On Monday, May 4, 2020, the U.S. Securities and Exchange Commission adopted a temporary rule relaxing certain requirements for capital raises under Regulation Crowdfunding. The SEC hopes that the temporary rule will make it easier for small and early-stage businesses to launch capital-raising campaigns during the coronavirus pandemic.

There are two major requirements relaxed by the temporary rule. First, the rule allows companies to omit financial statements from their initial campaign disclosures if they are not available. The crowdfunding campaign may proceed so long as the required financial statements are available prior to securing firm commitments from investors. Second, the rule allows companies to raise up to $250,000 (an increase from the normal $107,000) without having their financial statements reviewed or audited by an outside accounting firm. Instead, the financial statements only need to be certified by the company’s principal executive officer.

In order to take advantage of the relaxed rules, potential issuers must have been operating for at least six months, and, if they have raised money under Regulation Crowdfunding previously, they must have complied with all relevant rules. They must also include “clear, prominent disclosure” to potential investors regarding their reliance on the relaxed rules.

If your business wants to take advantage of these relaxed rules, please get in touch with me. My team at Crain Caton & James are experts in private offerings, especially under Regulation Crowdfunding, and would love to help guide you through the process.

Will Stafford | [email protected] | 713.752.8658