​​​​​​​​​​Statute: Wis. Stat. s. 551.302(3)

Administrative Code: Wis. Admin. Code s. DFI-Sec 2.04(2)

Used for: Transactions made in reliance on the exemption provided by Rule 506 of Regulation D under the Securities Act of 1933

Note: No commission or other remuneration may be paid or given to any person other than registered broker-dealers and agents for soliciting or selling to any person in Wisconsin.

Q: When must we file in Wisconsin for a Rule 506 offering?

A: Not later than 15 days after the first sale in Wisconsin.

Q: Are there any Wisconsin legend requirements for the Private Placement Memorandum?

A: No.

Q: Are the disqualification-from-use provisions set forth in Wis. Admin. Code s. DFI-Sec 2.029(3) for Rule 505 offerings also applicable to Rule 506 transactions subsequent to the 1996 passage of the National Securities Markets Improvement Act (NSMIA)?   

A: Yes. The federal Dodd-Frank Wall Street Reform and Consumer Protection Act that was enacted in July 2010 contained a provision in section 926 that directed the SEC to adopt a disqualification-from-use provision for Rule 506 offerings that is "substantially similar" to the existing disqualification-from-use provision for Rule 505 offerings. Accordingly, the SEC approved the final disqualification rule on July 10, 2013.

Q: May commissions or other remuneration be paid or given to any person for soliciting or selling in Wisconsin?

A: Yes, but only to broker-dealers or agents registered in Wisconsin because NSMIA does not affect the registration requirement of Wis. Stat. s. 551.401 and 551.402.

Q: Are amendments or final reports of sales required?

A: No, nor are the annual filings required federally for offerings continuing after a 1-year period. However, "material changes" may require a completely new filing. An increase in the aggregate dollar amount of securities being offered has been determined by the staff to constitute a "material change" so significant as to require a de novo/new filing.

Q: In what form should the Form D be submitted?

A: A photocopy of the Form D as filed electronically with the SEC will suffice. Additionally, because the date of first sale information contained in Item 7 of the Form D necessarily relates to the first sale "anywhere," in order for the division to establish whether a filing under the Wisconsin Regulation D/Rule 506 provision is timely, separate information regarding the date of the first sale to a person in Wisconsin should be provided in a cover letter to the Form D submitted to the Division of Securities.

Effective December 2014, issuers also have the option to electronically file the Form D and all amendments in Wisconsin with NASAA’s Electronic Filing Depository.

Q: Does Wisconsin’s Regulation D/Rule 506 provision contain a penalty fee for a late filing?

A: On July 9, 2014, the Administrator of the division signed an Order Regarding Reg D Delinquent Filing Fee. Accordingly, if a Reg D notice filing is received by the division more than 15 days after the first sale of the security in Wisconsin, a $200 delinquent filing fee is due in addition to the $200 notice filing fee.

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The Financial Industry Regulatory Authority (FINRA) published Regulatory Notice 10-22 applicable to its broker-dealer members, reminding them of their obligation to conduct a reasonable “due diligence” investigation of the issuer and the securities they recommend in offerings made under federal Regulation D (most of which are Rule 506 offerings). Although a large percentage of Regulation D/Rule 506 offerings are made solely by the issuer without the involvement of any broker-dealer (with the result that Notice 10-22 is not directly applicable to such issuer offerings), the division staff is including a link to that FINRA Notice to provide guidance to issuers and their controlling persons of important investor protection and disclosure considerations to be mindful of when they are making solicitations and sales to public investors in Regulation D offerings. Specifically, Notice 10-22 emphasizes that a broker-dealer’s due diligence investigation must cover at a minimum: (1) the issuer and its management; (2) the business prospects of the issuer; (3) the assets held or to be acquired by the issuer; (4) the claims being made; and (5) the intended use of proceeds of the offering. All those information areas are just as critical to investors in issuer-only offerings. Consequently, issuers and their controlling persons need to make sure that such information areas are part of the total package of information (included with other key disclosure areas such as financial statements, relevant risk factors, etc.) being provided to offerees/purchasers to enable them to make a fully-informed investment decision.

History: Predecessor statute Wis. Stat. s. 551.29(3) adopted July 9, 1998. Repealed and recreated as Wis. Stat. s. 551.302(3) effective January 1, 2009.