U.S SEC increases funding limit for Reg CF category targeting small and medium business growth

The United States Security and Exchange Commission(SEC) has now upped Reg CF category fundraising cap from $1.07M to $5M.

By · Nov 4, 2020 . 5min read

SEC increases funding limit for small business news

The United States Security and Exchange Commission (SEC), has released a new update Reg CF for small and medium businesses seeking to raise funds.

Crypto-friendly SEC Commissioner Hester M. Pierce statement in an open meeting yesterday came up with this update. Specifically, it has been at least a year since the SEC started reviewing its exempt offering framework.

Typically, for any company operating under United States financial laws, SEC classifies financial instruments available to the companies primarily as securities. And for any company to offer securities, it must either register with the SEC or opt for the exemption category. As most small and medium scale businesses do not always have the luxury of time required from SEC to grant permission or even the funds needed for that, they would instead opt for exemption which is anyway an astute decision.

We have several exemptions categories; e.g. A, Reg D and now Reg CF or Reg Crowdfunding. What the SEC has done now is to review and up the capital raise cap for each of the categories. The emphasis here is on Small and Medium businesses.

While Reg A Tier 2 is now $75M from $50M, the SEC doubled Reg D Rule 504 from $5M to $10M. And for Reg CF which small and medium businesses target, SEC has now upped it from $1.07M to $5M. Reg CF’s cap increase represents more than 467% increase. This is a huge alleviation to small businesses who may have been hampered by the initially small-cap.

Small businesses can now raise more easily with the reviewed SEC’s Reg CF rule.

What this means for small and medium businesses operating within SEC’s jurisdiction is that they do not need accredited investors. Usually, only accredited investors are allowed to take part in fundraising in any securities offering. Also, businesses under the Reg CF category can advertise more freely as compared to the usual SEC’s stiff advertising rule. As most businesses would rather not opt for ICOs (many argue the ear has gone already), Reg CF is an excellent avenue to grow their businesses whenever they need funds.

Many experts expect that this will help grow businesses, especially with SEC’s punitive measures of going after small businesses who once raised using ICOs.

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