Biden Administration to Review and (possibly Delay) Investment Crowdfunding Improvements

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Crowdfund Insider | JD Alois | Jan 22, 2021

white house regulatory freeze for review - Biden Administration to Review and (possibly Delay) Investment Crowdfunding Improvements Yesterday, Assistant to the President and Chief of Staff Ronald Klein distributed a Presidential Action by President Joe Biden that is poised to impact recent improvements to security crowdfunding including the Reg CF and Reg A+ exemption. Entitled Regulatory Freeze Pending Review, President Biden has ordered that rules that have been published in the Federal Register but have not taken effect will be delayed by 60 days of the memorandum which would be March 22, 2020. Rules that have been sent to the Office of the Federal Register but not published are to immediately withdrawn for review and, perhaps, approval.

On December 5, 2020, Representative Maxine Waters, Chairwoman of the House Committee on Financial Services, sent a letter to President-Elect Biden requesting a rollback of a litany of rule changes enacted by the Trump administration – some of which impacted Fintechs.

On January 15, 2020, Chair Waters sent a 2nd letter addressed to the incoming Biden administration asking him to

“temporarily suspend any midnight regulations” promulgated by the Trump administration.

This letter asked that any rules that have not yet been published in the Federal Register while requesting to

“postpone the effective dates of rules at least 60 days that have already been published in the Federal Register but which have not yet taken effect.”

See: Regulation Crowdfunding Cap moves from $1.07M to $5M on March 15, 2021

The Presidential action may impact improvements to the investment crowdfunding sector including funding increases to Reg CF and Reg A+, as well as some other areas of Fintech.

Reg CF is poised to increase its funding cap from $1.07 million to $5 million. Reg A+ may increase from $50 million to $75 million. Increasing the funding caps of these two exemptions make them more viable and in line with current requirements for younger firms. The updates by the Securities and Exchange Commission (SEC) were broadly lauded by the securities crowdfunding industry and many members of the industry view the changes necessary for survival.

The regulatory improvements also include several other updates that are designed to help entrepreneurs and younger firms. The entire list is viewable here.

So what happens next?

President Biden has appointed Gary Gensler to head the SEC. As was previously covered, Gensler has a solid knowledge of Fintech and, specifically, expertise in blockchain technology. Gensler has researched this sector of Fintech and previously taught a class on the subject at MIT. It is unclear as to when he will be approved by the Senate but his appointment should move relatively quickly. It would then be up to him to review the improvements to the crowdfunding ecosystem.

See: NCFA Response to CSA on NI 45-110 Harmonized Securities Crowdfunding Rules

Alternatively, Acting SEC Chair Allison Herren Lee could be asked to review rules. As a Commissioner, Lee disagreed with the changes stating her “concerns with the individual provisions of the final rule are numerous.” She questioned the “wisdom of increasing capital raising limits in offerings,” adding that “investors have demonstrated no interest, and issuers no need, for such increases.” But with Gensler on-deck, you can expect any determination will be made by him.

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NCFA Jan 2018 resize - Biden Administration to Review and (possibly Delay) Investment Crowdfunding Improvements The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org