Reg. A+ approved by SEC – $50 million equity deals open to unaccredited investors
After many delays and when no one expected a fast resolution of the Title IV Regulation A+ from the JOBS Act, originally planned for October 2015, this past Wednesday the SEC approved the final rules which will entitle small businesses and startups to raise up to $50 million through crowdfunding.
Even though this legislation still needs 60 days to be published in the federal register and become law, it sparked a renewed interest among all those entrepreneurs who will now be allowed to present IPOs to the general public and not just accredited investors.
This represents a true revolution in financing.
The bipartisan support of the JOBS Act intended from start to open the public offerings to the crowd of common Americans in a way that many more projects could find funding.
The almost unexplainable delays around the incomplete and imperfect first legislation on constant revision during more than two years created suspense and often hopelessness for no one knew when the final rules would be in place and how they would in fact affect businesses.
As it happens, the new rules correct the previous in a timely, profound and well-thought direction. The new Regulation A+ is comprehensive and tries to solve most of the former problems:
Issuers are now allowed to raise capital up to $ 50 M per year.
Anyone, and not just accredited investors, may invest (with some limits on the amount; 10% of income and/or net worth.)
Issuers can operate without any other review than the SEC’s (state approval through state blue sky law is no longer required.)
Any kind of startups and also existing businesses can raise funds.
No 12 (g) registration thresholds.
Allows a different version that requires SEC and state blue sky reviews & fees, deals less than $20M per year, remain open to unaccredited investors but with no audit required.
Simplified presentation at the SEC, filing documents and audit electronically via EDGAR
The suspense may be over for Regulation A+ but there will certainly be a sequel to this story, after the new system begins to work.
Since the main reason for delaying, editing, rewriting and rewriting again the rules for equity crowdfunding in the U.S. was the need to protect the general public from fraud, we can expect new corrections once new dysfunctions begin to be spotted.
Legislators voted for freedom, realizing that investors can protect themselves and that too many restrictions only hinder the path to growth. The new Regulation A+ represents a big step in the right direction.
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