Yesterday, the SEC issued a 341-page proposing release intended to “simplify, harmonize and improve certain aspects of the exempt offering framework.” The SEC’s press release summarizes the changes. Among other changes, the SEC proposes:
– Revisions to current offering and investment limits for certain exemptions for Reg A, Regulation Crowdfunding and Rule 504 of Reg D
– Amendments relating to offering communications, including:
- New rule permitting issuers to use generic solicitation of interest materials to “test-the-waters” for an exempt offer of securities prior to determining which exemption it will use
- Rule amendment permitting Regulation Crowdfunding issuers to “test-the-waters” before filing an offering document with the Commission in a manner similar to Reg A
- New rule providing that certain “demo day” communications would not be deemed a general solicitation or general advertising
– Amendments to eligibility restrictions in Regulation Crowdfunding and Reg A, which would permit use of certain special purpose vehicles to facilitate investing in Regulation Crowdfunding issuers, and would limit the types of securities that may be offered and sold in reliance on Regulation Crowdfunding
– Changes to the Securities Act integration framework by providing a general principle of integration that looks to the particular facts and circumstances of the offering, and focuses the analysis on whether the issuer can establish that each offering either complies with the registration requirements of the Securities Act, or that an exemption from registration is available for the particular offering
– Four non-exclusive safe harbors from integration
– A change in the financial information that must be provided to non-accredited investors in Rule 506(b) offerings to align with financial information issuers must provide to investors in Reg A offerings
– A new item in the non-exclusive list of verification methods in Rule 506(c)
– Simplification of certain requirements for Reg A offerings
– Harmonization of bad actor disqualification provisions of Reg D, Reg A and Regulation Crowdfunding
The comment period on the proposing release will remain open for 60 days following publication of the release in the Federal Register. It’s hard to say whether these amendments will make everyone happy but with all the confusion caused by the current rules, one would think the amendments will bring some improvement.
-Lynn Jokela, TheCorporateCounsel.net March 5, 2020
