The Securities and Exchange Commission voted Monday to amend its capital-raising rules for small and medium-sized businesses.
“For many small and medium-sized business, our exempt offering framework is the only viable channel for raising capital. These businesses and their prospective investors must navigate a system of multiple exemptions and safe harbors, each with different requirements,” said SEC Chairman Jay Clayton in a statement. “While each component in this patchwork system makes some sense in isolation, collectively, there is substantial room for improvement.”
SEC staff, Clayton added, “identified various costly and unnecessary frictions and uncertainties, and crafted amendments that address those inefficiencies in the context of a more rational framework that will facilitate capital formation for small and medium-sized businesses and benefit investors for years to come.”
Jennifer Schulp, director of financial regulation studies for the libertarian-leaning Cato Institute, said in an email to ThinkAdvisor that while the amendments “are a welcome step to streamline the exceedingly complex capital raising rules. … these changes do little to ease the costs of capital for the smallest companies seeking to use Regulation Crowdfunding, who can find the rules impose a comparatively hefty cost on a smaller dollar offering.”
Raising the crowdfunding offering limit to $5 million, “as the SEC did, may draw more companies looking to raise larger amounts of capital, but more work needs to be done to help the smallest companies take advantage of this exemption,” Schulp said.