SEC Looses the Guidelines for Crowdfunding In the Midst Of Economic Downturn

Crowdfunding in real estate

The SEC has introduced temporary changes to regulations on crowdfunding that make it easier for companies to raise funds in the midst of the coronavirus pandemic.

The Securities and Exchange Commission of the United States (SEC) has adopted temporary improvements to its regulatory crowdfunding rules, making it easier for crypto-blockchain companies to raise money through platforms such as Indiegogo.

The adjustments mean that companies seeking to raise cash through crowdfunding will not need to provide documents that can be difficult to obtain as a result of the lockdown of coronavirus, including financial statements.

SEC looses the guidelines for crowdfunding in the midst of economic downturn

Crowdfunding companies must however provide all required documentation before securing investor commitments.

The SEC’s Small Business Capital Formation Advisory Committee had approved the interim guidelines.

The relief measure passed in a four-to-nil SEC vote on May 4, and will take effect until August 31.

The SEC amends the rules on crowdfunding due to COVID-19

Rather than waiting for an offering statement to be made publicly available for at least 21 days, issuers can start sales as soon as they receive binding investor commitments.

The new guidelines also require companies to collect between $107,000 and $250,000 over 12 months to continue using documents that are approved by the chief executive of the organization, rather than an accountant.

According to SEC chairman Jay Clayton, in the current climate, many existing small businesses face challenges of timely and cost-effective access to desperately needed capital.

Regulation Crowdfunding offerings see little uptake

After the launch of the regulatory system in 2015, the business and crypto cultures have been reluctant to accept Regulation Crowdfunding offerings.

The restricted acceptance prompted the SEC to recommend increasing the annual funding cap from $1 million to $5 million earlier along with raising the limit that an individual investor may contribute to 10% of their annual income or net worth.

Hardware wallet manufacturer Ngrave launched sales on Indiegogo on May 26, for its ‘Zero’ wallet. Ngrave co-founder and CEO Ruben Merre told Cointelegraph that they opted to launch the crowdfunding campaign through Indiegogo due to the “huge user base” and considerable traffic on the platform.

HASHwallet also released a crowdfunding campaign on April 24 in collaboration with Indiegogo to kick-start its wallet.

Securities violators are excluded from relief

Companies seeking to exploit the adjusted rules must “provide clear, prominent disclosure to investors as to their dependence on the relief.

Companies that are less than six months old are not eligible to operate under the temporary changes nor are companies that have previously failed to comply with the 1933 Securities Act and the guidelines for Regulation Crowdfunding.

Those exempt are non-U.S.-based issuers, investment companies and blank check companies.