Sweeping Amendments to Investment Crowdfunding Rules
Financial regulators at the SEC last week approved changes that increase the amounts businesses can raise under Regulation Crowdfunding and other exemptions, boost the amount that investors can invest, and fix a range of shortcomings that crowdfunding advocates have long pressed for.
Other changes: businesses can ‘test the waters’ to gauge investor interest before launching a Reg CF campaign, and they can now freely pitch at Demo Days and other events held by accelerators, angel groups, educational institutions, nonprofits and other organizations without fear of violating securities laws. (They may already do so under other exemptions including Regulation A and Regulation D 506c).
What it means: More democratization! Reg CF will be more useful to a wider range of businesses and startups, and investors of all levels will be able to more meaningfully participate in the growth and wealth creation of promising businesses.
The changes bring Reg CF more in line with Regulation A, a ‘mini-IPO’ exemption for larger companies in need of more capital.
Crowdfunding raises under ‘Reg A’ also increased, from $50 million to $75 million. Caps for Rule 504 of Regulation D, an exemption used for direct public offerings limited to one or more states, were doubled from $5 million to $10 million.
The rules are expected to into effect sometime early next year.
More details here: https://www.sec.gov/news/press-release/2020-273