SEC Proposes Expanded Access to Exempt Offerings

By Stephen Barlas
September 1, 2020

There is quite a bit of controversy over the U.S. Securities & Exchange Commission’s proposal to broaden small company access to capital by widening exemptions for “exempt offerings” from private markets.


Key flash points are the proposed increase in offering limits under Tier 2 of Regulation A and the increase in both offering limits and investment limits under Regulation Crowdfunding.


On the one hand, opponents of the changes, such as the CFA Institute, argue that the proposal doesn’t make the case “that current rules impede capital formation through exempt offerings.” Barbara Roper, director of investor protection of the Consumer Federation of America, took a more partisan tone arguing, “These proposals reflect an ideologically driven approach to rulemaking in which meaningful economic analysis plays no role and investors’ concerns are treated as irrelevant.”


On the other hand, Amy Davine Kim, chief policy officer of the Chamber of Digital Commerce, said the expanded exemptions don’t go far enough. She wants the SEC to raise the cap on Tier 2 offerings to $100 million from the current $50 million, not the $75 million the SEC has proposed. “The $100 million limit is more consistent with the average size of initial public offerings and, thus, would provide a viable alternative to IPOs for smaller offerings,” she said.


Stephen Barlas has covered Washington, D.C., for trade and professional magazines since 1981 and since 1984 for Strategic Finance and its predecessor Management Accounting. You can reach him at sbarlas@verizon.net.
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