SEC Small Business Forum recommendations target crypto and crowdfunding

The Securities and Exchange Commission has sent Congress a report summarizing SEC Small Business Forum recommendations aimed at changing how smaller companies and funds raise capital. The priorities include revising crypto securities rules, lifting the Regulation Crowdfunding annual raise limit from $5 million to $20 million, and reducing costs for smaller public companies, according to the SEC.

The recommendations came from participants in the regulator’s 45th Annual Small Business Forum, held March 9, the SEC said in a Monday release. The forum brings together public- and private-sector participants, along with representatives from the SEC and other federal and state agencies, to discuss capital-raising policy.

Participants voted on which proposals should be prioritized. The SEC said the choices were drawn from recommendations submitted before the event and during the forum.

What did the SEC Small Business Forum recommend?

For early-stage capital raising, participants supported expanding the accredited investor definition to include more measures of financial sophistication. Accredited investor status determines who may participate in many private offerings, and broadening the definition could change access to investments that are not registered for public sale.

Participants also prioritized modernizing regulation for crypto assets that are securities, creating a federal friends-and-family exemption that would override state blue sky laws, and increasing funding-support resources for small businesses, according to the SEC. Blue sky laws are state securities rules that can apply in addition to federal requirements.

The crowdfunding recommendation would amend Regulation Crowdfunding by raising the amount a company can collect under the exemption in a 12-month period to $20 million from $5 million. Regulation Crowdfunding allows eligible companies to raise money from a broad set of investors without conducting a full public offering, subject to SEC rules.

Growth-stage companies and funds

For growth-stage companies and smaller funds, participants selected a proposal for a new private fund exemption intended to support small or regional funds focused on community-based investing, the SEC said.

Other selected priorities included preempting blue sky laws for off-exchange secondary trading in companies that make robust information available, streamlining the shift from private to public markets by making previously restricted shares available for public trading, and reducing compliance costs and regulatory burdens for smaller emerging fund managers.

Participants also voted to advance the INVEST Act, which the SEC described as aimed at improving capital formation, and to increase the number of investors permitted in a fund structured under Section 3(c)(1).

Small-cap companies and public markets

For small-cap companies and public markets, participants backed measures to improve over-the-counter trading by requiring more disclosures from issuers, according to the SEC. They also supported allowing more companies that are current in their filings to use at-the-market offerings, a structure that lets an issuer sell shares into the market over time.

Additional recommendations included enabling more issuers to conduct offerings on Form S-3, revising Regulation A to simplify reporting requirements for small issuers, and pursuing broader reforms to reduce the cost and liability barriers tied to operating as a smaller public company.

The SEC’s report presents the forum participants’ policy priorities to Congress. The release did not state that the recommendations have been adopted as SEC rules.

This story draws on original reporting from PYMNTS.