Tag: Regulation D

Corporate, Start 'n Knupp

SEC Proposes Rule Changes That Will Enable Entrepreneurs to Raise More Capital at Lower Costs

Commercial industrial construction
Photo Credit: istock.com/z_wei

By Mark T. Hiraide

This week, in a nearly 300-page release, the Securities and Exchange Commission proposed significant changes to its rules applicable to online equity crowdfunding and other securities offerings that are exempt from SEC registration.

These kinds of offerings generally are most advantageous to smaller and emerging companies that have limited funds to spend on raising capital. Last year, exempt securities offerings accounted for an estimated $2.7 trillion (69.2%) of new capital, compared to $1.2 trillion (30.8%) raised through SEC-registered offerings.

If adopted, the proposed changes will enable entrepreneurs to raise more capital through exempt offerings and simplify certain complex rules, thereby reducing legal costs associated with funding a business. The changes also will continue provisions to protect investors, especially individual retail investors. Continue reading “SEC Proposes Rule Changes That Will Enable Entrepreneurs to Raise More Capital at Lower Costs”

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Corporate

Amending the Definition of “Accredited Investor”

Employee in office
Photo Credit: istock.com/shironosov

By Arina Shulga

The definition of an “accredited investor” is the cornerstone of Regulation D that provides a safe harbor exemption for private placements of securities by startups and more mature companies. Only in 2018, $1.7 trillion was invested into the startup sector by means of Regulation D offerings, out of which $228 billion was raised by companies rather than investment funds. Nearly all of the investors in such offerings were accredited. Now, the definition of an accredited investor may be changing to include new categories of people. This will open the extremely risky but yet extremely lucrative startup investment opportunities to more participants.

This blog focuses on certain proposed changes to the definition as it relates to natural persons.

The definition of “accredited investor” came about in 1982 together with the adoption of Regulation D (although the concept of an “accredited person” was first introduced by Rule 242 in 1980). The following categories of natural persons are deemed to be accredited: Continue reading “Amending the Definition of “Accredited Investor””

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