The Securities and Exchange Commission (the “SEC”) recently issued temporary final rules for established small companies affected by COVID-19 that may consider meeting their funding needs through a Regulation Crowdfunding offering from certain requirements of Regulation Crowdfunding relating to the timing of the offering and the availability of financial statements required. Under the temporary final rules, the SEC allows issuers to gain access to funds through securities offerings more quickly than before by:
permitting an issuer to commence an offering after filing an offering statement without previously required financial statements, provided that the issuer may only accept investment commitments after such financial statements are filed;
permitting an issuer to use financial statements of the issuer and certain information from the issuer’s Federal income tax returns, both certified by the principal executive officer, instead of the financial statements reviewed by a public accountant independent of the issuer when the offering amount does not exceed $250,000 in a 12-month period;
changing the deadline for an investor to cancel its investment commitment from 48 hours prior to the stated offering deadline to 48 hours from the time an investor makes an investment commitment;
permitting the sales of securities once an issuer has received binding investment commitments (commitments are not binding until 48 hours after they are given) covering the target offering amount, instead of requiring an issuer’s offering information to be available for 21 days before any securities are sold; and
permitting an issuer to close an offering prior to the stated offering deadline when such issuer receives binding investment commitments that reach the target offering amount, provided that certain disclosure and notice requirements are met.
The temporary final rules apply to securities offerings initiated under Regulation Crowdfunding between May 4, 2020 and Aug. 31, 2020 by issuers who (i) meet the existing eligibility criteria for Regulation Crowdfunding and (ii) have been organized and have had operations for no less than six (6) months prior to commencement of such offering. Additionally, an issuer must have complied with section 4A(b) of the Securities Act to be eligible for the temporary final rules, if the issuer has previously sold securities under Regulation Crowdfunding.