To allow for faster crowdfunding offerings, the U.S. Securities and Exchange Commission (SEC) unveiled temporary, conditional relief for “established smaller companies” impacted by COVID-19. The actions will speed up the offering process for firms that are eligible by offering relief from specific procedures when it comes to the timing of an offering and needed financial statements, according to a press release from the agency.
“In the current environment, many established small businesses are facing challenges accessing urgently needed capital in a timely and cost-effective manner,” SEC Chairman Jay Clayton said in the release. “Today's action responds to feedback we have received from our Small Business Capital Formation Advisory Committee and others about the difficulties these companies may face in conducting an offering within a time frame that meets pressing capital needs, while continuing to provide appropriate protections for investors.”
A firm has to “meet enhanced eligibility requirements and provide clear, prominent disclosure to investors about its reliance on the relief” per the release. The relief will be applicable to offers rolled out from the date the temporary procedures take effect to Aug. 31 of this year. The temporary rules, for their part, let issuers that meet certain standards determine interest in a crowdfunding offering before full offering materials are ready and close an offering as well as have access to funds when rolled out faster than without the temporary relief measures.
An exemption from specific financial statement review requirements is provided by the temporary rules for issuers offering between $107,000 and $250,000 in securities with reliance on regulation crowdfunding over a timeframe of 12 months. Reuters reported that the regulator put forward the idea in March of letting smaller, private firms access additional capital prior to meeting a need to register with the body.
Certain advocates put forward concerns that even the more stringent regulations in place were not sufficient to inspire strong disclosure.