[Breaking] SEC Votes to Approve Changes to Regulation Crowdfunding Increasing the Maximum Raise to $5 Million

Crowdfund Capital Advisors  | Nov 2, 2020

crowd - [Breaking] SEC Votes to Approve Changes to Regulation Crowdfunding Increasing the Maximum Raise to $5 MillionJust a few minutes ago, at a Securities and Exchange Commission Hearing, the SEC approved amendments to facilitate capital formation and increase opportunities for investors by expanding access to capital for small and medium-sized businesses and entrepreneurs across the United States.

The vote was 3 to 2. SEC Chair Clayton said, “He's extremely pleased with the work done by the Commission. That the changes will modernize the exempt offering framework and have a lasting impact on our capital markets without detriment to investor protection."

See: European Crowdfunding Network Publishes Blockchain Study Analyzing Current Regulatory Environment

 

Some of the key Regulation Crowdfunding (aka Reg CF) changes include:

  • Increasing the maximum a company can raise from $1.07 million to $5 million
  • Amending the investment limits for investors in Regulation Crowdfunding offerings by:
    • not applying any investment limits to accredited investors; and
    • revising the calculation method for investment limits for non-accredited investors to allow them to rely on the greater of their annual income or net worth when calculating the limit on how much they can invest.
  • Permitting issuers to “test-the-waters” prior to filing an offering document with the Commission.
  • Permitting “demo day” communications that would not be deemed general solicitation or general advertising.
  • Permitting the use of Special Purpose Vehicles to facilitate investing in Regulation Crowdfunding issuers

“We are thrilled that the Commission has finally increased the maximum issuers can raise under Regulation Crowdfunding,” say Sherwood Neiss, principal at Crowdfund Capital Advisors. “When we began lobbying for Reg CF, we artificially set a low maximum target of $1 million so that we could test the model and make sure there was no fraud. Under those limits, more than 2,800 companies in 430 industries, across 50 states have raised over $500 million dollars in just 4 years, with no fraud.  The model is working incredibly well.”

See:

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

NCFA Response to the Modernizing Ontario’s Capital Markets Consultation Taskforce

NCFA Open Letter: Government should collaborate with Fintechs

“A $5 million limit and other substantial regulatory changes will expand crowdfunding’s use rapidly.  At $5 million, a tech startup can raise a seed round or a traditional small or mid-sized company can raise expansion capital.  This will open significant new opportunities for businesses to use this capital to recover from the current economic crisis or launch innovative new products and services.” says Jason Best, Principal at Crowdfund Capital Advisors.

The vote comes at a time when local businesses and local economies across the USA are facing the most challenging economic crisis since the Great Recession. The third wave appears to be worse than the first two with many Americans bracing for another shut down like in other parts of the world. If this happens, millions of small businesses that were just scrapping by might permanently shut their doors leading to a housing crisis as unemployed people cannot pay their rent or mortgages.

There is a way to supercharge Regulation Crowdfunding and provide immediate, impactful stimulus to Main Street businesses that may not survive the pandemic. That is for the Federal Reserve to take $20 billion of the $596.3 billion they have remaining from the Main Street lending, PPP and EIDL programs and put it into the Main Street Recovery Co-Investment Fund.

This fund would match dollar for dollar, up to $250,000, into businesses that are struggling to survive the pandemic but have customers that wish to see these businesses survive. By turning these customers into investors (what we are calling investomers), the businesses access capital from customers who are now stakeholders in the business and the government can successfully deploy capital at the most micro level into communities all across the USA.

The good news is, many small business have already begun to see the potential in turning to their customers for capital to bridge the divide. The data shows that more companies are turning online to raise funds from investors, more investors are pouring in capital and more money is being raised.

 

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NCFA Jan 2018 resize - [Breaking] SEC Votes to Approve Changes to Regulation Crowdfunding Increasing the Maximum Raise to $5 Million 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

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CONGRATULATIONS TO THE 2020 FINTECH DRAFT PITCHING AND DEMO COMPANY WINNERS!



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