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SEC expanded funding options

SEC expanded funding options

By: Dean Dorton | March 29, 2021

Dean Dorton can perform American Institute of Certified Public Accountants (AICPA) audits and reviews for alternative funding options with the SEC.

Audit and Assurance

Over the last 10 years, the SEC has implemented three funding programs that remove the rigor of traditional SEC public offerings. These offering programs don’t receive the fan fair of traditional public offerings, but they do provide many benefits to smaller companies with road maps to various levels of funding.

We encourage you to consult with your SEC counsel before embarking down one of these paths. We can facilitate this discussion as well, in regards to the need for an audit or review of historic financial statements. Below are more details of each program.

Regulation A Filings

On April 5, 2012, the Jumpstart Our Business Startups Act of 2012 (Jobs Act) was created to help businesses raise funds in public capital markets by minimizing regulatory requirements. Regulation A+ of Title IV of the Jobs Act which allows private companies to raise up to $50 million from the public in a 12-month period (Tier 2 Offering). A Tier 1 Offering allows companies to raise up to $20 million in a 12-month period. A Tier 2 offering requires an audit while a Tier 1 offering does not require an audit but comes with other complexities. A Tier 2 offering once approved requires annual reporting requirements including an annual audit while the Tier 1 offering has fewer annual requirements. Teir 2 has been raised to offerings up to $75 million in a 12-month period.

Regulation D Filings

Rule 504 of Regulation D provides an exemption from the registration requirements of the federal securities laws for some companies when they offer and sell up to $5,000,000 of their securities in any 12-month period. Companies must give non-accredited investors disclosure documents that are generally the same as those used in Regulation A or registered offerings, including financial statements, which in some cases may need to be audited.

Regulation Crowdfunding (CF) Filings

Currently, an initial crowdfunding of over $250,000 for a 12-month period will require a review of the financial statements. The limit falls back to $107,000 for security offerings initiated after February 28, 2021. For current and previous offerings that aggregate to over $535,000 will require an audited set of financial statements. Regulation CF funding allows for total capital raise of $1.07 million in a 12-month period (Limit raised to $5 million effective March 15, 2021).

For some companies, traditional funding sources have become more difficult to obtain. The SEC alternative offering programs may provide the necessary funding for many companies. Contact us to learn more about how we can help you evaluate whether these programs are right for your company.

Bill Kohm, Director of Assurance Services |
Jim Tencza, Director of Assurance Services |

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