If a fund were deemed to be making a public offering on the Internet, it would not only be subject to registration of the offering under the 1933 Act, but would have to register as an investment company under the 1940 Act. The private funds could post descriptive information and performance data on the site. There would be a 30-day wait after an investor became qualified before he would be allowed to purchase securities in a hedge fund. Additional Internet use by large and sophisticated institutions involves the paperless syndication of loans by groups of lenders. The issuer pays a fee to have information on a specific loan transaction posted.
Access is free to investors.
Banks who are chosen for a loan syndication receive a password and user identification that enable them to log onto the lead bank's page at the IntraLinks site. They can access details of a syndication in real time. Bank of America took the Internet loan syndication one step further in September 1997 when it used IntraLinks to syndicate a refinancing of National Semiconductor. Unlike prior loan syndications which used IntraLinks on the Internet alongside traditional paper syndication systems and paper documentation, the National Semiconductor deal was paperless. It was syndicated entirely over the electronic service.