SEC Relaxes Certain Crowdfunding Rules through August 31, 2020

July 9, 2020

The SEC recently adopted temporary final rules to expedite the offering process for small businesses affected by COVID-19 that are seeking to meet their funding needs through the offer and sale of securities pursuant to Regulation Crowdfunding. The temporary rules apply to offerings launched on or before August 31, 2020.

“In the current environment, many established small businesses are facing challenges accessing urgently needed capital in a timely and cost-effective manner,” said Chairman Jay Clayton in the SEC’s press release. “Today’s action responds to feedback we have received from our Small Business Capital Formation Advisory Committee and others about the difficulties these companies may face in conducting an offering within a time frame that meets pressing capital needs, while continuing to provide appropriate protections for investors.”

Among other things, the temporary rules:

  • Permit issuers that meet certain eligibility criteria to assess interest in a Regulation Crowdfunding offering before preparing full offering materials;
  • Permit issuers to close such an offering and have access to funds sooner than would otherwise be possible; and
  • Provide an exemption from certain financial statement review requirements for issuers raising up to $250,000 within a 12-month period.

Regulation Crowdfunding provides an exemption from registration for certain crowdfunding transactions that raise up to $1.07 million in a 12-month period. As The Ticker has previously reported, on March 4, 2020, as part of a broad set of proposed amendments to the exempt offering framework, the SEC proposed to increase the offering limit under Regulation Crowdfunding to $5 million. No final action has been taken on this proposal.

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