Twenty-seven companies have filed Form C with the Securities and Exchange Commission to start equity crowdfunding offerings and nine funding portals have completed the registration process with the agency and the Financial Industry Regulatory Authority, with more “in process,” SEC Chairwoman Mary Jo White said Wednesday.
“We are watching developments closely,” White said during a meeting of the agency’s Advisory Committee on Small and Emerging Companies.
She added that staff in the agency’s divisions of Corporation Finance and Trading and Markets have published compliance guidance on the agency’s equity crowdfunding rules under the Jumpstart Our Business Startups (JOBS) Act, which became effective Monday. Both divisions “are available to answer questions. It is important that we all continue to strive to make crowdfunding work for issuers and investors.”
Indeed, White said that the agency is “monitoring out the gates” how the three capital-raising measures the agency put into effect under the JOBS Act “are working.” Those measures include Rule 506(c), Regulation A+ and Regulation Crowdfunding, which White said are designed to foster new ways for smaller companies to access the capital markets, but “we must ensure that the exemptions are both workable for issuers and providing appropriate investor protections.”
The “vast majority” of offerings under Reg D occurred under Rule 506(b), the pre-JOBS Act exemption that does not allow general solicitation, White said.
The activity in exempt offerings “is of particular interest now, as issuers, investors and their advisors seek to take advantage of relatively new options for capital-raising like Rule 506(c) and its allowance for general solicitation,” she added.
In 2015, of the approximately $1.35 trillion reported to have been raised in Rule 506 offerings, approximately $38 billion used Rule 506(c). During 2014 and 2015, about 1,600 new offerings were initiated each year in reliance on Rule 506(c).
But White said at the meeting that the agency has “not seen a real uptick in fraud in that [506(c)] space yet.”
Margaret Cane, a specialist attorney in the SEC enforcement division’s office of market intelligence who’s also working with the division’s JOBS Act task force, said that the agency has filed eight JOBS Act-related cases, with five of them currently in litigation.