By: Pat Gouhin, Chief Executive Officer
The Angel Capital Association’s continued advocacy toward harmonizing and simplifying the existing framework to improve capital raising pathways and expand investment opportunities has yielded successful results for U.S. investors. The Securities and Exchange Commission voted on Monday, November 2nd to amend rules that will harmonize registration exemptions and eliminate complexity to facilitate access to capital while still preserving investor protections. ACA has endorsed these efforts and has diligently worked on behalf of investors to influence outcomes of this important decision by the SEC. The SEC rulemaking now puts into regulatory statute the so-called HALOS Act which reverses a previous Commission’s decision which deemed demo-days as a general solicitation event. The Commission under Chair Clayton made this clarification because of the direct advocacy of ACA and our members.
ACA members and the broader investment community will benefit from these steps to improve the exempt offerings and the modification of the registration process with the Commission. The amendments will address gaps and intricacies in the framework that hinder capital access for issuers and entrepreneurs, and access to investment opportunities for investors. This fall as the Commission was finalizing these recently announced rules, leading ACA public policy members were able to meet virtually with SEC Commissioner Elad Roisman to advocate for these much needed changes in how entrepreneurs raise capital.
“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 Chairman Jay Clayton in an SEC press release. “While each component in this patchwork system makes some sense in isolation, collectively, there is substantial room for improvement. The staff has 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.”
Facilitating Capital Formation and Expanding Investment Opportunities by Streamlining Access to Capital for Entrepreneurs
Nov. 2, 2020
The Securities and Exchange Commission today amended the rules under the Securities Act of 1933 to simplify, harmonize, and improve certain aspects of the exempt offering framework to promote capital formation while preserving or enhancing important investor protections.
The amendments generally:
- Establish more clearly, in one broadly applicable rule, the ability of issuers to move from one exemption to another;
- increase the offering limits for Regulation A, Regulation Crowdfunding, and Rule 504 offerings, and revise certain individual investment limits;
- set clear and consistent rules governing certain offering communications, including permitting certain “test-the-waters” and “demo day” activities; and
- harmonize certain disclosure and eligibility requirements and bad actor disqualification provisions.
ACA extends thanks to Chairman Clayton and the SEC Commissioners for this significant step to benefit investors and startup companies which will allow for increased participation to capital funding. See the SEC’s full press release for additional information and next steps.