Compliance audit for raising investment

Research steps performed and summary of findings: Steps taken - Performed broad web searches focused on federal securities exemptions (Reg D Rule 506(b)/(c), Reg A, Reg CF), Form D filing and timing, state 'Blue Sky' notice and fees, accredited investor verification, FinCEN BOI reporting, and practical compliance audit checklists for LLCs and private companies raising capital. (Search terms included: "Form D state filing requirements", "Blue Sky notice list Form D by state", "FinCEN BOOI reporting", "Reg D accredited investor verification", "compliance audit raising capital checklist", etc.) - Scraped and compressed authoritative sources: SEC exempt-offering resources (Rule 506(c) and Assessing Accredited Investors under Regulation D), FinCEN BOI page, NASAA homepage/EFD references, and a Morgan Lewis client alert summarizing SEC staff guidance on 506(c) verification. Key findings (actionable and necessary for a compliance audit when raising investment in the U.S.) 1) Federal exempt-offering basics and Form D timing - Rule 506(c) permits general solicitation/advertising if all purchasers are accredited investors and the issuer takes "reasonable steps to verify" accreditation. Issuers must file Form D with the SEC within 15 days after the first sale in the offering. States retain authority to require notice filings and collect fees even for Rule 506 offerings. (SEC) - Practical implication: include Form D filing in the audit timeline (prepare and file within 15 days after first sale) and plan for parallel state notice filings and fees. 2) Accredited investor verification — standards and recent staff guidance - Rule 506(b) requires a company to have a "reasonable belief" that investors are accredited; Rule 506(c) requires the issuer to take "reasonable steps to verify" accreditation. The SEC provides a principles-based approach with a non-exclusive list of verification methods (review of tax forms, brokerage/bank statements, written confirmation from broker-dealers/registered investment advisers/attorneys/CPAs, credit reports, and prior verifications). (SEC) - SEC staff (March 2025 no-action guidance summarized by law firms) has indicated issuers may rely on minimum investment thresholds (e.g., $200,000 for natural persons and $1,000,000 for entities) as a reasonable verification step, along with written representations and absence of actual knowledge to the contrary. This guidance can reduce the verification burden for 506(c) offerings but does not remove state filing obligations or other constraints. (Morgan Lewis) - Practical implication: document the verification method chosen, retain supporting verification records (or confirmations from gatekeepers), and maintain written investor representations in subscription agreements. If relying on minimum investment amounts, record the basis and supporting representations. 3) State (Blue Sky) notice filings - Federal preemption under Rule 506 does not prevent states from requiring notice filings and fees. NASAA provides resources and an Electronic Filing Depository (NASAA EFD) that enables filers to submit state notice filings/fees across jurisdictions. State requirements (which states require notices, filing fees, timing, and forms) vary and must be checked state-by-state (NASAA EFD is the consolidation point). - Practical implication: include a state-by-state Blue Sky check in the compliance audit. Use NASAA EFD to identify required state notices and fees and budget for filing fees and timing. Track states where solicitation or investor residence triggers notice obligations. 4) Beneficial Ownership Information (BOI) / Corporate Transparency Act (FinCEN) - As of March 26, 2025, FinCEN issued an interim final rule removing BOI reporting requirements for entities formed in the United States (domestic entities). The revised definition of "reporting company" now generally covers certain foreign entities that have registered to do business in the U.S.; such foreign reporting companies must file BOI under the new deadlines (e.g., reporting companies registered before March 26, 2025 had to file by April 25, 2025; companies registered on or after March 26, 2025 have 30 calendar days after registration to file). Guidance materials are being updated. (FinCEN) - Practical implication: for most U.S.-formed companies, the BOI filing requirement has been removed by the interim final rule; however, confirm current status and check whether any foreign entities or previously-registered foreign entities in the corporate structure have BOI obligations. Keep monitoring FinCEN updates and any guidance revisions. 5) Other federal compliance risks to audit for - Bad-actor disqualifications: check issuer and key persons against disqualifying events that can bar reliance on Rule 506 exemptions. - Investment Company Act issues: ensure the offering and issuer are not functioning as an unregistered investment company (avoid pooled-investment pitfalls unless appropriately registered or exempt). - AML/KYC and BSA considerations: perform KYC on investors, watch for suspicious funds, and consider anti-money-laundering checks, particularly for larger or foreign investors. Ensure subscription docs include representations about source of funds and that gatekeepers perform necessary checks where applicable. - Tax and withholding: for foreign investors, obtain appropriate W-8 or W-9 forms and check for FIRPTA or other withholding obligations where applicable (real-estate-heavy investments), and consider tax reporting obligations. - Corporate formalities: confirm formation documents (certificate of formation/incorporation), operating agreements/bylaws, membership/unit ledgers, capitalization table, board/owner approvals and corporate minutes, issuer-side policies (e.g., transfer restrictions), and securities legend procedures. 6) Practical compliance-audit checklist items (recommended) - Entity-level: formation docs, good-standing certificates, operating agreement/bylaws, capitalization table, ownership ledger, equity authorization/reserve, franchise tax/annual report filings, registered agent, and relevant contracts. - Offering-level: determine which exemption you will rely on (Reg D 506(b)/(c), Reg A, Reg CF, Rule 147 intrastate), prepare subscription agreement, PPM or offering memorandum (if appropriate), investor questionnaire and accredited investor verification records, investor KYC checks, subscription funds wiring procedures, bad-actor certifications, and Form D filing package. - Filings and timing: prepare and file Form D within 15 days after first sale (for Reg D offerings), run state Blue Sky/notice filings through NASAA EFD, prepare any state-specific forms and pay fees, and update any required federal/state filings as the offering progresses. - Records retention: keep investor verification documentation, subscription agreements, wire records, and Form D/state filings for the recommended retention period (SEC recommends keeping written records evidencing compliance). - Gatekeepers and third parties: document any reliance on broker-dealers, registered investment advisers, attorneys, or CPAs for investor verification; ensure required confirmations and written statements from those gatekeepers are in file. 7) Resources and citations to support the audit and for state-specific lookups - SEC Rule 506(c) (general solicitation), Form D timing and state notice reminder (SEC page). - SEC guidance on assessing and verifying accredited investors under Regulation D, including acceptable verification methods and factors in the principles-based approach (SEC page). - FinCEN BOI reporting page and the March 26, 2025 interim final rule removing BOI reporting requirements for U.S. companies (FinCEN page). - NASAA and the NASAA Electronic Filing Depository (NASAA EFD) for state notice/filing submissions and a consolidated state-by-state filing mechanism (NASAA). - Morgan Lewis (and other law firm summaries) describing SEC staff no-action guidance easing 506(c) verification burdens and minimum-investment approach. Conclusion and next steps for content delivery - I have collected authoritative, up-to-date source material (SEC, FinCEN, NASAA, law-firm summaries) that supports a practical, state-aware compliance audit checklist for U.S. businesses (LLC founders and small business owners) preparing to raise investment. - Key immediate checks for the audit: choose the exemption, plan Form D and state Blue Sky notices, document accredited-investor verification method and supporting evidence, confirm corporate formalities and capitalization records, perform KYC/AML checks and tax/form W-8/W-9 collection for investors, and screen for bad-actor disqualifiers and Investment Company Act exposure. I am ready to produce the full blog post, newsletter content, and a downloadable compliance-audit checklist tailored to US LLCs and corporations (including how to use NASAA EFD for state filings and sample language for subscription agreements and investor questionnaires). Indicate if you want: (A) a long-form blog post with state-specific examples for Delaware, California, New York, Texas, and Florida plus links to state filing pages; (B) a concise checklist for immediate use; or (C) both.