Answers|Dictionary

Do I have to file anything when I raise money on SAFEs or notes?

FundraisingCompliance

Yes, in almost every case: a Form D with the SEC within 15 days of the first sale, and a notice in some states. SAFEs and convertible notes are securities, and selling securities requires either registration with the SEC or an exemption. Nearly every startup round relies on the same exemption, Rule 506(b) of Regulation D, which allows sales to an unlimited number of accredited investors without general advertising. The exemption is self-executing, but it comes with a filing.

Form D

Form D is a short notice filed electronically with the SEC within 15 days after the first sale in the offering. It lists the company, its officers and directors, the exemption relied on, the amount raised and the amount still to be raised. It is public, it is not reviewed or approved, and there is no federal fee. Filing late is a common mistake and is generally curable, but the deadline exists and some states key their own deadlines to it.

State notices

States cannot require their own registration of a 506(b) offering, but many require a notice filing and a fee when investors in that state buy. New York and California are two that founders run into, each with its own deadline measured from the first sale in the state. The rule is to check every state where an investor lives, not just the state where the company is.

A round that includes people who are not accredited investors, or that was marketed publicly, does not fit 506(b) and needs a different analysis before anything is signed.

Written by the lawyers who built Arabella. This is legal information, not legal advice for your situation, and reading it does not make us your lawyers. For a real dispute or a high-stakes decision, talk to a licensed attorney. More questions.