SEC to Review Crowdfunding Rules to Ease Compliance, Boost Capital Formation

The U.S. Securities and Exchange Commission is developing changes to its crowdfunding regulations to reduce compliance burdens and make the fundraising method more attractive for small businesses and investors, Chairman Paul Atkins announced Tuesday. The review was detailed during a meeting of the agency's Small Business Capital Formation Advisory Committee.

Review Aims to Lower Costs

Atkins said he has directed SEC staff to assess which parts of Regulation Crowdfunding can be modified to lower costs and make the rules more appealing for both issuers and investors. The initiative is part of a wider agency effort to strengthen capital formation in the U.S. and expand retail investor access to private investment opportunities.

Since the current crowdfunding framework took effect in 2016, approximately 9,850 offerings have been completed through June 30, according to the source material.

Broader Push to Modernize Rules

The planned review follows other recent moves by the SEC to update private market regulations. In September, the commission proposed modifications to the definition of an "accredited investor," a key standard that determines eligibility for purchasing shares in privately-held companies.

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Atkins also reiterated his intention to revise rules governing company communications during the initial public offering (IPO) process. He noted a focus on providing more clarity on "gun jumping" rules, which restrict marketing and investor communications at various stages of an IPO to ensure all potential investors receive the same information and to prevent artificial inflation of a security's value.

Industry Calls for Higher Funding Caps

Under the current rules, companies are limited to raising a maximum of $5 million per crowdfunding offering. Some industry participants argue this cap is too restrictive for growing businesses.

Earlier this year, advisory firm Crowdfund Capital Advisors requested that the SEC increase the crowdfunding limit to $20 million. The firm stated that the existing cap often requires companies seeking larger investments to complete multiple, less efficient funding rounds.