On April 6, 2020, New York Attorney General Letitia James announced proposed revisions to existing rules to modernize and streamline securities filings in New York State, including with respect to notice filings related to offerings conducted pursuant to Rule 506 of Regulation D promulgated under the Securities Act of 1933, as amended (the "Securities Act"). The proposed revisions would move New York toward consistency with other states on such filings.

Article 23-A of the New York General Business Law (commonly referred to as the "Martin Act"), New York's securities law which imposes registration and disclosure requirements on issuers, has long been understood by many practitioners to go beyond the scope of state regulation permitted by the National Securities Markets Improvement Act of 1996 ("NSMIA") with respect to its requirements for offerings conducted under Rule 506. NSMIA preempts the ability of states to require registration or qualification of federal "covered securities," which include those issued pursuant to Rule 506. States are limited to requiring notice filings and filing fees related to the issuance of covered securities. The Martin Act, however, requires registration. As such, NSMIA preempts the requirements under the Martin Act. Issuers who otherwise provide notice and pay a fee to the various other states related to a Rule 506 offering, where applicable, have traditionally been advised by legal counsel that no such New York filing need be made as a result of the NSMIA preemption. In 2002, the New York State Bar Association issued a position paper to this effect, arguing that the Martin Act requirements constituted an impermissible regulatory scheme running parallel to the Securities Act.

The proposed revisions amend regulations to require notice filings for "covered securities," of the sort issued pursuant to Rule 506, sold in New York. Issuers would be required to effectuate fillings by way of the North American Association of Securities Administrators' electronic filing depository system ("EFD"), through which such filings are effectuated for most states. As per the proposed rules, within 15 days of a sale of securities in New York, issuers would be required to file a Notice of Exempt Offering of Securities on Form D through EFD in addition to paying a filing fee of either (i) $300 for total offerings in an amount less than $500,000 or (ii) $1,200 for total offerings in an amount equal to or greater than $500,000.

It is expected that the proposed revisions will be published in the State Register on or about April 15. Publication will commence a 60-day comment period. We will continue to monitor the progress of the proposal as it makes its way through the comment and approval process.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.