The SEC proposed rules last week that would make it easier for small companies to access capital, a provision mandated by Title IV of the Jumpstart Our Business Startup Act.
The proposal builds on Regulation A, which exempts small securities offerings of up to $5 million over a year-long period from registration requirements. The updated exemption would allow small firms to sell up to $50 million in securities over a 12-month period.
“This proposal is intended to help increase access of smaller companies to capital,” SEC Chairman Mary Jo White said. “In shaping this proposal, we sought to develop an effective, workable path to raising capital that, very importantly, also builds in necessary investor protections.”
Under the Securities Act of 1933, companies that offer or sell securities in order to raise capital are required to register the offer unless it can rely on an exemption. Companies are required to submit an offering statement that is reviewed by the SEC, but smaller firms are not required to continue reporting after the completion of the offer.
The SEC will publish the proposed rules, which will be available for public comment for 60 days. The commission will then review all public input and determine whether to adopt the rules as proposed.