Form D

True or False: Because DPP suitability standards, including specific net worth and income thresholds, are set by individual states and by each program's own offering documents rather than by a single uniform FINRA figure, a representative cannot rely on one fixed nationwide number to clear every DPP sale.

1. A.True.Correct. DPP suitability standards vary by state and by each program's offering documents, so no single nationwide figure applies to every sale.
2. B.False.Wrong. There is no single uniform FINRA dollar figure governing DPP suitability across every state and program; the applicable standard varies.

Why: DPP suitability is shaped by state securities administrators and by the specific numeric standards set out in each program's own offering documents, which can differ from state to state and from program to program. There is no single, uniform dollar figure a representative can apply across every DPP recommendation nationwide; the applicable standard depends on where the customer resides and which specific program is being offered. A representative and her firm need to confirm the correct standard for each transaction rather than relying on a fixed number remembered from a different program or a different state.

A sponsor completes a Regulation D offering of program interests and files a Form D with the SEC. What is the character of that filing?

1. A.A registration statement in abbreviated form for a limited offeringWrong. Nothing in Form D is reviewed or declared effective; it registers nothing.
2. B.An application for the SEC to confirm the offering qualifies as exemptWrong. The SEC does not rule on the availability of the exemption in response to the filing.
3. C.A notice that an exempt offering has been made, registering nothingCorrect. It reports the exempt sale and leaves the securities unregistered.
4. D.A prospectus that must be delivered to each purchaser before saleWrong. Form D goes to the Commission, not to purchasers, and it is not a prospectus.

Why: Form D is a notice of the sale filed under Regulation D; it reports that an exempt offering has been made and identifies the issuer and the offering. It is not a registration statement, so nothing in it is reviewed or declared effective and the securities remain unregistered. Candidates sometimes read the filing as converting the offering into a public one, which reverses its purpose: the notice exists precisely because the offering was exempt from registration. Had the sponsor wanted the interests registered, it would have filed a registration statement and waited for effectiveness before selling anything.

Bright Fen Materials sold unregistered stock to twelve institutional buyers. It filed no Form D and made no attempt to satisfy any condition of Regulation D. Its counsel says the sales were nevertheless exempt. On what basis could counsel be right?

1. A.Section 4(a)(2) exempts issuer transactions not involving a public offering, and Regulation D is only one safe harbor inside it.Correct. The statutory exemption stands on its own and the safe harbor is optional.
2. B.Sales to institutions are exempt securities under Section 3(a), so no transaction exemption is needed.Wrong. Section 3(a) exempts categories of instruments such as government issues, never the buyer institutional character.
3. C.Filing the Form D late cures the defect, so the offering becomes exempt once the notice is made.Wrong. Form D is a notice of sales, not the source of the exemption, so its timing cannot create one.
4. D.Any offering to fewer than thirty-five purchasers is automatically exempt whatever rule is relied on.Wrong. The thirty-five ceiling is a condition inside Rule 506(b), not a free-standing statutory exemption.

Why: Regulation D is a non-exclusive safe harbor. Rule 506 supplies objective conditions which, if met, establish the statutory private offering exemption in Section 4(a)(2) without argument. An issuer that declines the safe harbor is not thereby selling unlawfully; it must instead show on the facts that the transaction did not involve a public offering, looking to the buyers access to the kind of information registration would supply and their ability to fend for themselves. The price of leaving the safe harbor is that the issuer carries a facts-and-circumstances burden rather than a checklist.

A placement agent completes its distribution of a Rule 506(b) offering. Does the placement agent have any responsibility to confirm that the issuer actually filed the required Form D notice with the SEC, or is this entirely the issuer's own concern with no bearing on the placement agent?

1. A.The placement agent has absolutely no interest in this filing whatsoever, since Form D is exclusively the issuer's own regulatory paperwork with zero connection to the placement agent.Wrong. This draws too sharp a line between the issuer's filing obligations and the placement agent's own stake in the offering's compliance.
2. B.The placement agent is legally required to file Form D itself on the issuer's behalf in every Rule 506 offering it distributes.Wrong. Form D is filed by or on behalf of the issuer; there is no rule requiring the placement agent to be the filer in every case.
3. C.Form D's filing status has no bearing on the exemption's availability at all, so there is no reason for the placement agent to care whether or when it is filed.Wrong. While Form D is a notice filing rather than a condition precedent to the exemption itself, the placement agent still has a practical interest in the issuer's overall compliance posture.
4. D.The placement agent has a practical interest in confirming the filing was made, since its own distribution activity relies on the issuer's exemption being properly maintained.Correct. A prudent placement agent follows up rather than simply assuming compliance.

Why: The placement agent has a practical interest in confirming the issuer's Form D filing was made, since the placement agent's own conduct in distributing the offering relies on the issuer's exemption being properly maintained. A prudent placement agent does not simply assume the issuer handled this without any follow-up.