On November 2, 2020, the SEC adopted amendments to “simplify, harmonize, and improve certain aspects of the exempt offering framework” under the Securities Act of 1933. The amendments are intended to meet evolving market needs by providing, among other changes, all of the following: greater clarity around the SEC’s integration doctrine that can pose challenges for companies with ongoing or recurring financial needs to permit concurrent private and public offerings; increased efficiency of the private capital raising process by increasing the ceiling on the amount of funds that can be raised under Regulation A, Regulation Crowdfunding, and Rule 504 of Regulation D offerings; clear and consistent rules governing certain offering communications, including permitting certain “test-the-waters” and “demo day” communications; and aligned financial disclosure requirements for Rule 506(b) offerings to non-accredited investors with the requirements under Regulation A.

The final rules can be reviewed in full at https://www.sec.gov/rules/final/2020/33-10844.pdf/.  The rules will become effective 60 days after publication in the Federal Register, except for an amendment that extends the existing temporary relief under Regulation Crowdfunding to facilitate capital formation for small businesses impacted by COVID-19, which will be effective upon publication in the Federal Register.  The SEC’s goal with these amendments is to reduce confusion and costs of capital formation, providing a more rational exempt offering framework, facilitating growth and providing certainty to issuers and investors alike.  The amendments may expand capital-raising opportunities for private companies and expand the pool of eligible investors for certain issuers, including business development companies.