The SEC adopted rules to update and modernize the intrastate and regional offering framework. These amendments are intended to better accommodate how local offerings have evolved.
These changes include:
- a requirement that the issuer must have its "principal place of business" in-state and satisfy at least one "doing business" requirement;
- a new "reasonable-belief" standard for issuers to use when determining the residence of the purchaser at the time of the sale of securities;
- a requirement that issuers obtain a written representation from each purchaser concerning residency;
- a limit on resales, for a period of six months from the date of the sale by the issuer to the purchaser (for persons who reside within the state or territory of the offering);
- "an integration safe harbor that would include any prior offers or sales of securities by the issuer made under another provision, as well as certain subsequent offers or sales of securities by the issuer occurring after the completion of the offering";
- legend requirements for offerees and purchasers concerning the limits on resales; and
- amendments to Securities Act Rule 504 of Regulation D to (i) increase the aggregate amount of securities that may be offered and sold in any twelve-month period from $1 million to $5 million, and disqualify certain bad actors from participating in Rule 504 offerings, and (ii) repeal Securities Act Rule 505, which permits offerings of up to $5 million annually that must be sold solely to accredited investors or to no more than 35 non-accredited investors.
Revised Securities Act Rule 147 and new Rule 147A will become effective on April 20, 2017. The amendments to Securities Act Rule 504 will become effective on January 20, 2017. The removal of Securities Act Rule 505 and all other specified amendments will become effective on May 22, 2017.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.