Regulation CF annual filing season starts off batting .200

As of Friday night, when the SEC’s EDGAR system went to bed, there had been 61 filings of Form C-AR made (with the rest due Monday for all companies with a 12/31 fiscal year-end). This is the form that companies have to file to keep their investors updated when they have sold securities under Regulation Crowdfunding. Form C-AR requires updated information about the company’s business and its financial performance and, most importantly, the provision of financial statements.

The information that companies need to provide on Form C-AR is set out in Rule 202(a) under the Securities Act and can be found here.

Only 13 of those 61 companies to have filed a Form C-AR as of Friday night are compliant or even close to compliant. Many are missing financials, many are missing information, and more than a few are missing signatures. It is likely that many of the Form C-ARs filed today will be the same.

Here are the biggest issues we’ve noticed so far:

  • No financials at all. Oops. Surprisingly large number of these.
  • Non-GAAP financials. GAAP financials consist of a balance sheet, income statement, cash flow statement and statement of shareholders’ equity, together with notes explaining all these statements in further detail. And the information has to include “comparative” information for 2016. (Some companies provided this information separately; we treated that as “close enough.”)
  • Missing information. Like not updating the risk factors which date from two years ago saying you haven’t launched yet. Like not listing the officers and directors.
  • Signatures. How are so many people getting this wrong? The company signs (through an officer) AND its CEO, CFO, Chief Accounting Officer and a majority of its directors sign. Even if all those people are the same person s/he still has to sign in those capacities.
  • You do not need tax returns from previous years. Or financial statements from 2014/2015.
  • The Form C-AR that you download from the SEC is not a fill-in-the-blanks type form. If you actually read it, you will see it refers you in Item 3 to all the things that are supposed to be included in the Form.

Seems like the Staff are going to have to put out some gentle guidance on compliance.

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