After a long delay, final rules approved by the Securities and Exchange Commission (SEC) have made their way over to the Federal Register. By being published in the Federal Register, the clock begins ticking as to when the new rules become available to use by issuers and platforms. According to the document, all updates are effective, with several exceptions, as of March 15, 2021.
The final rules were published on the SEC website on November 2, 2020. Typically, soon migrate over to the Federal Register, becoming effective 60 days after being published. The rules, published today (January 14, 2021), are viewable here:
Facilitating Capital Formation and Expanding Investment Opportunities by Improving Access to Capital in Private Markets
The delay in being published had caught the eye of multiple industry insiders – some being concerned that issuers preparing to use the news were caught in limbo while others wondered if something more nefarious was amidst. Some insiders said the delay was due to the time of year combined by the transition to the Biden administration with many departures occurring at the Commission. In the end, it appears that issuers and platforms will only be delayed by several weeks.
The updated rules include a significant increase to Reg CF which goes from a funding cap of $1.07 million to a more reasonable $5 million. The increase will satisfy more promising early-stage firms that viewed the lower cap as unfeasible. In recent years, seed-stage funding rounds have hurdled over $2 million. Some anticipate that the increase will encourage more quality issuers to raise capital under the exemption.
Reg A+ received a boost too – going from $50 million to $75 million. Frequently described as a min-IPO type exemption, the increase may encourage greater utilization from both younger firms as well as more real estate issuers.
Beyond the increases, a summary of the changes to the exempt offering ecosystem may be viewed here with additional information available here. Many industry participants believe the improvements will help to make the crowdfunding industry sustainable (ie profitable) while making access to capital easier for entrepreneurs.