On May 4, 2020, the Securities and Exchange Commission (“SEC”) announced another initiative to improve access to capital during the COVID-19 pandemic. The SEC is providing temporary relief to expedite the process of conducting and closing Regulation Crowdfunding (“Reg CF”) offerings for eligible earlier stage companies so that they can meet urgent funding needs.
Namely, the SEC is providing relief for Reg CF offerings initiated from May 4, 2020 through August 31, 2020 by companies that, in addition to being eligible to conduct a Reg CF offering under existing rules, were formed and have been in operation for six or more months. In addition, to the extent the company has previously conducted a Reg CF offering, the company must have complied with the requirements for issuers with respect to such offering to be eligible for the relief. Companies that choose to avail themselves of the relief must also prominently disclose that they are relying on this relief in conducting their Reg CF offerings.
The relief relaxes certain regulatory requirements to allow eligible issuers to assess investor interest prior to spending the time and expense of preparing full offering materials. For offerings of up to $250,000, the relief relaxes the requirement that reviewed financial statements be prepared prior to commencing the offering and instead requires them to be prepared and made available to investors before the company receives binding commitments to invest. Once an offering is launched, the relief allows companies to close the offering and access funds on an expedited process upon receipt of commitments covering the targeted offering amount as opposed to the baseline 21-day offering period requirement.
For more information on the Reg CF offering relief, you can view text of the temporary rule here and the accompanying press release here. For more information on the SEC’s ongoing initiatives to provide regulatory relief during the pandemic, you can visit the SEC’s webpage here. Please reach out to a member of our Securities and Capital Markets group with any questions you may have with respect SEC compliance and accessing the capital markets during the pandemic.
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