1. The SEC released a set of proposed rules for loosening up current exemptions to registration requirements of securities offering. Details are below 👇 and they include increases to Reg A and CF offering limits. Here are the proposed rules: sec.gov/rules/proposed…
2. The approach to integration (when 2 different securities offerings are treated as one) would change and 4 safe harbors would be created in a new Rule 152. Integration is a more important concept than appears at first blush because it can really restrict offering flexibility.
2a. An offering launched more than 30 days after another is announced or completed would not be integrated with the announced or completed offering, essentially, as long as the rules regarding general solicitation were followed in the prior offering.
2b. Rule 701 offerings pursuant to employee benefit plans and Reg S offerings would not be integrated with other offerings.
2c. An offering where a registration statement has been filed would not be integrated if made after certain other types of offerings (e.g., offering with no general solicitation unless it terminated more than 30 days before the offering commences or was only made to QIBs).
2d. An offering in which general solicitation is permitted would not be integrated with another offering that terminated before the new offering (i.e., less restrictions on offerings involving general solicitations).
2e. The 4 safe harbors are great because of the clarity they provide but mostly replicate current integration rules. These changes will mostly help issuers who want to engage in offerings more than 30 days but less than 6 months apart from one another.
3. New Rule 148 would make it clear that certain “demo day” communications would not be considered general solicitations. This is consistent with past guidance from the SEC but adds some clarifying language and imposes clear restrictions on organizers of demo days.
4a. New Rule 241 would broaden the right to essentially “test the waters” through a “general solicitation of interest.” It would give issuers the flexibility to test interest in an offering (whether registered or exempt) to better determine the type and terms of the offering.
4b. The issuer wouldn’t need to know (and actually can't determine) the offering exemption. Materials used when engaging in a “general solicitation of interest” would need to include a specific legend. Additional disclosure would also be required in the actual offering.
4c. General solicitations of interest would be considered securities offerings, so integration rules would need to be considered, and state law would not be preempted—that is a problem.
5. Rule 506(c) would change to allow accredited investors to self-certify as to their continued accreditation after they have already been determined by an issuer to be accredited investors under an existing safe harbor. That probably won’t move the needle on 506(c) offerings.
6. Rule 502(b) would be amended to allow non-accredited investor to participate in 506(b) offerings with financial disclosure obligations required under Reg A. This probably will not move the needle much to increase participation of non-accredited investors in 506(b) offerings.
7. Changes to amounts that can be raised under Reg A, Reg CF and Rule 504 are proposed:
-Reg A, Tier 2 offerings: increased to $75 million from $50 million
-Reg CF offerings: increased to $5 million from $1.07 million
-Rule 504 offerings: increase to $10 million from $5 million
-Reg A, Tier 2 offerings: increased to $75 million from $50 million
-Reg CF offerings: increased to $5 million from $1.07 million
-Rule 504 offerings: increase to $10 million from $5 million
8a. Reg CF would finally permit SPVs to be used for crowdfunding purposes. It’s a big win to have just one shareholder on the cap table. These SPVs would be excluded from the definition of “investment company” under the Investment Company Act.
8b. The SPV would be called a “crowdfunding vehicle” and would be a co-issuer with the operating company who would be a "crowdfunding issuer."
9. Reg S would be amended to make clear that 506(c) and Reg S offerings can occur simultaneously without constituting a “directed selling effort.” This clarification is extremely important as many practitioners have disagreed on the feasibility of these concurrent offerings.
10. I'm not giving all the details here because the proposed rules were provided in a 341 page document. I give up after a while, though you have all the good stuff.
