SEC Relaxes Regulations on Crowdfunding for Small Businesses

The Securities and Exchange Commission has announced that it is providing temporary, conditional relief for established smaller companies affected by COVID-19 that may look to meet their urgent funding needs through a Regulation Crowdfunding offering. Today’s actions, which follow suggestions made by members of the SEC’s Small Business Capital Formation Advisory Committee, will expedite the offering process for eligible companies by providing relief from certain rules with respect to the timing of a company’s offering and the financial statements required.  To take advantage of the temporary rules, a company must meet enhanced eligibility requirements and provide clear, prominent disclosure to investors about its reliance on the relief. The relief will apply to offerings launched between the effective date of the temporary rules and Aug. 31, 2020.

“In the current environment, many established small businesses are facing challenges accessing urgently needed capital in a timely and cost-effective manner,” said SEC Chairman Jay Clayton. “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.”

The temporary rules are the latest in a series of steps the Commission has taken to assist financial market participants in addressing the impacts of the coronavirus. The Commission’s website provides additional information regarding its response. The Commission and its staff continue to assess impacts relating to the coronavirus on investors and market participants, and will consider additional relief from other regulatory requirements where necessary or appropriate.  Firms and financial professionals affected by the coronavirus are encouraged to contact the staff with questions and concerns.