Navigating the complex landscape of securities regulations can be a daunting task for real estate developers, business owners, private equity fund managers, and other professionals looking to raise capital. Understanding both federal and state securities laws is crucial to ensure compliance and successful fundraising. New Hampshire’s Blue Sky Laws are state-specific regulations that govern the offer and sale of securities within the state. These laws work alongside the federal securities regulations under Regulation D, which provide exemptions that simplify the capital-raising process.
This article aims to provide a comprehensive guide to New Hampshire’s Blue Sky Laws, their relationship with the SEC’s Regulation D, and the practical steps required for compliance. We will explore the key provisions of New Hampshire’s securities laws, the exemptions available, and the procedural requirements for taking advantage of these exemptions. Additionally, we will discuss the circumstances under which you might need a New Hampshire-licensed attorney and the role of out-of-state syndication attorneys in assisting with your offerings.
Whether you are involved in real estate syndication, considering a private placement memorandum, or simply seeking to understand the intricacies of Regulation D and state-specific regulations, this guide will equip you with the knowledge needed to navigate New Hampshire’s securities laws effectively. By understanding these laws and working with qualified legal professionals, you can ensure your offerings are compliant and well-structured, paving the way for successful capital-raising endeavors.
How do a State’s Blue Sky Laws Relate to the SEC’s Regulation D?
Federal vs. State Regulation
When raising capital through securities offerings, issuers must navigate both federal and state regulatory frameworks. Regulation D, established by the SEC under the Securities Act of 1933, provides exemptions from federal registration for certain securities offerings. These exemptions, specifically under Rule 506(b) and Rule 506(c), offer issuers significant advantages by allowing them to raise unlimited capital with fewer regulatory burdens compared to traditional registration.
Preemption of State Blue Sky Laws
Under 15 U.S. Code § 77r(b)(4)(F), offerings made pursuant to Regulation D Rule 506(b) and Rule 506(c) are considered “covered securities.” This federal designation preempts state Blue Sky Laws, meaning that states cannot require these offerings to undergo their typical registration processes. However, states are not entirely excluded from the process; they retain the right to mandate notice filings and collect associated fees.
- Rule 506(b): Allows issuers to raise an unlimited amount of capital from accredited investors and up to 35 non-accredited investors without general solicitation or advertising.
- Rule 506(c): Permits issuers to engage in general solicitation and advertising, provided all investors are accredited and their status is verified.
These provisions streamline the capital-raising process, making it more efficient for issuers by reducing the complexity and cost associated with state-by-state compliance.
State Notification Requirements
While Regulation D preempts the registration requirements of state Blue Sky Laws, issuers must still comply with state-specific notification rules. This typically involves:
- Filing Form D: Issuers must file Form D with the SEC within 15 days after the first sale of securities.
- State Notice Filings: Many states, including New Hampshire, require a copy of Form D to be filed along with additional documentation and filing fees. These filings inform state regulators of the securities offering and ensure compliance with local laws.
Intrastate Offerings
There are scenarios where a sponsor might choose to adhere to state Blue Sky Laws instead of utilizing a federal exemption. If an offering is entirely localized—meaning the sponsor, all investors, and the assets are all situated within a single state—the sponsor might opt for an intrastate offering. This approach can be beneficial if the issuer prefers to deal exclusively with state regulations, which may offer different advantages or align better with the specific characteristics of the offering.
In such cases, the offering would be subject to the state’s Blue Sky Laws, including any registration requirements and exemptions provided under state law. For example, New Hampshire’s Blue Sky Laws, governed by RSA 421-B, would apply in an intrastate offering scenario within New Hampshire.
Understanding the interplay between state Blue Sky Laws and the SEC’s Regulation D is crucial for issuers seeking to raise capital efficiently. While Regulation D’s preemption of state registration requirements simplifies compliance, issuers must remain vigilant about state notification rules and consider the potential benefits of intrastate offerings under certain conditions. Consulting with a knowledgeable syndication attorney can help navigate these complexities and ensure full compliance with both federal and state regulations.
Why Would I Choose Regulation D Rule 506(b) or Rule 506(c) Over the State’s Blue Sky Laws?
Federal Preemption and Streamlined Compliance
One of the primary reasons issuers opt for Regulation D, specifically Rule 506(b) or Rule 506(c), over state Blue Sky Laws is the streamlined compliance it offers. Under 15 U.S. Code § 77r(b)(4)(F), Regulation D Rule 506(b) and Rule 506(c) offerings are classified as “covered securities,” which preempts state Blue Sky Laws. This federal preemption means that issuers can avoid the complex and often costly state-by-state registration requirements, significantly simplifying the capital-raising process.
Benefits of Regulation D Exemptions
Rule 506(b):
- Unlimited Capital Raising: Issuers can raise an unlimited amount of capital.
- Investor Flexibility: Allows for up to 35 non-accredited investors, along with accredited investors, without the need for general solicitation or advertising.
- Reduced Disclosure Requirements: While non-accredited investors must receive certain information, the disclosure requirements are less burdensome compared to full state registrations.
Rule 506(c):
- General Solicitation: Permits general solicitation and advertising, which can broaden the pool of potential investors.
- Accredited Investors Only: Requires all investors to be accredited, with a robust verification process ensuring compliance.
- Unlimited Capital Raising: Similar to Rule 506(b), there is no cap on the amount of capital that can be raised.
Avoiding Jurisdictional Pitfalls
When raising capital, it’s crucial to ensure that all aspects of the offering comply with the applicable securities laws. This becomes particularly challenging with intrastate offerings under state Blue Sky Laws.
Interstate vs. Intrastate Concerns:
- Out-of-State Investors: If any investor or the sponsor is domiciled outside of the state, the offering cannot qualify as intrastate under state Blue Sky Laws.
- Discovery of Out-of-State Domicile: An unexpected discovery that an investor is domiciled outside the state can retroactively disqualify the offering as intrastate, leading to significant legal issues. This reclassification can result in non-compliance with both state and federal securities laws, potentially leading to enforcement actions, fines, or the invalidation of the offering.
Mitigating Risks with Regulation D
By choosing Regulation D Rule 506(b) or Rule 506(c), issuers can mitigate the risks associated with inadvertently violating state Blue Sky Laws due to jurisdictional errors. Regulation D provides a clear, federally compliant pathway for raising capital, regardless of the domicile of investors or the sponsor. This ensures that the offering remains compliant even if investors are spread across multiple states.
Key Advantages:
- Consistency and Predictability: Regulation D offers a uniform set of rules and exemptions applicable nationwide, reducing the complexity and uncertainty involved in compliance.
- Legal Protection: Using Regulation D helps protect against the risk of retroactive non-compliance due to changes in investor domicile or other jurisdictional issues.
- Broader Reach: Rule 506(c) allows for general solicitation, enabling issuers to reach a wider audience of accredited investors across the country.
Choosing Regulation D Rule 506(b) or Rule 506(c) over state Blue Sky Laws provides significant benefits in terms of compliance simplicity, risk mitigation, and the ability to raise unlimited capital. These federal exemptions offer a consistent and predictable framework, ensuring issuers can focus on their capital-raising efforts without the complexities and potential pitfalls associated with state-by-state regulations. For issuers, particularly in the realm of real estate syndication, consulting with a syndication attorney is essential to navigate these regulations effectively and ensure full compliance with federal and state securities laws.
What Are The Notification Rules and Terms For Notifying the State about a Regulation D Rule 506(b) or Rule 506(c) Offering?
When conducting a Regulation D Rule 506(b) or Rule 506(c) offering, issuers must comply with both federal and state notification requirements. While Regulation D provides exemptions from federal registration, states still have the authority to impose notice filing requirements and associated fees. In New Hampshire, these requirements ensure that state regulators are informed about securities offerings, even though the offerings are exempt from full state registration under federal preemption.
Filing Requirements in New Hampshire
To comply with New Hampshire’s Blue Sky Laws for a Regulation D Rule 506(b) or Rule 506(c) offering, issuers must complete the following steps:
File Form D with the SEC
- Issuers must file Form D electronically with the SEC within 15 days after the first sale of securities. This filing includes basic information about the offering, the issuer, and the principals involved.
Submit Notice Filing to New Hampshire via NASAA EFD
- Notice filings for New Hampshire must be submitted through the NASAA Electronic Filing Depository (EFD). The EFD streamlines the process by allowing issuers to file notices electronically to multiple states, including New Hampshire.
- Visit the NASAA EFD FAQ for detailed instructions on how to use the system.
Fees and Deadlines
New Hampshire imposes fixed fees for notice filings and late submissions. These fees are essential for maintaining compliance and avoiding penalties.
- New Notice Filing Fee: $500
- This fee applies to the initial notice filing submitted to the state through the NASAA EFD.
- Late Filing Fees:
- $500: If the filing is submitted 16 to 90 days after the first sale of securities.
- $1,000: If the filing is submitted 91 to 365 days after the first sale of securities.
Timely filing is crucial to avoid these additional costs. Issuers should aim to complete their state notice filings promptly within the 15-day window following the first sale to ensure compliance and avoid late fees.
Ongoing Obligations
After the initial notice filing, issuers must be aware of any ongoing obligations or updates required by the state. While New Hampshire may not impose significant ongoing reporting requirements for Regulation D offerings, it is essential to stay informed about any changes in state law or additional notifications that might be necessary.
Importance of Legal Guidance
Navigating the notification requirements and terms for a Regulation D Rule 506(b) or Rule 506(c) offering can be complex. Working with a syndication attorney, especially one familiar with New Hampshire’s securities laws, can help ensure all filings are accurate, complete, and timely. This legal guidance can prevent costly mistakes and provide peace of mind that the offering complies with both federal and state regulations.
Understanding and adhering to the notification rules and terms for Regulation D offerings in New Hampshire is a critical aspect of compliance. By filing the necessary forms through the NASAA Electronic Filing Depository, paying the required fees, and meeting all deadlines, issuers can avoid penalties and ensure their offerings proceed smoothly. Consulting with a knowledgeable syndication attorney can further streamline this process and help navigate the intricacies of both federal and state securities laws.
What are New Hampshire’s Blue Sky Laws?
Blue sky laws are state regulations designed to protect investors from securities fraud by requiring sellers of new issues to register their offerings and provide financial details. New Hampshire’s blue sky laws, codified in various sections of the New Hampshire Revised Statutes, ensure transparency and fairness in the state’s securities market. Key provisions include registration requirements (Section 421-B:3-301), notice filing for federal covered securities (Section 421-B:3-302), exemptions (Section 421-B:2-201), and regulations against misrepresentations (Section 421-B:5-506). These laws collectively aim to maintain a secure and trustworthy environment for investors.
NH ST § 421-B:3-301 Securities Registration Requirement
Section 421-B:3-301 of the 2015 New Hampshire Revised Statutes mandates that securities must be registered to be offered or sold within the state unless they are federal covered securities, exempt from registration, or registered under the relevant chapter. Additionally, various corporate documents must include a statement affirming that the securities are or will be registered or exempt under the chapter. This provision ensures compliance with state securities laws and does not, by itself, constitute registration or exemption under federal law.
NH ST § 421-B:3-302 Notice Filing
Section 421-B:3-302 of the 2015 New Hampshire Revised Statutes outlines the notice filing requirements for federal covered securities. It mandates that any person offering these securities must file records with the state, including those filed with the SEC, a consent to service of process, and applicable fees. The notice filing is effective for one year and can be renewed. Failure to comply may result in a stop order from the Secretary of State. This ensures that securities are properly registered and fees are paid.
NH ST § 421-B:2-201 Exempt Securities
Section 421-B:2-201 of the 2015 New Hampshire Revised Statutes enumerates various securities exempt from certain registration requirements. These include securities issued by the U.S. government, states, political subdivisions, and certain recognized foreign governments. It also covers securities from international banking institutions, banks, insurance companies, regulated public utilities, and federal covered securities. Additionally, exemptions apply to securities from non-profit organizations, equipment trust certificates, and interests in common trust funds managed by banks. This ensures specific securities can be offered without extensive regulatory compliance.
NH ST § 421-B:2-202-A Implementing Provisions
Section 421-B:2-202-A of the 2015 New Hampshire Revised Statutes outlines the criteria for counting purchasers of securities, including specific exclusions such as relatives living with the purchaser, IRAs, certain trusts, and business entities with significant beneficial interest. It also defines principles for integrating offerings, considering factors like timing, purpose, and the type of securities. Additionally, it mandates disclosures or conditions for exempt securities or transactions, especially if key individuals have recent convictions or enforcement actions related to securities.
NH ST § 421-B:2-203 Additional Exemptions and Waivers
Section 421-B:2-203 of the 2018 New Hampshire Revised Statutes allows the Secretary of State to issue orders exempting certain securities, transactions, or offers from registration requirements specified in RSA 421-B:3-301 through RSA 421-B:3-306 and RSA 421-B:5-504. Additionally, the Secretary can waive conditions for exemptions or offers under RSA 421-B:2-201 and RSA 421-B:2-202. This provision grants flexibility in the application of securities regulations to accommodate various circumstances.
NH ST § 421-B:5-506 Misrepresentations Concerning Registration or Exemption
Section 421-B:5-506 of the 2021 New Hampshire Revised Statutes addresses misrepresentations concerning the registration or exemption of securities. It clarifies that the filing or registration of a security, or the availability of any exemption, does not imply endorsement or validation by the Secretary of State. It is illegal to make false representations to clients or potential clients regarding the registration or exemption status of a security. This section ensures that investors are not misled about the regulatory status of their investments.
NH ST § 421-B:6-614 Fees
Section 421-B:6-614 of the 2015 New Hampshire Revised Statutes specifies the fees associated with securities registration and notice filings. It details initial and renewal fees for various securities, including mutual funds and initial public offerings, and outlines additional penalties for late filings. Fees vary based on the type and value of the securities, with maximum limits set for certain fees. The statute ensures compliance and timely reporting by imposing penalties for delinquent filings, fostering proper registration and regulation of securities within the state.
What are New Hampshire’s Securities Laws Exemptions?
New Hampshire’s Blue Sky Laws, codified under RSA 421-B, provide various exemptions that allow issuers to offer and sell securities without undergoing the full registration process required for non-exempt securities. These exemptions are designed to facilitate capital raising while ensuring investor protection. Understanding these exemptions is crucial for issuers seeking to comply with state securities laws while leveraging opportunities to streamline their offerings.
Governmental and Foreign Entities
- Governmental Entities: Securities issued or guaranteed by the United States, any state, any political subdivision of a state, or any agency or instrumentality of these entities are exempt from registration. This also includes securities issued by certain foreign governments, including Canadian federal, provincial, or territorial governments.
Financial Institutions
- Financial Institutions: Securities issued by banks, savings institutions, trust companies, savings and loan associations, building and loan associations, and credit unions are exempt. This exemption also extends to securities issued by industrial loan and thrift companies.
Other Entities
- Railroads and Common Carriers: Securities issued by railroads, common carriers, or public utilities regulated in respect of their rates and charges by a governmental authority are exempt.
- Listed Stock Exchange Securities: Securities listed on a national securities exchange or the Nasdaq Stock Market, as well as securities of the same issuer that are equal in seniority or senior to these listed securities, are exempt.
Non-Profit Organizations
- Non-Profit Persons: Securities issued by non-profit organizations, such as religious, educational, charitable, fraternal, or social entities, are exempt from registration, provided they are not primarily for profit and no part of the net earnings benefits any private shareholder or individual.
Commercial and Employee Benefit Transactions
- Current Transaction Commercial Paper: Securities that represent notes, drafts, bills of exchange, or banker’s acceptances that arise out of a current transaction and have a maturity at the time of issuance of not more than nine months are exempt.
- Employee Benefit Plans: Securities issued in connection with an employee benefit plan that meets certain conditions outlined in the law are exempt.
Securities Meeting Certain Conditions
- Specific Conditions: Securities that meet specific conditions set forth in New Hampshire law may also be exempt. These conditions include detailed criteria that must be satisfied to qualify for the exemption, ensuring that the securities offer a certain level of protection to investors.
Summary
Understanding the exemptions available under New Hampshire’s securities laws is essential for issuers looking to raise capital without the full burden of registration. These exemptions cover a broad range of entities and securities, providing flexibility while maintaining investor safeguards. Consulting with a syndication attorney can help issuers navigate these exemptions effectively, ensuring compliance and optimizing the capital-raising process.
For more detailed information on specific exemptions and their requirements, refer to RSA 421-B:2-201. This comprehensive understanding can help issuers determine the most appropriate and compliant path for their securities offerings.
What are New Hampshire’s Procedures for Securities Law Exemptions?
To leverage the securities law exemptions available under New Hampshire’s Blue Sky Laws, issuers must follow specific procedures to ensure compliance and proper documentation. These procedures help regulators maintain oversight and ensure that the exemptions are applied appropriately, protecting both issuers and investors.
Identifying the Appropriate Exemption
- Determine Eligibility: The first step is to identify the appropriate exemption that applies to the specific securities offering. Issuers should review the exemptions listed under RSA 421-B:2-201 and determine which category their securities fall into, such as governmental entities, financial institutions, or non-profit organizations.
Preparing the Required Documentation
- Supporting Documentation: Issuers must prepare the necessary documentation to support their claim for an exemption. This documentation may include:
- Articles of incorporation or organization for the issuing entity.
- Financial statements or reports demonstrating compliance with exemption criteria.
- Detailed descriptions of the securities being offered and the terms of the offering.
- Proof of regulatory status for entities such as financial institutions or public utilities.
Filing with the New Hampshire Bureau of Securities Regulation
- Notice Filing: Even though certain securities are exempt from registration, issuers may still be required to file a notice with the New Hampshire Bureau of Securities Regulation. This ensures that the state is informed about the securities offering and can verify the application of the exemption.
- Form D Filing: For Regulation D offerings under Rule 506(b) and Rule 506(c), issuers must file Form D with the SEC and provide a copy to the state. This can be done through the NASAA Electronic Filing Depository (EFD), which streamlines the process of submitting notice filings to multiple states.
Paying the Required Fees
- Filing Fees: Issuers must pay the necessary filing fees associated with their notice filing. In New Hampshire, the fees are fixed and are as follows:
- New Notice Filing Fee: $500
- Late Filing Fees: If the filing is submitted late, additional fees apply:
- $500 for filings submitted 16 to 90 days after the first sale of securities.
- $1,000 for filings submitted 91 to 365 days after the first sale of securities.
Compliance and Verification
- Review and Verification: Once the notice filing and fees are submitted, the New Hampshire Bureau of Securities Regulation will review the documentation to verify that the securities offering qualifies for the claimed exemption.
- Additional Information: The Bureau may request additional information or clarification to ensure compliance with the exemption criteria.
Ongoing Obligations
- Maintaining Compliance: Even after securing an exemption, issuers must continue to comply with any ongoing obligations or reporting requirements. This may include updates to the Bureau if there are significant changes to the offering or the issuer’s status.
Legal Assistance
- Consulting a Syndication Attorney: Navigating the procedures for securities law exemptions can be complex. Working with a syndication attorney, particularly one with experience in New Hampshire’s securities laws, can help ensure that all requirements are met and filings are accurate and timely. An attorney can provide valuable guidance on documentation, filing procedures, and maintaining compliance throughout the offering process.
By following the correct procedures for claiming securities law exemptions in New Hampshire, issuers can take advantage of streamlined regulatory processes while ensuring full compliance with state laws. Proper documentation, timely notice filings, and payment of required fees are critical steps in this process. Consulting with a knowledgeable syndication attorney can further ensure that issuers navigate these procedures effectively, minimizing legal risks and facilitating successful capital-raising efforts.
Frequently Asked Questions
Do I Need an Attorney from New Hampshire to Put Together an Offering?
Whether you need an attorney from New Hampshire to assemble your securities offering depends on the specifics of your situation. If your offering falls under Regulation D and is not subject to New Hampshire-specific Blue Sky Laws, it is likely that you do not need an attorney licensed in New Hampshire.
For instance, suppose you are a real estate syndicator looking to raise capital for a multifamily deal in Manchester, New Hampshire, and you intend to offer this investment opportunity across various states. In this case, you would primarily need assistance with preparing a private placement memorandum (PPM) under Regulation D. Here, a syndication attorney who specializes in Regulation D offerings, regardless of their state of licensure, could effectively assist you. This attorney could help you draft the PPM, form the necessary entities, and prepare operating agreements. However, they would not be able to provide legal counsel on specific New Hampshire securities laws and their potential implications on your offering.
Conversely, if your project is a development in Nashua, New Hampshire, and you plan to raise capital solely from New Hampshire investors, intending to rely on a New Hampshire-specific Blue Sky Law exemption, you would need to work with a lawyer licensed in New Hampshire. This is because the intricacies of state-specific securities regulations would require precise legal guidance to ensure compliance with New Hampshire’s laws and to properly utilize the state’s exemptions.
In summary, the need for a New Hampshire-based attorney is contingent upon whether your offering relies solely on federal Regulation D exemptions or requires navigation of New Hampshire’s Blue Sky Laws. For offerings that are primarily regulated by federal law and do not necessitate specific state legal advice, a qualified syndication attorney from any state can provide the necessary legal support. However, for offerings that must comply with state-specific exemptions and regulations, partnering with a New Hampshire-licensed attorney is essential to ensure full legal compliance and to leverage local legal expertise effectively.
Is it Okay if the Real Estate Syndication Attorney, Licensed Outside of New Hampshire, Looks Over My Purchase Contract?
A real estate syndication attorney who is licensed outside of New Hampshire can certainly review your purchase contract; however, their capacity to provide legal advice is limited by their licensure. For instance, Tilden Moschetti, Esq., a syndication attorney with the Moschetti Syndication Law Group, is able to examine a purchase contract for a property in Concord, New Hampshire. While he can offer business consulting advice—such as discussing the price and broad deal points like the timeline until closing—he cannot provide specific legal advice regarding the terms of the contract due to not being licensed in New Hampshire.
This limitation is crucial to understand because while a knowledgeable syndication attorney can help you evaluate the overall business aspects of your purchase contract, they cannot advise on legal nuances or the compliance with New Hampshire-specific laws and regulations. This distinction ensures that any legal interpretations or advice related to the contract’s terms, which are governed by New Hampshire law, are left to a locally licensed attorney who is familiar with the state’s legal landscape.
In summary, while an out-of-state syndication attorney can provide valuable insights and business advice, it is important to seek the expertise of a New Hampshire-licensed attorney for any legal advice pertaining to the specific terms of your purchase contract. This dual approach ensures that you receive comprehensive guidance while remaining compliant with local legal requirements.
Tilden Moschetti, Esq., is a highly sought-after syndication attorney with nearly two decades of experience. His clientele ranges from real estate developers and startups to established businesses and private equity funds. Tilden’s expertise in syndication law comes not only from his knowledge of syndication and securities law but from real, hands-on experience as an active syndicator himself in every real estate product type and nearly all markets in the US. His knowledge and experience set him apart and established him as the Reg D legal services leader.