What it means
Raising capital by selling securities normally means registration, disclosure and review. SCOR gives small companies a lighter version of that process: a fill-in-the-blanks form with questions designed so owners can produce the disclosure document themselves.
NASAA, the state regulators' association, maintains the framework. Its statement of policy sets eligibility: the company must be a corporation or centrally managed limited liability company organised in the United States or Canada, must not be a public reporting company or an investment company, and cannot be in extractive industries or a development-stage shell.
Financial statement requirements scale with the offering size. Under NASAA's summary, offerings above $500,000 require compiled statements, above $1 million reviewed statements, and above $2 million audited statements, all under U.S.
GAAP and certified by the chief executive and financial officers. The form becomes the disclosure document once a state declares the registration effective, and investors must receive it before sale.
Material changes during the offering require an amended filing, subscribers may need the chance to rescind, and selling literature generally must be filed before use. Registrations are usually effective for a limited period, often one year unless renewed.
The process has a regional convenience worth knowing: companies offering in several states within a region can request a regional review, where a lead jurisdiction coordinates the comments of the others. That reduces the burden of answering the same questions state by state.
State registration also interacts with federal law, because companies commonly pair SCOR filings with a federal exemption such as Rule 504, filing the related Form D as part of the state application, and both layers must be satisfied; one does not replace the other. SCOR suits genuinely small raises where a full registration would cost more than the money justifies.
The trade-off is reach and rigour, since review is state-by-state and the simplified disclosure still carries liability if it is materially inaccurate or misleading. Founders should treat the form as a legal document, not a questionnaire, because plain-English accuracy, current financials and respect for each state's process determine whether the offering can proceed.
In practice
Real-world examples.
Example
A fictional manufacturer raising $900,000 uses Form U-7 with compiled financial statements. The finished disclosure document goes to each prospective investor before any sale closes. The owners keep a signed receipt from every investor as proof of delivery.
Example
A fictional founder posts the draft form online before registration is effective. Regulators intervene, because soliciting before effectiveness is restricted in the relevant jurisdictions. The founder has to pause the raise and correct the record before continuing.
Example
A fictional company in extractive mining checks the eligibility list and stops. NASAA's policy excludes that industry from using the SCOR form at all. The company turns to a different exemption and pays for legal advice on it instead.
Formula
Calculation
There is no pricing formula; the framework is procedural. NASAA's financial-statement tiers work as thresholds: an offering of more than $500,000 requires compiled statements, more than $1 million requires reviewed statements, and more than $2 million requires audited statements.
Worked example. A company sells 300,000 shares at $5 each, so the offering size is 300,000 x $5 = $1,500,000. That sits above $1 million and below $2 million, so reviewed statements are needed. If the company instead sold 120,000 shares at $5, the offering would be $600,000, which needs compiled statements, and a $2.4 million offering would need audited statements. Thresholds come from the NASAA statement of policy and can be revised.Case study
Seen in the real world.
This case study is fictional and illustrative. A family food company wants $1.2 million from local investors and assumes any offering needs a national law firm and a full registration. Its state regulator points it to SCOR. The owners complete Form U-7 with reviewed financial statements, file in their state, respond to examiner comments, and wait for effectiveness before soliciting.
The raise closes at a fraction of expected legal cost. The key was matching the offering size and investor base to the simplified regime rather than defaulting to the heaviest process. After closing, the company keeps a checklist of its continuing duties. It files any amendment when a material fact changes, diarises the date the registration expires, and tells its accountant early because the next raise above $2 million would need audited statements.
Watch out
Common mistakes.
- Treating SCOR as an exemption from registration; it is a simplified registration that still involves state regulatory review and comments.
- Soliciting investors before the registration is declared effective in the relevant state.
- Assuming state SCOR compliance alone satisfies federal securities law; the federal exemption or registration must be handled too.
Questions
People also ask.
What form does SCOR use?
Form U-7, a standardised question-and-answer disclosure form that becomes the company's disclosure document once the registration is declared effective.
Who administers the framework?
State securities regulators administer it, coordinated through NASAA's statement of policy. Federal securities law applies separately and must also be satisfied.
Who is eligible?
Small U.S. or Canadian corporations and centrally managed LLCs, excluding public reporting companies, investment companies, extractive industries and development-stage shells without a specific business plan.
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