• Marc Indeglia

Regulation Crowdfunding – SEC Loosens Requirements in Response to COVID-19


On May 4, 2020, the Securities and Exchange Commission (SEC) adopted temporary rule changes to make it easier for eligible smaller companies to raise capital pursuant to a Regulation Crowdfunding offering. These temporary rule changes will apply to crowdfunding offerings that have begun by August 31, 2020.


Regulation Crowdfunding allows certain companies to issue securities to raise up to $1,070,000 in capital. Investors in such an offering are be limited in how much they can invest, based on their annual income and net worth. Regulation Crowdfunding offerings must be conducted through an online platform operated by either a broker-dealer or funding portal registered with the SEC. Companies must file an offering statement with the SEC containing certain disclosures, including financial statements of the Company, which, in most cases, must be reviewed or audited by an independent public accountant. The offering statement must be filed at least twenty-one (21) days before the first sale of securities.


The temporary rules relax several of these requirements. Under the temporary rules, companies that meet the enhanced eligibility requirements will be allowed to make offers pursuant to an offering statement where the financial statements are initially omitted if not otherwise available. Any investment commitments obtained pursuant to such an offering statement can be accepted once the company files an offering statement that includes the required financial statements. If the offering does not exceed $250,000, the financial statements do not need to be reviewed by an independent public accountant.


The temporary rules also allow that company to close an offering within 48 hours after receiving binding investment commitments covering the target offering amount, instead of having to wait the entire twenty-one (21) days after filing the offering statement with the SEC.


Companies relying on the temporary rules will need to prominently disclose their reliance on the temporary rules to investors in the offering, including, if applicable, disclosure that its financial statements are not available and will be provided later, that no commitments will be accepted until the financial statements are provided, and that the investor should review all of required information.


Indeglia PC is available to discuss whether your company is eligible to take advantage of the temporary rule changes to Regulation Crowdfunding.

A full description of the temporary rules can be found here