The JOBS Act requires the SEC to make inflation adjustments to certain JOBS Act rules every five years. Recent SEC action marks the first of these adjustments, effective on the fifth anniversary of the JOBS Act’s April 5, 2012 adoption. The following adjustments have been announced for Title III Regulation Crowdfunding or “Regulation CF”:
1. The maximum aggregate amount an issuer can sell under Regulation CF in a 12 month period has been increased from $1,000,000 to $1,070,000;
2. The threshold for assessing an investor’s annual income or net worth to determine investment limits is increased from $100,000 to $107,000;
3. The lower threshold of securities permitted to be sold to an investor if annual income or net worth is less than $107,000 is raised from $2,000 to $2,200;
4. The maximum amount that can be sold to an investor under Regulation CF is increased from $100,000 to $107,000; and
5. The financial statement requirement threshold amounts for Regulation CF are raised from $100,000 to $107,000, $500,000 to $535,000, and from $1,000,000 to $1,070,000 for the 3 tiers of offerings described in Rule 201(t) of Regulation CF.
Additionally, certain thresholds used to determine eligibility for benefits offered to Emerging Growth Companies or “EGCs” under Title I of the JOBS Act (the so-called “IPO on-ramp” provisions) are also adjusted for inflation. Specifically, every five years the SEC is directed to index the annual gross revenue amount used to determine EGC status to inflation to reflect the change in the Consumer Price Index published by the Bureau of Labor Statistics.
These changes are hardly going to remake the crowdfunding industry, but inflation adjustments could make a significant difference in the future. In the meantime, see my colleague Tom Zagorsky’s recent post concerning communications from the motivating Congressman behind the JOBS Act imploring the SEC to revisit some of the restrictions of Regulation CF.
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