The SEC temporary final rule providing smaller companies conditional relief from certain requirements under Regulation Crowdfunding was published in the Federal Register. The rule will be in effect from May 4, 2020 through March 1, 2021.

As previously covered, the relief is intended for small companies that have been affected by the COVID-19 pandemic and have urgent funding needs as a result. The SEC stated that the relief would allow issuers to gain access to funds from eligible securities offerings more quickly than possible under the current rules by:

  • permitting an issuer to commence an offering after filing a Form C offering statement with the SEC but before filing the financial statements required by rule 201(t) under the Securities Act, provided that the issuer may not accept investment commitments until filing such financial statements;
  • raising the threshold for exemption from certain financial statement review requirements from issuers offering less than $107,000 to issuers offering less than $250,000 in Regulation Crowdfunding offerings in a 12-month period;
  • changing the deadline for an investor to cancel its investment commitment from 48 hours prior to the stated offering deadline to 48 hours from the time an investor makes an investment commitment;
  • suspending the rule that requires an issuer's offering information to be available for 21 days before any securities are sold and instead permitting sales of securities after the issuer has received binding investment commitments reaching the target amount; and
  • permitting an issuer to close an offering prior to the stated offering deadline once binding investment commitments reach the target amount, provided that the temporary rule's disclosure and notice requirements are complied with.

The relief is available for offerings initiated between May 4, 2020 and August 31, 2020 by issuers who (i) qualify for Regulation Crowdfunding under the existing rules and (ii) have been organized and in operation for more than six months prior to commencement of the offering. Additionally, an issuer who has conducted previous Regulation Crowdfunding offerings must have previously complied with the requirements of section 4A(b) of the Securities Act in order to be eligible for the temporary relief.

Primary Sources

  1. Federal Register: Temporary Amendments to Regulation Crowdfunding

Originally Published 7 May 2020

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