Securities Law Daily provides daily coverage of developments in the regulation of federal, state, and international securities and futures trading, with objective coverage of the...
Nov. 3 — Small startups are slowly but steadily making use of new Securities and Exchange Commission rules allowing them to raise capital without registering their securities.
One-hundred and fourteen offerings have been made under the agency’s crowdfunding rules, which were adopted in October 2015 and went live in mid-May, Keith Higgins, director of the SEC’s Division of Corporation Finance, said Nov. 2 at a Practising Law Institute conference in New York.
Under 1933 Securities Act Regulation A Plus, which allows sales of unregistered securities up to $50 million, there have been more than 130 offerings since the rule took effect in June 2015, Higgins said. The data were through Sept. 30.
The numbers represent a modest bump over previous data, reflecting growing pains as a new set of securities registration exemptions take effect and skepticism by some lawyers that those pathways to raise capital are appropriate for small startups.
The 114 crowdfunding offerings have sought to raise more than $13 million, an average of roughly $115,000 apiece.
There have been a dozen completed offerings, Higgins said, eclipsing $5 million for an average of more than $400,000.
“That’s actually a little bit larger than I might’ve expected,” Higgins said.
Regulation Crowdfunding allows early-stage startups to raise money in small dollar amounts from a wider variety of qualified investors than previous regulations permitted.
An issuer may raise up to $1 million a year in a crowdfunded offering, but investors with less than $100,000 of annual income may invest no more than 5 percent of it.
Several lawyers at the conference told Bloomberg BNA that the crowdfunding rules are restrictive and are unlikely to flourish beyond current levels.
Reg A Plus breaks qualified offerings into two tiers. The first tier includes offerings up to $20 million per year, and Tier 2 includes those up to $50 million. State laws are preempted under the larger tier.
The number of offerings has been split almost evenly between the two tiers, Higgins said—65 for Tier 1, and more than 70 for Tier 2—but the dollar values are heavily weighted in the larger tier.
The SEC has qualified 76 of those offerings, meaning it has declared them eligible to begin raising money, and 14 offerings have been completed.
More than $170 million has been raised, the bulk of it under Tier 2. Higgins called it “a fair amount of money for startup capital.”
To contact the reporter on this story: Rob Tricchinelli in New York at firstname.lastname@example.org
To contact the editor responsible for this story: Phyllis Diamond at email@example.com
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)