Legislation of Interest to Capital Raisers

  • November 13th, 2017
  • Russell Weigel
  • Comments Off on Legislation of Interest to Capital Raisers

The U.S. House of Representatives passed the following bill which was then sent to the U.S. Senate in June 2017. There are 44 related bills reported.H.R. 10,” the Financial CHOICE Act, is a multi-faceted bill which provides for these changes to the federal securities laws among other changes to the financial system:

  • Providing a broker registration exemption for M&A brokers;
  • Raising the cap from $5 million to $20 million the aggregate sales price of securities sold under SEC Rule 701 (compensation plans such as sweat equity compensation) during a twelve-month period;
  • Exempting emerging growth companies and issuers with less than $250 million in gross revenues from the requirement to use XBRL for their financial statements;
  • Allowing registrants to use Form S-3 if the aggregate market value of voting and non-voting common equity held by non-affiliates is at least $75 million;
  • Providing that the general solicitation prohibition in Regulation D shall not extend to issuer presentations sponsored by higher education institutions, angel investor groups; venture forums and trade associations, and where the advertising of the event does not reference a specific offering by the issuer, among similar restrictions;
  • Providing for the registration of venture exchanges;
  • Providing for a securities offering registration exemption for offerings less than $500,000 and having 35 or less purchasers, and the purchasers have a pre-existing relationship with an officer, director, or ten percent shareholder of the issuer;
  • Extending the definition of accredited investor to include a “knowledgeable employee” of a private fund or the fund’s investment adviser and to a family office and its adviser;
  • Scrapping the crowdfunding statute and replacing it with a requirement that an issuer or an intermediary provide investors with certain warnings and disclosures, mandating that investors be able to communicate with each other through the issuer’s or intermediary’s website, mandating the SEC’s real-time inspection access to the issuer’s or the intermediary’s website, outsourcing cash-management functions to a third-party custodian, and limiting securities re-sales to occur after a one-year holding period unless sold to an accredited investor or to the issuer;
  • Raising the Regulation A maximum offering amount from $50,000,000 to $75,000,000;
  • Repealing the Volcker Rule; and
  • Exempting investment advisers of private equity funds from being required to register as investment advisers.

Contact us to discuss how this bill might affect your capital raise planning.

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