SEC Updates Guidance on Reg CF Crowdfunding
The SEC has updated its guidance for Regulation Crowdfunding (Reg CF). The new rules clarify procedures for startups switching fundraising platforms, managing offering caps, and handling issuer filings. The changes are intended to make it easier for early-stage companies, including fintechs, to navigate the compliance aspects of raising capital from the public.
- Regulation Crowdfunding (Reg CF) was established by the Jumpstart Our Business Startups (JOBS) Act of 2012, which was signed into law on April 5, 2012, to make it easier for small businesses to raise capital. - Under current rules, a company can raise a maximum of $5 million through crowdfunding offerings within a 12-month period. This offering cap is calculated on a rolling 12-month basis from the date of each sale. - For non-accredited investors, if either annual income or net worth is less than $124,000, they can invest the greater of $2,500 or 5% of the greater of their income or net worth in a 12-month period. - If both an investor's annual income and net worth are $124,000 or more, they can invest up to 10% of the greater of the two, with a maximum investment of $124,000. - The new guidance clarifies that an issuer can move an offering from one intermediary's platform to another before any sales are made by canceling the first offering and filing a new Form C to start on the new platform. - All transactions under Regulation Crowdfunding are required to take place online through an intermediary registered with the SEC, which can be either a broker-dealer or a funding portal. - If a crowdfunding offering remains open for more than 120 days after the end of the issuer's fiscal year, the company is required to file an amendment with updated financial statements. - A key feature of Reg CF is that it allows both accredited and non-accredited investors to participate, democratizing access to early-stage investment opportunities that were previously limited.
