On Nov. 2, 2020, the Securities and Exchange Commission (“SEC”) approved rule amendments “to harmonize, simplify, and improve the multilayer and overly complex exempt offering framework.” The SEC believes the amendments will make it easier for companies to raise capital and will expand available investment opportunities for investors. The amendments impact securities offering under Regulation A, Regulation Crowdfunding and Regulation D, among others exemptions, and would be of interest to those engaged in exempt securities offerings. The amendments will become effective 60 days after publication in the Federal Register, except for the extension of the temporary Regulation Crowdfunding provisions described below, which will be effective upon publication in the Federal Register.
We have summarized below the most important aspects of the amendments. For further information, please refer to our comprehensive summary of the amendments available here, and the final rule available here.
Amendments to Regulation A
Amendments to Regulation Crowdfunding
Amendments to Regulation D
Amendments to Securities Act Integration Framework
Amendments to Offering Communication Rules
Several of the amendments should have a practical positive impact on capital formation efforts. The increased offering limits under Rule 504 and Regulation Crowdfunding, and the other amendments to Regulation Crowdfunding, should make both offering types more attractive to issuers. Further, the new offering communication rules will allow issuers greater flexibility to gauge interest in a planned securities offering and seek feedback on terms, structure and related matters before launch, which should save both time and money for issuers. Lastly, the new integration framework is a welcome harmonization and update of the current complex patchwork of rules and guidance to reflect current market realities. The integration safe harbors will create certainty for issuers generally, and the reduction of the current six-month integration period under Regulation D to 30 days will create greater flexibility for issuers.