SEC Final Rule Changes For Exempt Offerings – Part 5
On November 2, 2020, the SEC adopted final rule changes to harmonize, simplify and improve the exempt offering framework. The new rules go into effect on March 14, 2021. The 388-page rule release provides a comprehensive overhaul to the exempt offering and integration rules worthy of in-depth discussion. As such, like the proposed rules, I am breaking it down over a series of blogs with this final blog discussing the changes to Regulation Crowdfunding. The first blog in the series discussed the new integration rules (see HERE). The second blog in the series covered offering communications (see HERE). The third blog focuses on amendments to Rule 504, Rule 506(b) and 506(c) of Regulation D (see HERE). The fourth blog in the series reviews the changes to Regulation A (see HERE).
Current Exemption Framework
The Securities Act of 1933 (“Securities Act”) requires that every offer and sale of securities either be registered with the SEC or exempt
SEC Final Rule Changes For Exempt Offerings – Part 2
On November 2, 2020, the SEC adopted final rule changes to harmonize, simplify and improve the exempt offering framework. The new rules go into effect on March 14, 2021. The 388-page rule release provides a comprehensive overhaul to the exempt offering and integration rules worthy of in-depth discussion. As such, like the proposed rules, I am breaking it down over a series of blogs with this second blog discussing offering communications including new rules related to demo days and generic testing the waters. The first blog in the series discussed the new integration rules (see HERE).
Background
The Securities Act of 1933 (“Securities Act”) requires that every offer and sale of securities either be registered with the SEC or exempt from registration. The purpose of registration is to provide investors with full and fair disclosure of material information so that they are able to make their own informed investment and voting decisions.
Offering exemptions are found in Sections 3
SEC Proposed Rule Changes For Exempt Offerings – Part 5
On March 4, 2020, the SEC published proposed rule changes to harmonize, simplify and improve the exempt offering framework. The SEC had originally issued a concept release and request for public comment on the subject in June 2019 (see HERE). The proposed rule changes indicate that the SEC has been listening to capital markets participants and is supporting increased access to private offerings for both businesses and a larger class of investors. Together with the proposed amendments to the accredited investor definition (see HERE), the new rules could have as much of an impact on the capital markets as the JOBS Act has had since its enactment in 2012.
The 341-page rule release provides a comprehensive overhaul to the exempt offering and integration rules worthy of in-depth discussion. I have been breaking the information down into a series of blogs, with this fifth and final blog focusing on amendments to Regulation Crowdfunding.
To review the first blog
SEC Proposed Rule Changes For Exempt Offerings – Part 4
On March 4, 2020, the SEC published proposed rule changes to harmonize, simplify and improve the exempt offering framework. The SEC had originally issued a concept release and request for public comment on the subject in June 2019 (see HERE). The proposed rule changes indicate that the SEC has been listening to capital markets participants and is supporting increased access to private offerings for both businesses and a larger class of investors. Together with the proposed amendments to the accredited investor definition (see HERE), the new rules could have as much of an impact on the capital markets as the JOBS Act has had since its enactment in 2012.
The 341-page rule release provides a comprehensive overhaul to the exempt offering and integration rules worthy of in-depth discussion. I have been breaking the information down into a series of blogs, with this fourth blog focusing on amendments to Regulation A other than integration and offering communications which
SEC Proposed Rule Changes For Exempt Offerings – Part 2
On March 4, 2020, the SEC published proposed rule changes to harmonize, simplify and improve the exempt offering framework. The SEC had originally issued a concept release and request for public comment on the subject in June 2019 (see HERE). The proposed rule changes indicate that the SEC has been listening to capital markets participants and is supporting increased access to private offerings for both businesses and a larger class of investors. Together with the proposed amendments to the accredited investor definition (see HERE), the new rules could have as much of an impact on the capital markets as the JOBS Act has had since its enactment in 2012.
The 341-page rule release provides a comprehensive overhaul to the exempt offering and integration rules worthy of in-depth discussion. As such, I will break it down over a series of blogs, with the second blog in the series which focuses on offering communications, the new demo day exemption, and
SEC Publishes Report on Access to Capital and Market Liquidity
On August 8, 2017 the SEC Division of Economic and Risk Analysis (DERA) published a 315-page report describing trends in primary securities issuance and secondary market liquidity and assessing how those trends relate to impacts of the Dodd-Frank Act, including the Volcker Rule. The report examines the issuances of debt, equity and asset-backed securities and reviews liquidity in U.S. treasuries, corporate bonds, credit default swaps and bond funds. Included in the reports is a study of trends in unregistered offerings, including Regulation C and Regulation Crowdfunding.
This blog summarizes portions of the report that I think will be of interest to the small-cap marketplace.
Disclaimers and Considerations
The report begins with a level of disclaimers and the obvious issue of isolating the impact of particular rules, especially when multiple rules are being implemented in the same time period. Even without the DERA notes that noted trends and behaviors could have occurred absent rule changes or reforms. The financial crisis
SEC Issues Whitepaper On Title III Crowdfunding
On February 28, 2017, the SEC released a white paper on Regulation Crowdfunding, which law went into effect on May 16, 2016. Regulation Crowdfunding had been long in the making, with the JOBS Act having been passed on April 5, 2012, and the first set of proposed crowdfunding rules having been published on October 23, 2013. Regulation Crowdfunding provides the rules implementing Section 4(a)(6) of the Securities Act of 1933 (the Securities Act). For a summary of Regulation Crowdfunding, see my blog HERE.
From the time the SEC published the final Regulation Crowdfunding rules and regulations on October 30, 2015, the regulatory framework has met with wide criticism. The most commonly repeated issues with the current structure include: (i) the $1 million annual minimum is too low to adequately meet small-business funding needs; (ii) companies cannot “test the waters” in advance of or at the initial stages of an offering; and (iii) companies cannot currently use a Special Purchase
Title III Crowdfunding
As required by Title III of the JOBS Act, on October 30, 2015, the SEC has published the final crowdfunding rules. Regulation Crowdfunding has been long in the making, with the JOBS Act having been passed on April 5, 2012, and the first set of proposed crowdfunding rules having been published on October 23, 2013. The new rules will be effective 180 days after publication, but the forms for registering a funding portal with the SEC will be effective and available January 29, 2016.
The SEC has dubbed the new rules “Regulation Crowdfunding.” Regulation Crowdfunding provides the rules implementing Section 4(a)(6) of the Securities Act of 1933 (the Securities Act) and the regulatory framework for registered funding portals and broker-dealers that companies are required to use as intermediaries in crowdfunding offerings. In addition, Regulation Crowdfunding exempts securities sold under Section 4(a)(g) from the mandatory registration requirements found in Section 12(g) of the Securities Exchange Act of 1934 (“Exchange Act”).
SEC Issues Advertising Guidance Related to State-Specific Crowdfunding
ABA Journal’s 10th Annual Blawg 100
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As required by Title III of the JOBS Act, on October 23, 2013, the SEC published proposed crowdfunding rules. The SEC has dubbed the new rules “Regulation Crowdfunding.” The entire 584-page text of the rule release is available on the SEC website. As of today, it is unclear when final rules will be released and passed into law and what changes those final rules will have from the proposed rules. Moreover, upon passage of the final rules, there will be a period of ramping-up time in which crowdfunding portals complete the process of registering with the SEC, becoming members of FINRA and completing the necessary steps to ensure that their portal operates in compliance with those final rules. Federal crowdfunding is coming, but it is a slow process.
In the meantime, several states have either enacted or introduced state-specific crowdfunding legislation.
Federal Authority for State Crowdfunding Legislation
Both the federal government
Crowdfunding Using Intrastate Offerings and Rule 147 – Is Florida Next?
As required by Title III of the JOBS Act, on October 23, 2013, the SEC published proposed crowdfunding rules. The SEC has dubbed the new rules “Regulation Crowdfunding.” The entire 584-page text of the rule release is available on the SEC website. The proposed rules invite public comment on many points and have indeed resulted in such comments. As of today, it is unclear when final rules will be released and passed into law and what changes those final rules will have from the proposed rules. Moreover, upon passage of the final rules, there will be a period of ramping up time in which crowdfunding portals complete the process of registering with the SEC, becoming members of FINRA and completing the necessary steps to ensure that their portal operates in compliance with those final rules. Federal crowdfunding it coming, but it is a slow process.
In the meantime, many states have recently either enacted or introduced state-specific crowdfunding
