SEC Prepares Amendment for more Accessible Fundraising

SEC's latest proposal could make fundraising easier for Startups, SME or Scaleups. Particularly projects leveraging from tokenized crowdfunding via digital assets, such as rational CRE, digitalised company shares etc,  would benefit from the potential new ruling.  

The amendments would increase the amount companies could raise through exemptions and expand who qualifies as an “accredited investor.”

  Companies that raise investments through crowdfunding eg Security Token Offering, could see the process become simpler if the new rules proposed by the SEC are passed. While increasing the limit to how much companies can raise without having to register with the SEC or file for an exemption is aimed at the entire market, the ones that would benefit most from it are cryptocurrency companies. SEC commissioner, Hester Pierce, announced that the SEC has proposed changes to its exempt offering framework. The proposal is the latest initiative to come out of the SEC’s efforts to remove unnecessary friction from the capital-rising process, Pierce said in an official statement. Proposed some changes to our exempt offering framework, and I suggest some additional changes we might want to consider here and here. Jay Clayton, the Chairman of the SEC, said that the proposals will allow entrepreneurs to access capital while preserving and enhancing investor protection. “The complexity of the current framework is confusing to many involved in the process, particularly for those smaller companies whose limited resources spent on navigating our overly complex rules are diverted from direct investments in the companies’ growth.”  

What Can We Expect?

The changes to Regulation D propose, the maximum offering amount will be raised from $5 million to $10 million. Regulation A would raise the maximum offering amount from $50 to $75 million, while the offering limit in Regulation Crowdfunding would be increased from $1 to $5 million.  The proposed rules would also waive the investment limits for accredited investors and revise the calculation methods applied to non-accredited investors, the SEC said. Another major improvement would be the expansion of the definition of an “accredited investor.” At the moment, the term applies to an individual with a net worth of $1 million that had a net profit of $200,000 or more per year for the past two years. It also includes entities controlling over $5 million in assets. The proposal aims to expand the definition to those with professional knowledge, experience, or qualifications that would allow them to make informed investments. SEC’s proposal will remain open for public comments in the next 60 days, after which it will be put up for a vote.  

Source: Cryptobriefing, U.S. Securities and Exchange Commission, Moonwhale Digital Ventures

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