Since the 2012 Jumpstart Our Business Startups Act (JOBS Act) exemptions from registration have been introduced, expanded, and revised, particularly in response to the Fixing America’s Surface Transportation Act of 2015 (the “FAST Act”) and the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018. As the scope of exempt offerings expanded, the framework became more complex with different requirements and conditions. In response to issuers (particularly smaller companies) who have expressed concern about the exempt offering framework, the SEC would now like a comprehensive review of the design and scope of that framework.

The SEC has undertaken a broad review of available exemptions to the registration requirements of the federal securities laws that facilitate capital raising and seeks input in order to assess whether the current exempt offering framework is consistent, accessible, and effective for both issuers and investors. The SEC would also like input on whether changes to simplify, improve, or harmonize the exempt offering framework should be considered in order to benefit capital markets and address gaps and complexities.

The SEC seeks comment on:

• whether overlapping exemptions may create confusion for issuers trying to determine and navigate the most efficient path to raise capital;


• whether changes should be made to improve, harmonize or streamline any of the capital raising exemptions (specifically: the private placement exemption and Rule 506 of Regulation D, Regulation A, Rule 504 of Regulation D, the intrastate offering exemptions, and Regulation Crowdfunding);


• whether there may gaps in the framework that may make it difficult for issuers to rely on an exemption from registration to raise capital at key stages of their business cycle;


• whether the limitations on who can invest in certain exempt offerings, or the amount they can invest, provide an appropriate level of investor protection or pose an undue obstacle to capital formation or investor access to investment opportunities;


• whether the SEC can and/or should do more to allow issuers to transition from one exempt offering to another and, potentially, to a registered public offering without undue friction or delay;


• whether the SEC should expand issuers’ ability to raise capital through pooled investment funds and whether retail investors should be allowed greater exposure to growth-stage issuers through pooled investment funds; and


• whether the rules governing exemptions for resales of securities to facilitate capital formation and to promote investor protection by improving secondary market liquidity should be revised.

The public comment period will end 90 days after the publication of the Concept Release in the Federal Register.

The Concept Release can be read here. You can submit comments using the form available on the SEC’s website (https://www.sec.gov/rules/concept.shtml) or by e-mailing rule-comments@sec.gov with the File Number S7-08-19 in the subject line. You can also send your comments by mail to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549-1090. Again, please remember to include reference number S7-08-19.

All comments will be posted without change on the SEC’s website here: https://www.sec.gov/rules/concept.shtml.

Sources:

SEC Seeks Public Comment on Ways to Harmonize Private Securities Offering Exemptions (www.sec.gov)
SEC Release Nos. 33-10649; 34-86129; IA-5256; IC-33512: Concept Release on Harmonization of Securities Offering Exemptions (www.sec.gov)