SEC Amendments Positively Impact Capital Formation For Emerging Companies

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The ability to raise capital is a critical pillar for any startup. For decades, the regulatory framework to do so was incredibly complex, and at times overwhelming, for many early-stage companies. Fortunately, beginning with the JOBS Act in 2012, and namely Regulation CF, which birthed equity crowdfunding in the US, the SEC has made great strides in recent years to simplify the rules and facilitate capital formation.

On November 2, 2020, the Securities and Exchange Commission (SEC) voted to amend the existing regulations and those rules went into effect on March 15, 2021. The new amendments:

  1. Modernize and simplify the Securities Act integrations framework for registered and exempt offerings,
  2. Set clear and consistent rules governing offering communications between issuers and investors,
  3. Increase offering and investment limits for certain exemptions, and
  4. Harmonize certain disclosure requirements and bad actor disqualification provisions.

The SEC is optimistic these amendments will promote capital formation and expand investment opportunities, while also maintaining key investor protections.

The SEC amendments change the landscape for small businesses and entrepreneurs seeking to raise capital through exempt offerings. Over the next few months, we will publish a series of blogs detailing each amendment and how they affect capital formation for our emerging company clients. Like the SEC, VW is hopeful these changes will positively impact investment opportunities for issuers and investors alike.

About the Author
Kevin Vela

Kevin is the managing partner at Vela Wood. He focuses his practice in the areas of M&A, venture financing, fund representation, and gaming law.

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