Beginning next year, companies that raise money from investors are going to have more trouble staying secretive.
The Securities and Exchange Commission will publish investor information electronically, so that anyone can access the investment filing information, according to a rule change that will go into effect March 16, 2009. (Download Pdf here). On the other hand, companies will no longer have to list the names of their investors.
Until now, companies taking capital have filed so-called Form Ds with the SEC, which provide basic information about the funding, including total amount, and name of the company and names of the major investors. However, that information is kept on paper filings in an SEC office in Washington, DC. Only Thomson Financial files them immediately into a proprietary database, where clients access them for a fee. It is an odd relationship. Thomson essentially helps manage the filing room at the SEC. Because of the speed at which the filings are made into its electronic system, Thomson is the first to report on them, via its PEHub subsidiary. The paper versions released to the public often trail behind — and are dumped into folders in boxes, making it a time-consuming process for others to sort through.
So next year, the Form Ds will be filed electronically, so that anyone can access them from anywhere as soon as they are available — ending Thomson’s cozy relationship.
It means companies will have to be on their toes even more than they have so far. Even today, it’s surprising how many start-ups don’t even know that their filings will be made public. Lawyers don’t seem to communicate clearly with their companies that the filing will blow their cover. Beginning next year, that will happen all the more quickly.
However, in another change, the SEC has eliminated the requirement that filers list investors owning more than 10 percent of a class of their securities. As a result, it will be easier for start-ups to keep their venture backers secret. Moreover, the disclosure of limited partners in venture capital and private equity partnerships will no longer be required.
