SEC takes major action to relax margin limits and simplify securities issuance exemptions.
The U.S. Securities and Exchange Commission (SEC) has voted on and proposed a series of regulatory amendments to streamline and improve the exempt offering framework to facilitate capital formation, expand investment opportunities, and enhance investor protection.
Table of Contents
- Increase Financing Limits, Redefine "Accredited Investors"
- Open to Public Input
Significantly Expand Financing Limits
Regulatory uncertainty has been a widespread issue for cryptocurrencies in various countries, and this amendment aims to improve the existing complex and confusing framework to make it easier for startups to launch financial products that cater to investors.
In the United States, securities offerings, including Initial Coin Offerings (ICOs), must be registered with the SEC to seek exemptions. Therefore, most startups (such as Telegram) have had to raise funds under the exemption regulations. Previous regulations included:
The proposed amendments include:
- Regulation A fundraising cap raised to $75 million
- Regulation A secondary sale limit increased from $15 million to $22.5 million
- Regulation D504 issuance limit raised to $10 million
- Regulation D506(b) financial information provided to non-accredited investors must be consistent with the information provided under Regulation A
- Streamline Regulation A issuance requirements to establish consistency between Regulation A and registered offerings
In the field of cryptocurrency, many exempt securities regulations fall under Regulation D504. The SEC has stated that this amendment comprehensively reviews the system pieced together over decades in the United States, aiming to address the differences and complexities in exemption regulations, which may have hindered the fundraising success of issuers and the opportunities for investors.
SEC Chairman Jay Clayton commented on the amendment:
The complexity of the current framework has left many participants in this process confused, especially small and medium-sized enterprises, using their limited resources to digest overly complicated regulations instead of directly investing in areas beneficial to company development. These proposals aim to establish a more rational framework that is more conducive to entrepreneurs accessing capital while enhancing investor protection.
Adopting Public Suggestions
According to the announcement, starting today, the public will have 60 days to provide feedback on the proposed amendments. Additionally, the SEC will enhance the definition of "accredited investors."
Currently, accredited investors are individuals with a net worth of $1 million or institutions holding assets exceeding $5 million. The new rule will define accredited investors as those with professional knowledge and experience in investments.
The SEC emphasizes that this move aims to prevent ordinary investors from being disadvantaged due to information gaps and lack of professional knowledge, as Regulation D506 currently only allows accredited investors to participate.
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