The past year was a memorable one for the Securities and Exchange Commission (SEC). The Commission finally completed all of the mandated rules under the JOBS Act, alongside significant work regarding Dodd-Frank and other required rule changes (and the never ending cascade of enforcement actions). On whichever side of the political fence you sit, you must admit the SEC, under the guidance of Chair Mary Jo White, has accomplished quite a bit. This is in stark contrast to some of her recent predecessors who were less diligent in their efforts.
In closing out 2015, the SEC has shared its top news – at least in regards to public interest.
Number 1: SEC Adopts Rules to Facilitate Smaller Companies Access to Capital
This refers to Regulation A+ or Title IVof the JOBS Act. The updated rules fixed old Reg A which was encumbered by state Blue Sky Review. Under old Reg A an issuer had to submit itself to the whims of each state for approval. Most companies avoided the exemption and simply utilized the more workable Reg D rules. The SEC was directed by Congress to address the problem and the Commission released two different options under Regulation A+. Under Tier I an issuer could raise up to $20 million but must still submit to Blue Sky Review. Under Tier II, an issuer could raise up to $50 million and skip over the duplicative and costly Blue Sky Review. Tier II includes several additional requirements such as audited financial statements and regular reports. Under both Tiers non-accredited investors may invest thus mitigating the detrimental Accredited Investor requirements.
While it will take some time to see how effective the updated exemption is in providing access to capital and investment opportunity for all, initial indications have been positive.
Number 2: SEC Adopts Rules to Permit Crowdfunding
This is Title III of the JOBS Acts, the portion of the law that allows for retail crowdfunding. Unlike its brethren Reg A+, issuer requirements are lower but the cap on amount raised is far smaller at only $1 million.
While there remain shortcomings in the final rules, such as a cap that is too low and the inability to use SPVs, many within the industry believe the rules are workable. Issuers may also choose to do a side-by-side offer along with a 506(c). Of course there will be a legislative push which may improve the workability of the exemption but for now the SEC can check this one off their list.
The other top stories of 2015 are listed below:
#3 Citigroup Affiliates to Pay $180 Million to Settle Hedge Fund Fraud Charges
#4 Fee Rate Advisory #3 for Fiscal Year 2015
#5 SEC Charges 36 Firms for Fraudulent Municipal Bond Offerings
#6 SEC Adopts Rules for Pay Ratio Disclosure
#7 SEC Announces 2015 Examination Priorities
#8 SEC Charges 32 Defendents in Scheme to Trade on Hacked News Release
#9 SEC Companies Cannot Stifle Whistleblowers in Confidentiality Agreements
#10 SEC Announces Fraud Charges Against ITT Educational Services