On April 5th, the SEC announced that it would be adopting amendments to increase the amount of money issuers can raise, and investors can invest, under Regulation Crowdfunding (“Reg CF”). The amendments were adopted pursuant to the SEC’s mandate under the JOBS Act (passed in 2012) to keep up with the pace of inflation at least once every five years.
The maximum amount an issuer can sell in any 12-month period is now $1,070,000, up from $1 million. In a tweak to Section 201(t)(2) of Reg CF, offerings of between $500,000 and $535,000 by issuers that have previously conducted Reg CF offerings now only require reviewed financing statements instead of audited (i.e. more expensive) financial statements.
If either an investor’s annual income or net worth is less than $107,000 (instead of the former $100,000), that investor’s Reg CF investment limit is the greater of (a) $2,200 (up from $2,000) or (b) 5 percent of the lesser of the investor’s annual income or net worth. If the investor’s annual income and net worth are both at least $107,000, the investor’s limit is still 10 percent of the lesser of such annual income or net worth.
While the increases to Reg CF thresholds are slight, they are still better than a poke in the eye with a sharp stick. Only a few companies have come close to the former $1 million mark, but any medium-income or net worth investors hot on Reg CF will need to pay closer attention to the limits to ensure they are in compliance with the regulations.
In a statement, acting SEC Chairman Michael Piwowar stated that he looks forward to seeing “empirical studies of capital raising” under Reg CF, and suggested that the SEC consider “whether any further steps should be taken to improve our crowdfunding regulations, including the use of exemptive authority.”
The new thresholds have been posted on the SEC’s website and are available here.