The Securities and Exchange Commission on March 5, 2020 proposed sweeping changes to the rules governing capital raising through private offerings and other offerings exempt from registration under the Securities Act. If adopted, these amendments, along with the previously proposed expanded definition of “accredited investor,” will be the most significant changes in the regulation of exempt offerings in many years, expanding opportunities for capital raising without registration. The SEC stated that the objective of the proposed rules is “to harmonize, simplify, and improve the exempt offering framework to promote capital formation and expand investment opportunities while preserving and enhancing important investor protections.” The proposal was approved by a 3 to 1 vote of the Commission, with the dissenting Commissioner believing that the changes would further erode the distinction between public and private markets and weaken investor protections. A Commissioner who voted for the proposal believed that it did not go far enough and suggested the possibility of deregulating “offers” entirely and streamlining the number of exemptions. The proposed rules will have a 60-day comment period following publication in the Federal Register.
Summary of the Changes
The following are some of the key changes being proposed:
Exempt Offering Alternatives Chart
For many years, we have co-authored a widely-used Alternatives to Registration Chart outlining the requirements for various exempt and other offerings not requiring full registration. The most recent version with the current requirements can be found at this link, with printing instructions at this link.
We have prepared a supplemental chart (available at this link) to show the proposed changes to the requirements for exempt offerings. Although we expect the SEC to move expeditiously to adopt amendments along the lines of the changes proposed, it remains to be seen what the final form of the changes, as well as those changing the definition of “accredited investor,” will be.
The post SEC Proposes Sweeping Changes for Exempt Offerings appeared first on Capital Markets.
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