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Sweeping Amendments to Investment Crowdfunding Rules

Financial regulators at the SEC announced 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.

By Amy Cortese | Nov 9, 2020, updated Mar 15, 2021
Highlights about the raised limits

can now raise up to $5 million via ‘Reg CF,’ up from $1.07 million.

Accredited investors

can invest as much as they want under Reg CF with no limits. They are also allowed to self-verify their financial status, rather than going through a clunky verification process.

Non-accredited investors

– meaning most U.S. investors – also got a lift in how much they can invest. While still capped, the formula going forward will be based on the greater of their net worth or annual income, rather than the lower of the two.

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 new rules became effective on March 15, 2021.

More details here: