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SEC Proposes Improvements to Regulation A, Regulation Crowdfunding and Rule 504 Offerings

The proposed changes would provide a more rational framework, eliminate complexity and increase access to capital.

CEO and Chief Trust Officer, Prime Trust

Scott Purcell is the CEO and Chief Trust Officer of Prime Trust, the technology-driven trust company. His firm provides custody, trustee, escrow, AML, KYC, payment processing, accounting, and compliance for numerous OTC desks, exchanges, stablecoins, platforms, broker-dealers, investment advisers, portals and others who are building businesses that are changing the world. Prior to forming Prime Trust, Mr. Purcell founded FundAmerica, a financial technology firm providing software and back office services to banks, trust companies, broker- dealers, investment advisers, securities exchanges, SEC registered transfer agents, and large issuers (primarily real estate companies). He is a founding Board member of the Crowdfunding Intermediary Regulatory Association (CFIRA) the “Industry Best Practices for Funding Portals” and “BD and Registered Portal Regulatory Mechanics”. He also started a fixed income trading firm, a clearing broker for institutional investors and published a book “The Guide to Fixed Income Investing”.
Scott Purcell is the CEO and Chief Trust Officer of Prime Trust, the technology-driven trust company. His firm provides custody, trustee, escrow, AML, KYC, payment processing, accounting, and compliance for numerous OTC desks, exchanges, stablecoins, platforms, broker-dealers, investment advisers, portals and others who are building businesses that are changing the world. Prior to forming Prime Trust, Mr. Purcell founded FundAmerica, a financial technology firm providing software and back office services to banks, trust companies, broker- dealers, investment advisers, securities exchanges, SEC registered transfer agents, and large issuers (primarily real estate companies). He is a founding Board member of the Crowdfunding Intermediary Regulatory Association (CFIRA) the “Industry Best Practices for Funding Portals” and “BD and Registered Portal Regulatory Mechanics”. He also started a fixed income trading firm, a clearing broker for institutional investors and published a book “The Guide to Fixed Income Investing”.

Exciting news from the SEC – the Commission has significantly upgraded the rules. Click here to see a summary of the proposed changes where the SEC says “Proposed amendments would provide a more rational framework, eliminate complexity and increase access to capital while preserving and enhancing important investor protections.

Some highlights…

  • Reg CF max raise now = $5M
  • Reg A max raise now = $75M
  • Accredited investors can now invest in Reg CF offerings (prior to this, issuers had to conduct concurrent Reg D offerings along with a Reg CF).
  • Non-accredited investors are now subject to investment limitations based upon the “greater of” their income or net worth instead of the constricting “lesser of” rules.
  • SPV’s are allowed to invest in Reg CF offerings.

This is the most exciting news for the industry in 8 years, since the birth of the JOBS Act in April 2012.

In my opinion, this is a GAME CHANGER for the crowdfunding industry, and for private capital formation. Reg CF now becomes truly usable by almost all real estate businesses, as well as start-up and medium-sized businesses of all types. Crowdfunding Portals can now flourish, which will in turn not only help more businesses get funded, but also protect the public by ensuring that offerings are done in compliance with securities regulations. It means Reg A can be used by even larger businesses. It means the general public has better access to alternative investments, giving them nearly the same wealth-building opportunities that historically have been reserved (by securities regulations) only for the very rich.

This also means more disclosures and more transparency. Which in turn will help accelerate the dawn of a new age of Alternative Trading Systems (“ATS”) which focus on secondary markets for private securities. And it means the dream of disruption and innovation in our capital markets is now within reach.

When do these new rules go into effect? Not immediately, so don’t start trying to use them today. Soon though, 60 days after publication in the Federal Register.

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Equities Contributor: Scott Purcell

Source: Equities News

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