New York Businesses and Others Raising Private Placement Monies under Rule 506 Still Need to File Notice Papers with New York
When selling private securities under rule 506, due to the Securities Act preempting state law, one does not typically have to comply with any state rules. However, even with the adoption of the National Securities Markets Improvements Act of 1996 (NSMIA) greatly reducing state regulation for securities sold in reliance upon Rule 506 of Regulation D, as “covered securities” under Section 18 of the Securities Act, NY still wants to be “in the know.” Under Section 18, covered securities are exempt from state regulations that: (1) require the registration or qualification of securities or securities transactions; (2) impose any requirements related to disclosure documents used in an offering; or (3) impose any merit regulation of such offerings.
New York Filing Requirements Still Apply (“Blue Sky Laws”)
While New York may not review the 506 securities offering, it still has notice and filing requirements that must be complied with. Just like the SEC, NY has its own securities division and not keeping them in the loop can be disastrous. This is especially due to the fact NY, like other states, can still bring actions against securities violators pursuant to state law.
New York Form 99
In New York, when notifying the state that a 506 offering of securities is being made to NY residents, the offeror will need to file a form 99 (in addition to the Form D filed with the federal government) and pay the associated fee at least one day prior to the first “offer”.
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