SEC Facilitates Smaller Companies’ Access to Capital
On Wednesday, March 25 the Securities and Exchange Commission (SEC) adopted new rules to facilitate smaller companies’ access to capital. The new rules presented by the SEC will provide a greater level of confidence from investors and there will be an increased amount of choices.
These new rules are said to be updated and expanded from Regulation A, an existing exemption from registration for smaller issuers of securities. The rules are mandated by Title IV of the Jumpstart Our Business Startups (JOBS) Act.
This move is significant in that could bring a sudden growth of crowdfunding investment sites and other startups. Additionally, it could level the playing field against big corporations such as banks, giving smaller businesses a chance to compete.
The updated exemption will enable smaller companies to offer and sell $20 to $50 million of securities in a 12-month period. Regulation A+, establishes two tiers of offerings: Tier 1 and Tier 2:
Tier 1: Federal and state registration and qualification requirements; issuers may take advantage of the coordinated review program developed by the North American Securities Administrators Association (NASAA). Designated to offerings of securities up to $20 million in a 12-month period, with not more than $6 million in offers by selling security holders that are affiliates of the issuer
Tier 2: Provides for the preemption of state securities law registration and qualification requirements for securities offered or sold to “qualified purchasers”. Designated to regulate offerings of securities up to $50 million in a 12-month period, with not more than $15 million in offers by selling security holders that are affiliates of the issuer.
Both Tiers are subject to certain basic requirements; while Tier 1 offerings are also subject to eligibility disclosure, Tier 2 will require additional disclosure and ongoing reporting requirements.
“These new rules provide an effective, workable path to raising capital that also provides strong investor protections. It is important for the Commission to continue to look for ways that our rules can facilitate capital-raising by smaller companies.”
These rulings will also serve as a way of building legitimacy for digital currency related business and will most certainly lead Bitcoin to Wall Street in a short time notice.
These new rules are considered to be a big improvement on the earlier version. They will provide investors with wider investment choices, increased financial maneuverability, and greater reliability as these regulations will be tightening the fence against possible bad actors or frauds.
Even though it doesn’t mention digital currency directly, these rulings will make a real difference and have a positive reaction to bitcoin and crypto-related projects and startups, as it will be loosening the laws that make crypto equity nearly impossible for U.S. companies.
The final rules go live within 60 business days, so it will only be considered to be effective starting June 2015. You can read the whole Securities and Exchange Comission Final rules here.
What do you think about these new rules and how would it benefit digital currency related business? Let us know in the comments below!