Two important elements of the JOBS Act are Title III and Title IV. These two portions of the act created Reg CF, retail crowdfunding, and Reg A+, a scaled disclosure exemption for companies to raise up to $50 million. In the opening remarks of the SEC Advisory Committee on Small and Emerging Companies (ACSEC) yesterday (July 19), SEC Chair Mary Jo White gave a quick update on both securities exemptions. White said a “diverse range of companies” are using Reg CF. As of yesterday, 12 funding portals had been approved, over 60 issuers have filed a Form-C, and $4.4 million has been raised in total.
Under Reg A+, over 100 filings have been submitted to the SEC with the Commission qualifying nearly 50. Later in the day, it was revealed that $2 billion in targeted funding was included in the 100 Form 1-A’s with $840 million associated with the approved filings.
ACSEC meets to discuss issues that may be arcane to many but vital to all. Smaller companies are the lifeblood of the economy. Policy makers and regulators ignore SMEs at the country’s peril.
The other item mentioned by Chair White was the ongoing review of the definition of an accredited investor. White reported the SEC is working on further recommendations for the Commission. This follows the in-depth report from late last year.
While there are some organizations seeking to make the accredited investor definition less inclusive, there is growing acknowledgment the current approach is dysfunctional creating a division between the haves and have-nots. The ongoing interest of the SEC under Chair White’s guidance is an encouraging sign.
Chair Whites Remarks Opening the ACSEC Meeting are Republished Below
July 19, 2016
Thank you, Steve and Sara, and welcome back, everyone. These dog days of summer often motivate people to get out of Washington D.C., so we appreciate that you are here today. I will make just a few short comments on each of your agenda items and a word on what has happened so far in the crowdfunding space.
Your agenda today starts with a discussion of the Accredited Investor definition, obviously an issue of great importance, which we are very focused on. We have received some 40 comment letters on the staff study of the definition and as the staff is working on further recommendations for the Commission, I look forward to your thoughts and recommendation. Your feedback is obviously very important and helpful.
Your agenda today also focuses on Regulation A+. It was just over a year ago – in June 2015 – that the Commission’s amendments to Regulation A+ went into effect. We have had over 100 offering statements filed with the Commission, with even more issuers taking advantage of provisions in the rules that allow for non-public staff review of draft offering statements before publicly filing. Since the effective date of the final rules, the Commission has qualified nearly 50 of those offering statements. This is a very interesting and dynamic space, and I look forward to today’s discussion and especially the presentation by participants who are directly involved in this market.
As was mentioned, last month the Commission proposed amendments that would increase the financial thresholds in the “smaller reporting company” definition. As you know, the “SRC” definition has been of keen interest to this Committee for some time and the subject of prior Committee recommendations, which go beyond the reach of the Commission’s current proposal in some respects.
If adopted, the proposal would expand the number of companies that can qualify for certain existing scaled disclosures provided in the SEC’s regulations by raising the public float threshold from its current level of $75 million up to $250 million and the annual revenues threshold, in the absence of a public float, from less than $50 million to less than $100 million. The objective of the proposal, which would raise the financial thresholds in the definition as I indicated, is to promote capital formation and reduce compliance costs for smaller companies while maintaining important investor protections, such as those provided by section 404(b) of Sarbanes-Oxley.
The Commission will benefit greatly from the thoughts and public comments we receive on the SRC proposal, from you and all constituents, including investors and companies, as well as the comments we receive on our Regulation S-K concept release, which explores the scaled disclosure requirements for SRCs, among many other areas. Your input, along with input from investors, issuers and other affected market participants, will help inform any changes to the scaled disclosure system or other changes to our disclosure requirements.
I also wanted to provide a very quick update on another of our recent rules to facilitate small business capital formation. Regulation Crowdfunding went into effect on May 16, just two days before your last meeting. I can report that a very diverse range of companies are using the crowdfunding exemption and that, as of July 18th, there had been over 60 offerings with a total of $4.4 million in funds committed by investors. Twelve funding portals have registered with the Commission and become members of FINRA. For our part, SEC staff continues to closely monitor the Regulation Crowdfunding and Regulation A+ markets and are available to answer questions.
Thank you again for being here today. I look forward to your discussion and input.