On Nov. 2, 2020, the U.S. Securities and Exchange Commission (SEC) adopted final rules to simplify the exempt offering framework. The SEC’s goal with these amendments was to “simplify, harmonize, and improve certain aspects of the exempt offering framework to promote capital formation while preserving or enhancing important investor protections.”. More Specifically they aimed to:

  • Address the ability of issuers to move from one exemption to another;
  • Set clear and consistent rules governing offering communications between investors and issuers;
  • Address potential gaps and inconsistencies in their rules relating to offering and investment limits; and
  • Harmonize certain disclosure requirements and bad actor disqualification provisions.

They were confident that the current system did not require major restructuring to accomplish these goals, and in collaboration with SEC Small Business Capital Formation Advisory Committee, the SEC Investor Advisory Committee, the annual Government-Business Forums on Small Business Capital Formation, and other market participants created amendments to tweak the current system and maintain or improve customer protections.

What is the SEC Making Amendments to?

  • Regulation Crowd Funding
  • Regulation A
  • Securities Act of 1933
  • Regulation D
  • Regulation S-K
  • Securities Exchange Act of 1934
  • Investment Company Act of 1940
  • Securities Act and investment Company Act

What Are the Changes to Integration?

The Commission sought to modernize and simplify the Integration rules, that over the years, have become overly complicated. The result was the introduction of the new Rule 152, split into two parts, Integration Principle in New Rule 152(a), and Non-Exclusive Integration Safe Harbors in new Rule 152(b). Also, after taking public comments into consideration, the Commission added anti-evasion language to the introduction, which means the provisions of Rule 152 will not have the effect of avoiding integration for any transaction or series of transactions that, although in technical compliance with the rule, are part of a plan or scheme to evade the registration requirements of the Securities Act.

What Are the New Safe Harbor Rules?

  1. Any offering made more than 30 calendar days before the commencement of any other offering, or more than 30 calendar days after the termination or completion of any other offering, will not be integrated with such other offering; provided that, for an exempt offering for which general solicitation is not permitted that follows by 30 calendar days or more an offering that allows general solicitation, the provisions of Rule 152(a)(1) shall apply.
  2. Offers and sales made in compliance with Rule 701, pursuant to an employee benefit plan, or in compliance with 17 CFR 230.901 through 230.905 (“Regulation S”) will not be integrated with other offerings.
  3. An offering for which a Securities Act registration statement has been filed will not be integrated if it is made subsequent to: (i) a terminated or completed offering for which general solicitation is not permitted; (ii) a terminated or completed offering for which general solicitation is permitted that was made only to qualified institutional buyers (“QIBs”) and institutional accredited investors (“IAIs”); or (iii) an offering for which general solicitation is permitted that terminated or completed more than 30 calendar days prior to the commencement of the registered offering.
  4. Offers and sales made in reliance on an exemption for which general solicitation is permitted will not be integrated if made subsequent to any terminated or completed offering.

To learn exactly how your firm could benefit from these amendments, Contact Us. MasterCompliance provides expert consulting, outsourcing, and implementation tools in planning and budgeting your firm’s compliance responsibilities.