The SEC reported to Congress on the capital-raising framework recommendations made by participants in the 39th Annual Small Business Forum. The report was prepared by the SEC Office of the Advocate for Small Business Capital Formation and includes SEC responses to certain of the forum's recommendations.
According to the report, participants' recommendations included the following changes to the capital-raising framework:
- Accredited Investor. Participants recommended expansion of the definition of "accredited investor" to include other measures of sophistication (e.g., specialized professional experience). In response, the SEC noted its recent adoption of a final rule that added new qualification categories for accredited investors (see previous coverage).
- Crowdfunding / Community Investing. Participants recommended increasing offering limits and allowing the use of pooled vehicles in crowdfunding. The SEC pointed to its rule proposal ("Capital Formation Proposal") to increase the offering limits in Regulation Crowdfunding, and reported that the Division of Corporation Finance will consider participants' recommendations in connection with its initiative to harmonize and streamline rules for exempt offerings.
- Retail Access to Pooled Investment Funds. Participants recommended (i) expanding retail investor access to funds that invest in private offerings and (ii) allowing retail investors to invest alongside institutional or accredited investors. The SEC referred to its recent concept release concerning the "Harmonization of Securities Offering" (the "Concept Release"), which solicited comments on whether retail investors should be permitted to have greater exposure to early-stage companies via pooled investment funds.
- Micro Offerings. Participants recommended adding a new "self-executing exemption" for debt offerings of up to $250,000 that would enable participation by non-accredited investors. The SEC stated that, while it did not include a micro-offering exemption in its Concept Release, it explicitly requested public comment on the matter.
- Secondary Liquidity. Participants recommended that there be state preemption for secondary transactions in the securities of issuers with appropriate disclosures. The SEC cited its request for comments within its Concept Release on whether federal preemption should be extended to (i) additional offers and sales of securities, and (ii) secondary sales of Regulation A or Regulation Crowdfunding securities.
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