These companies got slapped with civil penalties ranging from $60k - $175k.

That's a high toll for failing to make a free filing.

It's just not worth the risk.😬

At our firm, we take Reg D compliance so seriously that we pre-file Form D for every fund we form—submitting it even before the initial closing. ✅

Many don’t realize that pre-fling Form D is an option, but it ensures there’s never a risk of missing the 15-day deadline.

The offerings here involved ~$300 million worth of securities.

While Form D filing is generally mandatory regardless of the transaction size, it's definitely hard to fly under the SEC's radar with deals involving hundreds of millions. 😅

As quick background, if you're issuing a security in reliance on Regulation D exemptions/safe harbors, you must file Form D within 15 calendar days after the first sale of securities. 🗓️

Link to the suit/petition here: t.co/gbAcLZmtXA

Is the accredited investor definition valid as-is or outdated? The truth is probably somewhere in the middle.

The debate rages on!

The counterargument is that financial metrics are a protection mechanism to ensure that only investors who can absorb the potential losses in private markets participate in these investments.

Replacing these with non-financial metrics will result in a lot of ordinary people losing their shirt.

The rationale for the petition?

Democratize the private financial markets.

ICAN argues that the SEC’s recent attempts to broaden the definition by including holders of certain securities licenses doesn’t go far enough to ensure broad access to private markets.

Currently, to be deemed an accredited investor, the main financial metrics to meet are having a $1 million net worth (excluding primary home 🏠), or $200k annual income ($300k with a spouse).

Fortunately, many AML/CFT compliance tasks can be outsourced to third-party providers. However, this demands proactive coordination—please don’t wait until December 31, 2025, to begin. 😅

5⃣ Ongoing Customer Due Diligence

4⃣ AML/CFT Employee Training

3⃣ Designate an AML/CFT Compliance Officer

2⃣ Independent Testing of the AML/CFT Program

Critically, there are five "pillars" to an effective AML/CFT program.

I've set them out below with clippings of the actual text from the final rule:

1⃣ Internal Policies, Procedures, and Controls

The final rule will require certain fund managers to:

▶️establish a reasonable, risk-based AML/CFT program,
▶️ file Suspicious Activity Reports w/ FinCEN, maintain certain records, and
▶️ follow other BSA-related obligations, including special information sharing procedures.

"Financial Institutions" traditionally included:
🏦 Banks
💼 Broker-dealers in securities
🎰 Casinos
💵 Money services businesses

and so on.

Per the recent FinCEN final rule, the definition of "financial institutions" will now include investment advisers (certain RIAs + ERAs).

As background, the Bank Secrecy Act (BSA) requires certain "financial institutions" to adopt certain minimum standards for implementing AML/countering the financing of terrorism (AML/CFT) programs.

If your entities or portfolio companies were preparing for CTA compliance, this ruling could be huge (pending any further appeals). Stay tuned.