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Crowdfunding

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Podcast: Regulation A+ Whitepaper Overview with Regulation A Auditing Tips from PCAOB Auditor 

SEC Staff Views, Regulation Crowdfunding - A Small Entity Compliance Guide for Issuers 

Staff Speech, New Ways for the Financing of Small and Medium Enterprises and the Challenges of Crowdfunding by Mary Jo White, SEC Chair

Crowdfunding

SEC Staff Views, Opportunity for Companies to Test File in Preparation for Crowdfunding Offerings

Amendments to Regulation A

Division of Corporation Finance: Amendments to Regulation A - A Small Entity Compliance Guide

FASB Accounting Standards Update No. 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern

Articles

Podcast: Regulation A+ Whitepaper Overview with Regulation A Auditing Tips from PCAOB Auditor 

Click here to listen to Audit Partner Steven Vertucci's guest appearance on the Reg A Funding Group's podcast where he discusses Regulation A+ company offerings and their need for a PCAOB audit.

SEC Staff Views, Regulation Crowdfunding - A Small Entity Compliance Guide for Issuers 

Summary -  The staff in the SEC's Division of Corporation Finance (Corp Fin) has issued the following documents related to Regulation Crowdfunding:
  • Compliance and Disclosure Interpretation (C&DI), Regulation Crowdfunding; and
  • Small Entity Compliance Guide on Regulation Crowdfunding.
The C&DI provides guidance on aspects of Regulation Crowdfunding, which is an SEC final rule that permits companies to offer and sell securities through crowdfunding. Crowdfunding is an evolving method of raising capital that has been used to raise funds through the Internet for a variety of projects. Title III of the JOBS Act created a federal exemption under the securities laws so that this type of funding method can be used to offer and sell securities.

Regulation Crowdfunding  permits individuals to invest in securities-based crowdfunding transactions subject to certain investment limits. The rules also limit the amount of money an issuer can raise using the crowdfunding exemption, impose disclosure requirements on issuers for certain information about their business and securities offering, and create a regulatory framework for the broker-dealers and funding portals that facilitate the crowdfunding transactions.

The Small Entity Compliance Guide on crowdfunding summarizes and explains provisions of Regulation Crowdfunding. Topics covered include:
  • Requirements of Regulation Crowdfunding;
  • Issuer disclosure;
  • Limits on advertising and promoters; and
  • Restrictions on resales.
For more information, click here.

© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.


Staff Speech, New Ways for the Financing of Small and Medium Enterprises and the Challenges of Crowdfunding by Mary Jo White, SEC Chair

Summary - SEC Chair Mary Jo White recently gave a speech entitled, New Ways for the Financing of Small and Medium Enterprises and the Challenges of Crowdfunding. Ms. White acknowledged the fact that small businesses play a crucial role in the U.S. economy and capital markets. Ms. White indicated that the SEC "has been quite focused in recent years advancing a range of initiatives aimed at facilitating capital formation for small and emerging companies, including by updating and amending our existing rules for smaller offerings and by developing new rules for crowdfunding." Highlights of Ms. White's remarks include:

  • There is significant interest and excitement in the U.S. about the use of securities-based crowdfunding, which will hopefully give small businesses another tool for raising capital and building vibrant markets. Companies have many options for raising money to fund their businesses, and those seeking capital will ultimately be in the best position to decide whether crowdfunding or another capital-raising option will work best for them.
  • Importantly, in implementing the SEC's statutory crowdfunding mandate, the rules issued seek to maintain strong investor protections, while also streamlining capital formation for smaller issuers. There are also specific initial and ongoing disclosure requirements regarding the business and the securities offering and requirements for financial statements.
  • The SEC has completed all of its other statutory requirements from the JOBS Act to promote capital-raising. In 2013, the SEC created a new exemption that allows companies to engage in general solicitation of the public for certain unregistered securities offerings, provided that all purchasers are "accredited investors" and that issuers take reasonable steps to verify that status. Historically, general solicitation had not been permitted in these types of private offerings. The SEC has implemented statutory enhancements to the registration and reporting process for initial public offerings of common equity securities. These enhancements are known as the "IPO on-ramp."
  • About 85% of the companies doing IPOs since the JOBS Act was enacted have chosen to start as an emerging growth company. Nearly 1,000 emerging growth companies have taken advantage of the ability to confidentially submit draft registration statements for their IPOs.
  • The SEC has also been working to improve capital formation for smaller companies through the SEC staff's Disclosure Effectiveness Initiative. As part of this initiative, the SEC staff is reviewing the SEC's key disclosure requirements, and is considering ways to improve the disclosure regime for the benefit of both companies and investors.
  • As part of the Disclosure Effectiveness Initiative, the SEC staff is considering how our rules can be improved for smaller companies. Just last month, the SEC issued a "concept release" in which it considered and sought comment on aspects of our scaled disclosure system for smaller reporting companies. The scaled disclosure system provides accommodations to smaller reporting companies with regard to certain disclosure requirements, as compared to the requirements applicable to their larger counterparts. The SEC looks forward to comments on this concept release to help inform any potential further consideration of changes to the scaled disclosure system.
For more information, click here.

© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.


Crowdfunding

Summary -  The SEC has adopted final rules, Regulation Crowdfunding, to permit companies to offer and sell securities through crowdfunding. Crowdfunding is an evolving method of raising capital that has been used to raise funds through the Internet for a variety of projects. Title III of the JOBS Act created a federal exemption under the securities laws so that this type of funding method can be used to offer and sell securities.
The final rules permit individuals to invest in securities-based crowdfunding transactions subject to certain investment limits. The rules also limit the amount of money an issuer can raise using the crowdfunding exemption, impose disclosure requirements on issuers for certain information about their business and securities offering, and create a regulatory framework for the broker-dealers and funding portals that facilitate the crowdfunding transactions.
The new crowdfunding rules and forms will be effective 180 days after they are published in the Federal Register. The forms enabling funding portals to register with the SEC will be effective January 29, 2016.
For more information, click here.
© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

SEC Staff Views, Opportunity for Companies to Test File in Preparation for Crowdfunding Offerings

Summary -  The SEC staff has issued an announcement, Opportunity for Companies to Test File in Preparation for Crowdfunding Offerings. According to the announcement, companies may immediately begin test filings of the form to be used when conducting Regulation Crowdfunding offerings. Under new SEC rules that take effect on May 16, 2016, companies will be permitted to offer and sell securities through crowdfunding. Companies seeking to conduct a crowdfunding offering using the new rules must file the required disclosures about the offering on a new Form C on EDGAR, the SEC's electronic document filing system. Companies can access the Form C on the SEC's EDGAR filing website provided they have a Central Index Key (CIK) and a CIK Confirmation Code.
Filers are now able to submit test filings on the new form. The test filings will be accepted until February 29, 2016, and are intended to help prospective issuers become more familiar with the mechanics of the filing process in advance of a crowdfunding offering. During this testing period, filers should identify their Form C filings as "test" filings. "Live" filings are not permitted, and the system will reject such filings, until the rules are effective. Test filings will not be evaluated for compliance with the rules and will not be reviewed by SEC staff or available for public viewing. As is the case with any document submitted on EDGAR, testers should not submit confidential or personally identifiable information in the test filings.
For more information, click here.
© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Amendments to Regulation A

Summary - The SEC adopted rules and forms related to the offer and sale of securities pursuant to Section 3(b) of the Securities Act of 1933 to implement Section 401 of the Jumpstart Our Business Startups Act (JOBS Act). Section 401 of the JOBS Act includes provisions known as Regulation A+ that permit public offerings of up to $50 million in a 12 month period without having to comply with the SEC's general registration requirements. The new rules adopted create a two-tiered system:

  • Tier 1 includes the current Regulation A that allows companies to sell stock without having to comply with the SEC's general registration requirements; however, it increases the limit to $20 million from the current $5 million worth of stock offered in a 12 month period. Offerings under Tier 1 must be filed and fees paid in every state in which they're selling pursuant to state "blue sky laws." The $20 million limit on Tier 1 set by the SEC is different from the previous proposal to keep the limit at $5 million.
  • Tier 2 creates new rules that increase the limit on the capital that can be raised to $50 million in a 12 month period without having to comply with the SEC's general registration requirements. For Tier 2 offerings, issuers will have to provide audited financials with their offering circular, and will have to file annual and semi-annual financial reports with certain scaled disclosure. In addition, Tier 2 offerings will be required to provide certain current event reporting. The Tier 2 rules preempt state blue sky laws.
The rules adopted by the SEC provide additional provisions applicable to all offerings under both tiers of Regulation A, including required electronic filing of offering circulars, the ability to file draft offering circulars with the SEC for review before going public, and the ability to use certain "test the waters" communications.

For more information, click here.

© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.


Division of Corporation Finance: Amendments to Regulation A - A Small Entity Compliance Guide

Summary - The staff of the SEC has issued a Small Entity Compliance Guide, Amendments to Regulation A. This guide summarizes and explains rule amendments to Regulation A issued by the SEC in March 2015. The amendments implement Section 401 of the Jumpstart Our Business Startups Act by expanding Regulation A into two tiers: (a) Tier 1, for securities offerings of up to $20 million in a 12-month period; and (b) Tier 2, for securities offerings of up to $50 million in a 12-month period. The intent of these amendments to Regulation A is to enable all smaller firms to raise capital more easily while still providing certain protections to investors. These rule amendments became effective June 19, 2015.  Topics discussed in this guide include:

  • Summary of Regulation A;
  • Scope of Exemption;
  • Offering Statement;
  • Solicitation of Interest Materials;
  • Ongoing Reporting;
  • Bad Actor Disqualification;
  • Relationship with State Securities Law; and
  • Transition Issues.
For more information, click here.

© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.


FASB Accounting Standards Update No. 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern

The amendments in ASU 2014-15 are intended to define management's responsibility to evaluate whether there is substantial doubt about an organization's ability to continue as a going concern and to provide related footnote disclosures.
 
Under GAAP, financial statements are prepared under the presumption that the reporting organization will continue to operate as a going concern, except in limited circumstances. The going concern basis of accounting is critical to financial reporting because it establishes the fundamental basis for measuring and classifying assets and liabilities.
 
Currently, GAAP lacks guidance about management's responsibility to evaluate whether there is substantial doubt about the organization's ability to continue as a going concern or to provide related footnote disclosures.
 
This ASU provides guidance to an organization's management, with principles and definitions that are intended to reduce diversity in the timing and content of disclosures that are commonly provided by organizations today in the financial statement footnotes.
 
Effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. Early application is permitted for annual or interim reporting periods for which the financial statements have not previously been issued.
 
For more information, click here.
 
© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.