SEC Schedules Open Meeting on Expanding Access to Capital for Small and Medium-sized Businesses

The Securities and Exchange Commission (SEC) has scheduled an open meeting to “consider whether to adopt rule amendments to facilitate capital formation and increase opportunities for investors by expanding access to capital for small and medium-sized businesses and entrepreneurs across the United States.”

The meeting will take place at 10 AM, Monday, November 2nd.

Most likely, the Commission will consider changes to Reg CF, including whether it should increase the funding cap from its current $1.07 maximum amount. Other exemptions may receive an update as well as Reg A+ could see its funding cap increase from its current $50 million (Tier 2). Additional adjustments may make it easier for issuers to utilize the JOBS Act exemptions.

The Commission stated:

“[We] will consider whether to adopt rule amendments to simplify, harmonize, and improve certain aspects of the framework for exemptions from registration under the Securities Act of 1933 to promote capital formation while preserving or enhancing important investor protections and reducing complexities in the exempt offering framework that may impede access to investment opportunities for investors and access to capital for businesses and entrepreneurs.”

Reg CF, or Regulation Crowdfunding, has long been deemed anemic due to strict rules that hamper its utilization and increase cost. Elected officials, concerned about possible fraud, hobbled the exemption with expensive disclosure requirements that challenged issuers and online capital formation platforms alike. To date, Reg CF has experienced no fraud. Regardless, the exemption has been viewed as a success even with excessive constraints. Many observers believe loosened restrictions will be a boon for small businesses and the economy in general.

The Reg CF funding cap stands in contrast to the UK where there is no statutory cap on platforms raising capital online. If an issuer wants to raise more than €8 an extensive offering document must be filed – a requirement that acts as a speed bump of sorts. Frequently, UK platforms will partner with venture firms on offerings where professional money is joined by retail investors.

Europe just announced harmonized crowdfunding rules that assign a €5 million funding cap for all member nations.

The meeting will be live-streamed (audio only) on the SEC website and is open to the public.


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