SEC Reveals Plan to Boost Public Stock Deals
(CN) - The Securities and Exchange Commission proposed a rule expansion that would allow companies to sell up to $50 million in unregistered securities per year, making it easier for small companies to raise capital.
Current federal securities law caps unregistered public offerings at $5 million in securities within one year, including no more than $1.5 million of securities offered by company shareholders.
This exemption, dubbed "Regulation A," has been rarely used in recent years, according to the SEC, due to the cost and complexity of federal and state law compliance.
That's why Congress included a provision in the Jumpstart Our Business Startup (JOBS) Act to extend the exemption to up to $50 million in unregistered securities within a year.
The proposed expansion would continue to apply to companies in the United States and Canada, and would require the companies to file ongoing reports similar to public company reporting. Companies' financial statements would also be subject to auditing, and investors could purchase no more than 10 percent of their annual income or net worth, whichever is greater, in stock.
Cumbersome state securities law requirements have been a key factor in the exemption's limited use, according to the Government Accountability Office, so the updated version would remove those requirements for larger offerings up to $50 million.
The SEC said it will seek public comment for 60 days, and then determine whether to adopt the proposed rules.