After the Securities and Exchange Commission (SEC) amended its “accredited investor” definition in August 2020, it amended its rules once again in November of the same year. In its latest rule amendments, the SEC increased the annual caps on equity crowdfunding and raised the maximum offering amounts for Reg A+ offerings and Rule 504 of Reg D offerings.
In November 2020, the SEC amended its rules to expand investment opportunities and promote capital formation while also strengthening protections for investors in the United States. Some of the most significant rule amendments included:
- Amend the rules governing the integration of private and public offerings to permit concurrent private and public offerings;
- Increase the annual caps on equity crowdfunding;
- Increase the maximum offering amounts for Regulation A and Rule 504 of Reg D offerings;
- Revise individual investment limits;
- Extend the “testing-the-waters” to gauge market interest; and
- Amend the disclosure requirements for MD&A and other financial disclosures.
If you are unsure how the latest rule amendments by the Securities and Exchange Commission affect your business, speak with a legal expert. At Structure Law Group, LLP, our knowledgeable lawyers provide practical business and legal advice to startups and companies in California.
SEC Rule Amendments for Regulation Crowdfunding, Reg A, and Rule 504 of Reg D Offerings
Below, we will summarize the SEC’s rule amendments for Regulation Crowdfunding, Regulation A, and Rule 504 of Regulation D. Here is a summary of the amendments for Regulation Crowdfunding:
- Increase the offering limit to $5 million (before the amendment, the limit stood at $1.07 million);
- Eliminate investment limits for accredited investors;
- When calculating investments limits for non-accredited investors, use the greater of the investor’s annual income vs. net worth; and
- Extend for 18 months the temporary relief that makes qualifying issuers exempt from certain regulations.
The amendments for Regulation A include:
- Increase the offering limit from $50 million to $75 million (Tier 2 of Regulation A); and
- Increase the offering limit from $15 million to $22.5 million for secondary sales (Tier 2 of Regulation A).
The amendments for Rule 504 of Regulation D include increasing the offering limit to $10 million.
The SEC also amended rules governing offering communications, including the “testing-the-waters” and “demo day” communications. In particular, it eased restrictions on communications during private offerings, allowing issuers to test the waters before choosing exemptions.
Before the recent amendments took effect, the SEC’s rules lacked certainty. Many issuers had a hard time understanding how to structure multiple offerings to qualify for exemptions from registration.
The amendment of SEC rules simplified the integration framework by establishing new integration principles in Rule 152 and supplementing them with new non-exclusive safe harbors. The integration principles will assess qualifying exemptions to determine whether multiple securities offerings should be part of a single offering.
If you are not sure how the latest SEC rule amendments will affect your business, consider speaking with an attorney. Discuss your particular situation with our skilled California business attorneys at Structure Law Group. Call (408) 441-7500 or fill out this contact form for a case review.