I recently wrote about the Securities and Exchange Commission's announcement that it had settled "charges" against several entities for failing to file time Forms D. One of the entities settling with the SEC is a registered investment adviser to private funds. According to the SEC's two of these funds conducted unregistered offerings in which the investment adviser engaged in a general solicitation. Consequently, the funds were required to rely on either Rule 504 or Rule 506(c). A Form D is required be filed as a condition to each of these rules.
According to the SEC, the fund agreements made the investment adviser responsible for the management, business and affairs of the funds. In the SEC's view this made the investment adviser responsible for filing the Form Ds. There is just one problem. Rule 503 applies to the issuer, not persons contractually responsible for managing the business and affairs of the issuer:
An issuer offering or selling securities in reliance on § 230.504 or § 230.506 must file with the Commission a notice of sales containing the information required by Form D . . . .
The SEC clearly knows that this is the case because its own order states:
An issuer offering or selling securities in reliance on one of the exemptions provided by Regulation D is required by Securities Act Rule 503 to file a notice of sales on Form D . . . .
Notably, the SEC does not assert that the investment adviser is an "issuer," a term defined in Section 2(a)(4) of the Securities Act. Nor does the SEC claim that the investment adviser was liable as an aider and abetter, much less the statutory basis for such liability
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