In previous blog posts we have outlined the details and processes for Regulation A, Regulation D, and Regulation Crowdfunding filers. Since then, there have been various changes affecting each Regulation. The most significant change for each are the increases in limits placed on the amount that can be raised through offerings. The primary goal for the new changes is to entice more small and medium sized businesses to utilize Regulation A, Regulation D, and Regulation Crowdfunding in order to raise capital, and to address changes in the marketplace that have occurred since the initial implementation of the Regulations. For investors, the change also aims to provide a wider variety of companies to choose from since more companies will be attracted to the process. The changes have been outlined below:
- The investment limits for Regulation A filers have been raised for Tier II offerings from $50 million to $75 million.
- The secondary sales limit for Tier II has been raised from $15 million to $22.5 million.
- Issuers that are delinquent on their reporting obligations under the Securities Exchange Act of 1934 are now not eligible to rely on Regulation A.
- The twelve month dollar limit for Rule 504 filers has been doubled from $5 million to $10 million.
- For Rule 506(b) filers, an amendment was added to restrict the number of non-accredited investors to a maximum of 35 for every 90 day calendar period.
- Disclosure requirements for Rule 502(b) filers have been updated to align with those required for Regulation A filers.
- Form C filers can now raise $5 million in a twelve month period instead of the previously set limit $1.07 million.
- All investment restrictions for accredited investors have been removed.
- Investment restrictions for non-accredited investors have been revised. Going forward, the aggregate amount of Regulation Crowdfunding securities sold to any non-accredited investor across all issuers during any 12-month period shall not exceed: (i) the greater of $2,200, or 5% of the greater of the investor’s annual income or net worth (if either the investor’s annual income or net worth is less than $107,000); or (ii) 10% of the greater of the investor’s annual income or net worth, not to exceed an amount sold of $107,000 (if both the investor’s annual income and net worth are equal to or more than $107,000).
- Certain restrictions on advertising Regulation Crowdfunding offerings have been lifted. Form C filers can now conduct a “testing the waters” phase, similar to what Regulation A filers already had been able to do. This advertising is not required to be conducted through the offering’s intermediary website. Unlike Regulation A filers, the testing the waters phase for crowdfunding offerings can only be conducted before the offering begins.