The US Securities and Exchange Commission (SEC) voted on Monday to raise the limits on Regulation Crowdfunding offerings from $1.07 million to $5 million in an effort to support entrepreneurs and emerging businesses.
The SEC aims to expand investment opportunities as the amendments will promote capital formation. The commission plans to simplify the overly complex exempt offering framework.
Regulation crowdfunding is an important tool for startups to raise money without going through the complex registration process of the SEC. The new amendments now support emerging startups including crypto startups to raise funds from the community.
The commission states that many entrepreneurs and emerging businesses raise capital by selling securities in reliance on an offering exemption. Rule amendments show that accredited investors no longer have any limits while non-accredited investors can calculate limits by using their annual income or net wealth.
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In an official statement, Jay Clayton, Chairman at the SEC, said: “For many small and medium-sized businesses, our exempt offering framework is the only viable channel for raising capital. These businesses and their prospective investors must navigate a system of multiple exemptions and safe harbors, each with different requirements.”
“While each component in this patchwork system makes some sense in isolation, collectively, there is substantial room for improvement. The staff has identified various costly and unnecessary frictions and uncertainties and crafted amendments that address those inefficiencies in the context of a more rational framework that will facilitate capital formation for small and medium-sized businesses and benefit investors for years to come.” Clayton added.
The commission aims to support entrepreneurs with the latest amendments as startups can now raise money from the public instead of VC’s. According to the SEC, in the past, particularly small businesses found the regulatory framework confusing. These amendments are intended to reduce the potential friction points to make the capital raising process efficient enough to meet the needs of the evolving market.
The SEC recently modernized the regulatory framework for derivatives use.