to:

• file a Form D within 15 days following the first sale of securities;
• file via the North American Securities Administrators Association (“NASAA”) electronic filing depository system (the “EFD”);
• pay filing fees of $1,200 (for offering amounts over $500,000) and $300 (for offering amounts of $500,000 or less); and
• consent to service of process via the EFD.

Under the State’s prior rules persons conducting an offering under Regulation D within or from New York were required:

• to file via mail a Form 99 or, if elected by the issuer, a Form M-11, with the OAG’s Investor Protection Bureau (“IPB”) prior to the sale of any securities;
• to pay filing fees of $1,200 (for offering amounts over $500,000) and $300 (for offering amounts of $500,000 or less);
• to file via mail a State Notice and Further State Notice; and
• to file via mail a Form U-2 Universal Consent to the Service of Process.

The final rules streamline the filing requirements for Regulation D offerings in New York State by aligning the State’s rules with federal regulations. Issuers making an offering under Regulation D will no longer be required to mail physical copies to the State, use the State’s more onerous forms and file prior to making sales of securities. New York’s filing requirements are now the same as, rather than prior to and more extensive than, the federal requirements.

Updates Applicable to Regulation A Offerings and Offerings of Registered Investment Company Securities

The final rules also change the requirements for satisfying the State’s securities laws when conducting Regulation A-Tier 2 Offerings and certain offerings of registered investment company securities. The modified requirements are substantially similar to the requirements for offerings of securities under Regulation D noted above.

Under the final rules:

• persons making a Regulation A-Tier 2 Offering are required to a file a Uniform Notice Filing of Regulation A-Tier 2 Offering Form with the IPB via the EFD not less than 21 calendar days prior to the qualification by the SEC of any securities issued or to be issued; and
• registered investment companies selling their own securities will be required to file a Uniform Investment Company Notice Filing, known as Form NF, with IPB via the EFD prior to the sale of any such securities.

The final rules became effective on December 2, 2020. Further, the IPB has indicated that no new Form 99s will be accepted in connection with Regulation D offerings after February 1, 2021. The IPB further indicated its intention to completely phase out Form 99 for Regulation D offerings by December 2, 2024.