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U.S. Securities and Exchange Commission Relaxes the CrowdFunding Regulations amid Economic Crisis

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Jayashree Ingle Follow

INDIA

Aug, 27 2020

Aug, 27 2020

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Amid the Corona related commotion, The U.S. Securities and Exchange Commission (SEC) has announced short-term amendments in CrowdFunding regulations to provide relief to smaller firms pursuing to raise capital.  

The amendments in regulations will be applicable to the firms which fulfill the “enhanced eligibility requirements” providing clear prominent disclosure to investors about its reliance on the relief”. The relief measures will be applicable from May 4 till 31 August 2020.

The temporary amendments will relax the criteria to submit the required documents while registering with the Commission, which are difficult to furnish within the timeframe during the ongoing nationwide lockdown. However, the agency insisted that the firms must provide the documents to the investors before making any commitments to them.

Which Firms will get Relief?

The exemptions will be pertinent to issuers who have to raise funds between $107,000 and $250,000 in Securities over 12 month period certified by the Chief Executive of the firm rather than an independent auditor.

Firms that have been operational for at least six months before the commencement of the crowdfunding offering are also eligible for the exemptions in the regulations.

SEC Chairman Jay Clayton said:

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

He further added that the action was taken to mitigate the delay issue these companies might be facing to deliver the offerings within the committed time frame. And the action will also ensure protection for the investors.

Non-eligible firms for the Exemption 

Firms that have been formed in less than six months will not be eligible for the relief exemptions. Also, the firms which have failed to meet the compliance standards as per the Securities Act of 1933 and Regulations for Crowd finding Guidelines will not be entitled to the exemption.

The non-US-based firms, investment companies, and blank companies are also excluded from the relief measures.


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Jayashree Ingle

CBW - External Analyst

INDIA

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