NASAA and SEC Sign Crowdfunding Agreement
On February 17, 2017 the Securities and Exchange Commission (the “SEC”) the North American Securities Administrators Association (“NASAA”) signed a crowding funding agreement. The agreement sets forth the rules to facilitate intrastate crowdfunding offerings and regional offerings take effect. The agreement signed by the SEC and NASAA is intended to facilitate the sharing of information to ensure that the new exemptions are serving their intended purpose of facilitating access to capital for small businesses. Under the memorandum of understanding (MOU), federal and state securities regulators will be better able to monitor the effects of the new rules and also guard against fraud.
The MOU was signed by SEC Acting Chairman Michael S. Piwowar and Mike Rothman, Minnesota Commissioner of Commerce and President of NASAA, which represents state securities administrators.
“The agreement not only builds on an already productive relationship between the SEC and state regulators, it also offers additional insights and protections as we help companies grow and create jobs while providing new opportunities to investors,” said Acting Chairman Piwowar.
“This agreement will strengthen collaboration among state and federal securities regulators to help expand small-business investment opportunities while also protecting investors,” said Rothman. “Ongoing dialogue is essential to carry out our responsibilities going forward. With this MOU in place, we have an opportunity to share information that will bolster our efforts to support small business capital formation and prevent fraud.”
NASAA and the SEC have not always been in the new exemptions from SEC registration under the JOBS Act. Last year, In 2015, Montana and Massachusetts filed a unsuccessful lawsuit challenging the SEC’s adoption of Regulation A+ alleging that Reg A+ incorrectly removed the state’s ability to require more expansive disclosure under the exemption. Regulation A+ prevents states from reviewing offerings over $20 million. For smaller offerings, companies may undergo state review of the offering, or comply with more expansive disclosure requirements.
Under the new crowdfunding rules, companies will have more flexibility to engage in intrastate offers through websites and social media without having to register their offering with the federal government. Companies now can also raise up to $5 million per year through other amended rules, which could facilitate the development of regional offering exemptions at the state level to permit companies to raise from investors in a specific region. The previous limit was $1 million.
New JOBS Act rules went into effect in 2015 and 2016. New amendments to facilitate regional offerings went into effect in January and amendments to provide more flexibility for intrastate crowdfunding offerings will go into effect in April of this year. These amendments are intended to facilitate greater access to capital for entrepreneurs that may not have been able to otherwise access capital using other alternatives. The MOU will increase the regulators’ ability to share data to better monitor implementation of the new rules and guard against fraud.
For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956 or by email at [email protected]. This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.
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