United States

SEC proposes to simplify the exempt offering framework


The SEC recently issued a proposed rule in Release 33-10763, Facilitating Capital Formation and Expanding Investment Opportunities by Improving Access to Capital in Private Markets. The proposed rule is intended to address difficulties and confusion in applying the exempt offering framework, which is complex and made up of differing requirements, such as those in Regulation D, Regulation A and Regulation Crowdfunding, among others. 

The SEC proposes to generally retain the current exempt offering structure, but will address, in one broadly applicable rule, the ability of issuers to move from one exemption to another and ultimately to a registered offering. The proposed amendments also include the following, among many others:

  • Amending the financial statement information requirements in Regulation D Rule 502(b) for sales to non-accredited investors to align with the financial statement requirements in Regulation A. Specifically:
    • For Regulation D Rule 506(b) offerings of up to $20 million in securities, issuers no longer would be required to provide audited financial statements and instead would be required to comply with the financial statement requirements that apply to Tier 1 Regulation A offerings, which do not require audited financial statements unless the issuer already has obtained an audit for another purpose
    • For Regulation D offerings of greater than $20 million in securities, issuers would be required to provide audited financial statements and comply with the requirements of Regulation S-X similar to Tier 2 Regulation A offerings
  • Permitting issuers who meet certain criteria to incorporate previously filed financial statements by reference into a Regulation A offering circular
  • Raising the maximum offering amount under: 
    • Tier 2 of Regulation A from $50 million to $75 million, and increasing the maximum offering amount for secondary sales under Tier 2 of Regulation A from $15 million to $22.5 million
    • Regulation Crowdfunding from $1.07 million to $5 million; and any offerings in excess of the current $1.07 million offering limit would continue to be required to provide audited financial statements
    • Rule 504 of Regulation D from $5 million to $10 million

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