‘These proposals are intended to create a more rational framework,’ SEC Chairman Jay Clayton said.
Photo: Jacquelyn Martin/Associated PressWASHINGTON—Startups and small companies would be allowed to raise more money from investors when they opt for light-touch fundraising methods under a plan made public Wednesday by the Securities and Exchange Commission.
The proposal seeks to further ease rules for measures such as crowdfunding, which was supposed to make it cheaper and easier to raise limited pools of capital online. The plan, passed on a 3-1 vote, shows how Trump-appointed regulators are still trying to make those measures more useful to small firms that lack access to alternatives such as venture capital.
Under the plan, which is open for public comment for 60 days, firms could use crowdfunding to raise as much as $5 million, up from about $1 million under current rules. Congress set the $1 million cap in a 2012 law, and the SEC is proposing to use its broad authority to waive that restriction and increase the limit.
Business groups have lamented for years that crowdfunding hasn’t been widely used because the rules set a relatively low fundraising cap. At the same time, the rules require many companies using crowdfunding to provide investors with audited financial statements, which increases the cost of selling stock or debt.
There were 519 completed crowdfunding deals from 2016 to 2018, with a median amount raised of $107,367, SEC staff said in a report last year. The median investor contribution per deal was just $260, the report found.
Lawmakers set the cap at $1 million, partly out of concern that swindlers would exploit the light-touch regulatory design to peddle inferior investments, said Andy Green, a former Democratic Senate aide and now managing director of economic policy at the Center for American Progress.
The SEC also proposed raising the maximum amount an individual investor could contribute to crowdfunded deals. Under the new plan, people could invest as much as 10% of their annual income or net worth, whichever is higher. Current rules set the cap at the lower of those two measures.
Another part of the proposal would allow firms to raise as much as $75 million through a so-called mini-public offering, up from $50 million currently. That fundraising exemption, known as Regulation A+, comes with stricter disclosure requirements than crowdfunding and is used by startups seeking more capital without having to go through the red tape that accompanies an initial public offering of shares.
“These proposals are intended to create a more rational framework that better allows entrepreneurs to access capital while preserving and enhancing important investor protections,” said SEC Chairman Jay Clayton.
Firms raising money under Regulation A+ have the added benefit of selling shares that can be publicly traded. But many of those companies have performed poorly, and stock exchanges have shied away from listing the shares.
Increasing the maximum amount raised could make Regulation A+ more attractive to small firms and help companies attract larger and more seasoned investors, the SEC said.
The blueprint would also loosen some restrictions on private-market fundraising. Companies that stage successive, separate deals to raise capital from both private investors and the general public would find it easier to qualify for less regulation on the private deal.
The SEC’s proposal said that change could be helpful to firms that are courting private, institutional investors at the same time they are weighing an offering targeted at individual investors, such as a deal done under Regulation A+.
Write to Dave Michaels at dave.michaels@wsj.com
Copyright ©2019 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
"plan" - Google News
March 05, 2020 at 08:54AM
https://ift.tt/2In52mI
SEC Plan Would Allow Startups to Raise More Money Under Light-Touch Rules - The Wall Street Journal
"plan" - Google News
https://ift.tt/2un5VYV
Shoes Man Tutorial
Pos News Update
Meme Update
Korean Entertainment News
Japan News Update
Bagikan Berita Ini
0 Response to "SEC Plan Would Allow Startups to Raise More Money Under Light-Touch Rules - The Wall Street Journal"
Post a Comment