Earlier today at an open meeting, the SEC adopted final rules regarding intrastate and regional offerings, which closely follow the SEC's proposed rules issued on October 30, 2015. The final rules amend Securities Act Rule 147 to facilitate offerings relying upon recently adopted intrastate crowdfunding exemptions under state securities laws. Rule 147 provides a safe harbor for intrastate offerings exempt from registration pursuant to Securities Act Section 3(a)(11), which exempts any security offered and sold only to persons resident within a single state or territory by an issuer residing or incorporated in and doing business within such state or territory. As amended, Rule 147 will continue to function as a safe harbor under Section 3(a)(11), though Section 3(a)(11) will still be available as a potential statutory exemption in and of itself. The final rules also establish a new Securities Act exemption, designated Rule 147A, that further accommodates offers accessible to out-of-state residents and companies that are incorporated or organized out-of-state. The final rules also amend Rule 504 of Regulation D to (1) increase the aggregate amount of securities that may be offering and sold in any twelve-month period from $1 million to $5 million and (2) disqualify certain bad actors from participating in Rule 504 offerings. In addition, the final rules repeal Rule 505 of Regulation D, which had provided a safe harbor from registration for securities offered and sold in any twelve-month period from $1 million to $5 million. The amendments to Rule 147 and Rule 504 are part of the SEC's broader effort to assist smaller companies with capital formation consistent with other public policy goals, including investor protection.
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