Insights and Resources
SEC simplifies the exempt offering framework
FINANCIAL REPORTING INSIGHTS |
Authored by RSM US LLP
The SEC recently issued a final rule in Release 33-10884, Facilitating Capital Formation and Expanding Investment Opportunities by Improving Access to Capital in Private Markets. The final rule is intended to address difficulties and confusion in applying the exempt offering framework, which is complex and made up of differing requirements, such as those in Regulation D, Regulation A and Regulation Crowdfunding, among others.
The SEC’s final rule generally retains the current exempt offering structure, but addresses, in one broadly applicable rule, the ability of issuers to move from one exemption to another and ultimately to a registered offering. The final rule includes the following amendments, among many others:
- Amending the financial statement information requirements in Regulation D Rule 502(b) for sales to non-accredited investors to align with the financial statement requirements in Regulation A. Specifically:
- For Regulation D Rule 506(b) offerings of up to $20 million in securities, issuers no longer are required to provide audited financial statements and instead are required to comply with the financial statement requirements that apply to Tier 1 Regulation A offerings, which do not require audited financial statements unless the issuer already has obtained an audit for another purpose
- For Regulation D offerings of greater than $20 million in securities, issuers are required to provide audited financial statements and comply with the requirements of Regulation S-X similar to Tier 2 Regulation A offerings
- Permitting issuers who meet certain criteria to incorporate previously filed financial statements by reference into a Regulation A offering circular
- Raising the maximum offering amount under:
- Tier 2 of Regulation A from $50 million to $75 million, and increasing the maximum offering amount for secondary sales under Tier 2 of Regulation A from $15 million to $22.5 million
- Regulation Crowdfunding from $1.07 million to $5 million; and any initial offerings of more than $1.07 million continue to be required to provide audited financial statements
- Rule 504 of Regulation D from $5 million to $10 million
- Establishing safe harbor rules for analyzing compliance with applicable conditions and limitations when issuers use various private offering exemptions in parallel or in close time proximity
Call us at +1 213.873.1700, email us at firstname.lastname@example.org or fill out the form below and we'll contact you to discuss your specific situation.
This article was written by RSM US LLP and originally appeared on 2020-11-06.
2020 RSM US LLP. All rights reserved.
RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each is separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/about us for more information regarding RSM US LLP and RSM International. The RSM logo is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.
Vasquez & Company LLP is a proud member of the RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.
Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise and technical resources.
For more information on how Vasquez & Company LLP can assist you, please call +1 213.873.1700.
Subscribe to receive important updates from our Insights and Resources.