Following its open meeting yesterday, the SEC announced that it adopted amendments to simplify and harmonize the private offering framework. The Commission had proposed these rules in March following a concept release last summer. Here are highlights from the SEC’s Fact Sheet about what the amendments do:
– Establish a new integration framework that provides a general principle that looks to the particular facts and circumstances of two or more offerings – 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. The amendments also provide 4 non-exclusive safe-harbors from integration.
– Increase the offering limits for Reg A, Regulation Crowdfunding, and Rule 504 offerings, and revise certain individual investment limits
– Set clear and consistent rules governing certain offering communications, including permitting certain “test-the-waters” and “demo day” activities
– Harmonize certain disclosure and eligibility requirements and bad actor disqualification provisions
As has become the norm, the amendments were adopted by a 3-2 vote, with Commissioners Hester Peirce and Elad Roisman saying the rules don’t go far enough, and Commissioners Allison Herren Lee and Caroline Crenshaw saying that the rules strip away investor protections and were adopted without adequate data.
The amendments will go effective 60 days after publication in the Federal Register, except for the extension of the temporary Regulation Crowdfunding provisions, which will be effective upon publication in the Federal Register. Publication often takes about a month — so if that’s the case, that would put us in the February time frame for this new private offering regime.
We’ll be updating our “Reg D Handbook” for these new rules as well as the changes to the accredited investor definition that go effective next month. We’ll also be posting memos in our “Private Placements” Practice Area.
-Liz Dunshee, TheCorporateCounsel.net November 3, 2020