On November 2, the Securities and Exchange Commission (SEC) amended its rules governing exempt offerings. The amendments intend to harmonize the “patchwork” framework currently in place that governs exempt offerings. Among other things, the amendments increase the offering limits for Regulation A, Regulation Crowdfunding and Rule 504 offerings, revise certain individual investment limits, and set clear and consistent rules regarding certain offering communications. Release.
On March 26, the SEC announced temporary measures to assist market participants in response to COVID-19. The actions include i) temporary relief from Form ID notarization requirements through July 1, ii) extended filing deadlines for certain reports and forms required under Regulation A and Regulation Crowdfunding issuers, and iii) a temporary exemption, subject to certain conditions, for required filings for municipal advisors through June 30. Release.
On March 25, the SEC adopted final rules updating and expanding Regulation A, which provides an exemption from registration for smaller issuers of securities, to implement Title IV of the Jumpstart Our Business Startups (JOBS) Act. The updated exemption (referred to as Regulation A+) will enable smaller companies to offer and sell up to $50 million of securities in a 12-month period, subject to eligibility, disclosure and reporting requirements. Release. Final Rule.
The disqualification provisions of Rules 262 and 505 under the Securities Act make the exemptions from registration under Regulation A and Rule 505 of Regulation D unavailable for an offering if, among other things, an issuer, any of its predecessors, or any affiliated issuer is subject to certain administrative orders, industry bars, an injunction involving certain securities law violations or specified criminal convictions. Disqualification also occurs if any of the issuer’s directors, officers, general partners, 10 percent beneficial owners of any class of the issuer’s equity securities, or promoters, underwriters, persons compensated for soliciting purchasers, or any of the underwriters’ or paid solicitors’ partners, directors, or officers, is subject to administrative orders, injunctions, associational bars or specified convictions.
On March 13, the SEC clarified that it may waive Regulation A or Regulation D disqualifications upon a showing of good cause that it is not necessary under the circumstances that the exemptions be denied. A waiver could include conditions or limitations. The SEC has delegated authority to grant these waivers to the Director of its Division of Corporation Finance.
On December 18, the SEC proposed rule amendments to Regulation A implementing Section 401 of the JOBS Act directing the SEC to exempt annual offerings of up to $50 million from registration. The comment period will close 60 days after publication in the Federal Register. Proposed Rule.
