If your startup sells securities in a Rule 506 offering under Regulation D and any purchaser is in California, you generally must file a federal Form D with the SEC within 15 days after the first sale and a California notice filing with the Department of Financial Protection and Innovation (DFPI) within 15 days after the first sale in California, with a fee. These notices do not register the offering, and the federal exemption does not depend on the state filing, but missing them can still lead to penalties and complications in later diligence. Offerings that do not rely on Rule 506 need a separate California exemption, such as Corporations Code Section 25102(f).
California founders raise money constantly through SAFEs, convertible notes and priced rounds, and every one of those instruments is a security. Here is how the federal and California filing rules fit together.
What Is Form D?
Form D is a short notice filed electronically with the SEC through its EDGAR system by companies that sell securities without registration in reliance on Regulation D. It identifies the issuer, its executive officers, directors and promoters, the exemption claimed, the type and amount of securities offered, the amount sold, the number of investors and any sales compensation. It does not require financial statements and is not reviewed or approved by the SEC. For background, see our article What Is a Form D?
The Regulation D Exemptions
- Rule 504 allows offerings of up to $10 million in a 12-month period. Rule 504 securities are not “covered securities” under federal law, so state registration or a state exemption is still needed.
- Rule 506(b) allows an unlimited raise from accredited investors and up to 35 non-accredited investors who are financially sophisticated (alone or with a representative), with no general solicitation. If any non-accredited investors participate, specific disclosure and financial information must be provided to them.
- Rule 506(c) allows general solicitation, such as public advertising, but every purchaser must be accredited and the company must take reasonable steps to verify accredited status.
Both Rule 506 exemptions are unavailable if the company or certain covered persons are subject to “bad actor” disqualification under Rule 506(d), so run bad actor questionnaires for officers, directors, large holders and placement agents. For a broader look at private offering options, see how to raise capital without registering with the SEC.
How California Treats Rule 506 Offerings
Securities sold under Rule 506 are “covered securities,” so under the National Securities Markets Improvement Act states cannot require them to be registered or qualified. States can, however, require a notice filing, a fee and consent to service of process. California does this under Corporations Code Section 25102.1(d).
In practice, a California Rule 506 notice involves:
- Filing a notice, generally a copy of the federal Form D, with the DFPI within 15 days after the first sale of securities in California. Many issuers file through NASAA’s Electronic Filing Depository (EFD), which California accepts.
- Paying a filing fee that is set on a sliding scale based on the value of securities offered in California.
- Providing a consent to service of process (Form U-2) if one is not already on file.
The California notice is separate from the SEC filing. Filing with the SEC does not automatically satisfy California, and the reverse is also true.
Offerings That Do Not Rely on Rule 506
If a company relies on Rule 504, Section 4(a)(2) alone, or another exemption that does not produce covered securities, California law requires its own exemption or qualification. The most common is the limited offering exemption in Section 25102(f), which generally limits the number of non-accredited purchasers, requires that purchasers have a pre-existing relationship with the company or the ability to protect their own interests, prohibits advertising, and requires a notice filing with a fee within 15 days after the first sale in California, unless an exception applies.
Timing
The federal Form D is due within 15 calendar days after the “date of first sale,” which the SEC treats as the date the first investor is irrevocably contractually committed to invest, not the closing date or the date money arrives. California’s 15-day period runs from the first sale in California.
Who Counts as a California Sale?
California’s securities law applies to offers and sales made in California, including those made to or accepted by investors located in the state. A Delaware corporation headquartered in San Francisco that sells only to New York investors may not need a California notice, while an out-of-state company that sells to a California angel generally does. Each other state where purchasers reside may have its own notice filing for Rule 506 offerings.
Accredited Investors
Both the SEC and California rely on the federal accredited investor definition. It includes, among others, individuals with net worth over $1 million excluding their primary residence, individuals with income over $200,000 (or $300,000 jointly with a spouse or spousal equivalent) in each of the last two years with a reasonable expectation of the same this year, certain entities with more than $5 million in assets or investments, and holders of certain professional certifications such as the Series 7, 65 or 82 licenses. In a Rule 506(c) offering, verification can involve reviewing tax returns or financial statements, or obtaining written confirmation from a lawyer, CPA or registered broker-dealer or investment adviser. SEC staff guidance issued in 2025 also recognizes that high minimum investment amounts, combined with written representations, can support verification in some circumstances.
Amending Form D
A federal Form D amendment is generally required annually while the offering continues, to correct a material mistake, and when certain information changes, such as an increase of more than 10% in the total offering amount. Check whether each state, including California, also expects an updated notice.
What Happens If You Miss a Filing?
Filing Form D is not itself a condition of the Rule 506 exemption, so a late filing does not by itself destroy the federal exemption. But a court can bar a company from using Rule 506 if it has been enjoined for failing to file, states can impose late fees and penalties, and missing filings commonly come up in investor and acquirer due diligence. Late filings should be made as soon as the gap is discovered.
Common Mistakes
- Forgetting that SAFEs and convertible notes are securities that require Form D and state notices.
- Filing with the SEC but not with California or other investor states.
- Using public announcements of an offering in a 506(b) round.
- Relying on self-certification alone in a 506(c) round.
- Not running bad actor checks before the first closing.
The Takeaway
For most California startups, a priced round or SAFE raise under Rule 506 means two filings: a federal Form D and a California notice, each due within 15 days of the relevant first sale. Choose the exemption before you start talking to investors, track where purchasers are located, and calendar the deadlines. Related reading: SAFE notes.
Frequently Asked Questions
Do I need to file Form D for a SAFE round?
Usually yes. A SAFE is a security, so a SAFE financing that relies on Rule 506 generally requires a federal Form D and state notice filings, including California if any investor is in California.
When is the California Form D notice due?
For a Rule 506 offering, the California notice is generally due within 15 days after the first sale of securities in California. The federal Form D is due within 15 days after the first sale anywhere.
Does a late Form D filing invalidate my exemption?
Not by itself. Filing is not a condition of the Rule 506 exemption, but late filings can bring state penalties, may affect future use of the exemption if a court enjoins the company, and can raise issues in due diligence.
Can I advertise my fundraise in California?
Only in a Rule 506(c) offering in which every purchaser is accredited and the company takes reasonable steps to verify that status. A Rule 506(b) or Section 25102(f) offering does not allow general solicitation.
How Sutter Law Can Help
Sutter Law advises startups on venture financings, including choosing an exemption, preparing investor documents, and making federal and state notice filings. Contact us for a free consultation.
This article is general information, not legal advice. Reading it does not create an attorney-client relationship.
