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October 26, 2016 at 10:14 AM
The Securities and Exchange Commission on Wednesday unanimously adopted new and amended rules to update and modernize companies’ ability to raise money from investors through intrastate and small offerings.
The final rules adopted Wednesday are designed to further facilitate access to capital in cross-state and regional securities offerings.
New rule Rule 147A as well as an amended Rule 147 include the following provisions:
- Requires that the issuer has its “principal place of business” in-state and satisfies at least one “doing business” requirement that would demonstrate the in-state nature of the issuer’s business;
- Institutes a new “reasonable belief” standard for issuers to rely on in determining the residence of the purchaser at the time of the sale of securities;
- Requires that issuers obtain a written representation from each purchaser as to residency;
- Puts a limit on resales to persons residing within the state or territory of the offering for a period of six months from the date of the sale by the issuer to the purchaser; and
- Provides for an integration safe harbor that would include any prior offers or sales of securities by the issuer made under another provision, as well as certain subsequent offers or sales of securities by the issuer occurring after the completion of the offering.
As SEC Chairwoman Mary Jo White explained in her Wednesday remarks, the agency over the last few years has adopted “several important” new rules to facilitate capital raising by smaller issuers, including new provisions for federal crowdfunding and enhanced Regulation A offerings.
“The rules have given companies new options for funding their businesses within a strong framework of investor safeguards,” White said. “During this time, many state securities regulators have been working to update their regulatory structures to better accommodate how local offerings have evolved, including through crowdfunding and the use of modern information technology.”
She added that the SEC’s rules related to these intrastate offerings have not been updated for decades, “and do not sufficiently take into account how technology and business practices have changed.”
Also passed by the agency Wednesday were amendments to increase the aggregate offering amount in Rule 504 from $1 million to $5 million in any twelve-month period and provide for disqualification of bad actors in a consistent manner across Regulation D.
