SEC Issues Concept Release on Harmonization of Securities-Offering Exemptions

Current Exemption Framework

Exemptions from the registration requirements of the Securities Act are contained in the statute itself. Commission rules provide safe-harbor standards for certain exemptions. Legal understandings of the exemptions are informed by interpretations from the courts and the Commission. Securities Act exemptions from registration are in Section 3, which generally exempts certain classes of securities, and Section 4, which exempts certain types of securities offerings. The concept release solicits feedback primarily on the Securities Act’s exempt offering regime; however, improvements to the Securities Act’s exempt securities regime should be considered as part of any Commission rulemaking that may result from the feedback the Commission receives on the concept release.

Over time, the scope of exempt offerings has evolved primarily through legislative changes and Commission rulemaking and guidance. The most recent legislative changes to the scope of exempt offerings are those resulting from the Jumpstart Our Business Startups Act of 2012 (JOBS Act), the Fixing America’s Surface Transportation Act of 2015 and the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018.

The principal Securities Act offering exemptions include:

• Section 4(a)(2), which exempts “transactions by an issuer not involving any public offering”
• Regulation D, which exempts certain small offerings pursuant to Section 3(b) and provides a nonexclusive safe harbor under Section 4(a)(2) and an exemption allowing general solicitations:

1. Rule 504 – exemption for offers and sales of up to $5 million of securities in a 12-month period
2. Rule 506(b) – sales of securities to an unlimited number of accredited investors and up to 35 unaccredited investors who, alone or with a representative, meet certain knowledge and experience requirements, provided that certain conditions are met, such as no general solicitation or advertising is used to market the securities and the requirement to provide buyers specified disclosure if any unaccredited investors are included in the offering
3. Rule 506(c) – sales of an unlimited amount of securities through general solicitation provided all purchasers are accredited investors, the issuer takes steps to verify the accredited investor status of the investor and certain other conditions are satisfied

• Regulation A, which permits offers and sales of up to $20 million (Regulation A Tier 1) or $50 million (Regulation A Tier 2) of securities over a 12-month period, provided that certain conditions, including filing requirements, are met
• intrastate exemptions in Section 3(a)(11), as modified by Rule 147 and Rule 147A, which permit certain unregistered offerings to residents within a single state
• Section 4(a)(6) (crowdfunding), which permits certain crowdfunding offerings provided certain conditions are met
• Regulation S, which provides a safe harbor for offers and sales of securities outside the U.S., so long as no directed selling efforts are made in the U.S. and certain other conditions are met
• Rule 144A offerings, where, following an initial offering by the issuer to investment banks acting as initial purchasers made under Section 4(a)(2), resales by the initial purchasers are made to qualified institutional buyers pursuant to the Rule 144A resale exemption (discussed below); in practice, if permitted by the offering documentation, the initial purchasers may also resell a portion of the securities outside the U.S. pursuant to Regulation S, and the issuer may also sell a portion of the securities directly to investors pursuant to Section 4(a)(2) or Regulation D

The conditions to these offering exemptions, discussed in more detail below, are based on investor protection considerations, and, consistent with the SEC v. Ralston Purina Co. decision, the number and strictness of the conditions tend to correlate with the perceived sophistication of the potential investors. These conditions include limits on the size or amount of the offering, the manner in which the offering can be conducted, eligible investors (such as qualified institutional buyers, accredited investors, sophisticated investors or non-U.S. investors), disclosure or filing requirements, resale restrictions and types of issuers (such as blank check companies, investment companies or issuers that have associated “bad actors”).

Investors who want to resell securities that they acquire from an issuer in a registered offering or an exempt offering must either register the resale or rely on an exemption. Some of the more common resale exemptions are discussed below. These resale exemptions are subject to conditions set out in the law itself, Commission rules, regulations and guidance and case law, and, in some cases, developed through industry practice.

The Commission is also seeking feedback on the integration doctrine, which determines when concurrent or successive offerings are considered a part of the same offering for purposes of the registration and exemption analysis. Like many of the exemptions, as discussed below, the integration doctrine requires facts and circumstances determination.

SEC Concept Release

As described in the Commission press release, the concept release covers seven broad themes related to the exempt offering framework:

• The Exempt Offering Framework – whether the Commission’s exempt offering framework, as a whole, is consistent, accessible, and effective for both companies and investors or whether the Commission should consider changes to simplify, improve, or harmonize the exempt offering framework
• The Capital Raising Exemptions Within the Framework – whether there should be any changes to improve, harmonize or streamline any of the capital raising exemptions, specifically the private placement exemption and Rule 506 of Regulation D, Regulation A, Rule 504 of Regulation D, the intrastate offering exemptions and Regulation Crowdfunding
• Potential Gaps in the Framework – whether there may be gaps in the Commission’s framework that may make it difficult, especially for smaller companies, to rely on an exemption from registration to raise capital at key stages of their business cycle
• Investor Limitations – whether the limitations on who can invest in certain exempt offerings, or the amount they can invest, provide an appropriate level of investor protection (i.e., whether the current levels of investor protection are insufficient, appropriate or excessive) or pose an undue obstacle to capital formation or investor access to investment opportunities, including a discussion of the persons and companies that fall within the “accredited investor” definition
• Integration – whether the Commission can and should do more to allow companies to transition more easily from one exempt offering to another and, ultimately, to a registered public offering
• Pooled Investment Funds – whether the Commission should facilitate capital formation in exempt offerings through pooled investment funds, including interval funds and other closed-end funds, and whether retail investors should be allowed greater exposure to growth-stage companies through pooled investment funds in light of the advantages and risks of investing through such funds
• Secondary Trading – whether the Commission should revise its rules governing exemptions for resales of securities to facilitate capital formation and to promote investor protection by improving secondary market liquidity

The 211-page concept release reviews the existing securities law framework for each of these topics and follows with a series of questions. The number (138 in total) and tenor of the questions, ranging from very open-ended, broad questions to very specific questions, suggest that the Commission is conducting a very thorough, fundamental inspection of the overall framework. Below are highlights of some of the discussions and questions under each topic.

Overall Exempt Offering Framework

The concept release begins by providing a broad, but comprehensive, overview of the overall exempt offering framework, including recent legislative and rulemaking developments and statistics about the exempt offering market. The Commission covers some of the common themes relating to exempt offerings, including the evolutionary, patchwork nature of the framework; the reality that due to recent legislative changes, such as the JOBS Act, companies are staying private (and relying on private exemptions) longer; the interplay of the capital raising exemptions with resale exemptions, such as Rule 144 and Rule 144A; and the effects of changing information and communication technologies on the capital markets. This discussion is followed by 19 questions that, following a common pattern throughout the concept release, begin by asking broadly whether the current overall framework is working from various perspectives – investor protection, capital formation, complexity, access – and what can be done to improve it, if anything, followed by more specific questions about the framework. See questions 1-19 of the concept release. Among these questions, the Commission asks:

• Should current exemptions be revised across the board to focus consistently on investor protections at the time of sale rather than at the time of the offer? Should offers be deregulated altogether?
• Given the technological advancements in communication since the current rules were adopted, should any rule changes seek to enhance an issuer’s ability to communicate with investors throughout the exempt offering framework?
• Should any rule changes be considered to ease issuers’ transition from one exempt offering to another as their businesses develop and grow?
• Should any rule changes be considered to help issuers transition to a registered public offering without undue friction or delay?
• Should disclosure requirements of the various exemptions be harmonized to provide issuers with a more consistent framework?

Accredited Investor Definition

The accredited investor definition in Rule 501(a) of Regulation D is used in Rules 506(b) and 506(c) of Regulation D and Regulation A, and in other contexts, such as in Section 12(g) of the Securities Exchange Act of 1934 (Exchange Act), which determines when an issuer needs to register under the Exchange Act, and Section 5(d) of the Securities Act, the “test the waters” provision created by the JOBS Act for emerging growth companies.

Under the current definition, natural persons are accredited investors if (1) their income exceeds $200,000 in the two most recent years, or $300,000 joint with a spouse, and they reasonably believe they will reach the same income in the current year, (2) their net worth exceeds $1,000,000 (excluding primary residence) or (3) they are directors, executive officers or general partners of the issuer selling the securities. Certain enumerated entities with over $5 million in assets qualify as accredited investors, while others, including regulated entities such as banks and registered investment companies, are qualified investors by virtue of their status.

The concept release discusses the components and uses of the accredited investor definition, statistics on households that qualify, and recent recommendations and attempts to revise the definition, including the December 2015 Commission staff report on the accredited investor definition.

The discussion is followed by 13 questions, beginning with a broad “should we change or retain the current definition” question and progressing to very specific questions about monetary thresholds. One focus of the questions is whether to expand the definition, for example by lowering the financial thresholds or allowing certain professional qualifications to become eligible for accredited investor status, to enable a broader set of investors to access some of the investment opportunities currently available only to accredited investors. See questions 20-32 of the concept release. Some of the most pertinent questions include:

• Should the definition of accredited investor be expanded to include criteria other than income and net worth, for example by taking into consideration an investor’s experience with exempt offerings or other nonfinancial indicia of financial sophistication (such as education, experience and training)?
• Should the methods used by foreign jurisdictions to identify sophisticated or accredited investors (e.g., certain non-U.S. regulatory regimes rely on minimum investment tests, investment experience and certification or verification by financial professionals) inform the Commission’s approach?
• Should the definition of accredited investor be revised to expand the eligible pool of sophisticated investors? If so, should an investor who is advised by a registered financial professional be considered an accredited investor? Should an investor who is advised by a registered financial professional be provided with any other investor protections?
• If an investor is permitted to be considered an accredited investor by virtue of being advised by a registered financial professional, should any limits be imposed on the types or amounts of investments that such an investor can make in exempt offerings?
• If an investment limit is implemented for investors considered accredited investors because they are advised by a registered financial professional, what should be considered in setting the amount of the limit? Should the limit depend on the type of exemption or be consistent across all exemptions? Should the limit vary depending on the type of issuer conducting the exempt offering?

Private Placement Exemption and Rule 506 of Regulation D

Section 4(a)(2), which exempts “transactions by an issuer not involving any public offering,” is one of the most important exemptions in the Securities Act. The availability of the exemption is based on a facts and circumstances analysis. The Supreme Court in SEC v. Ralston Purina Co. stated the basic criteria for Section 4(a)(2) eligibility – namely, whether persons in the offering are able to fend for themselves and whether they have access to the type of information normally provided in a prospectus for a registered securities offering. Securities issued pursuant to Section 4(a)(2) are restricted securities.

The Commission adopted Regulation D to provide clarity to Section 4(a)(2) and facilitate capital formation consistent with investor protection. Importantly, Regulation D creates two types of exemptions under Section 4(a)(2) – Rule 506(b) and Rule 506(c) of Regulation D – that provide objective standards that issuers can follow. Rules 506(b) and (c) both allow unlimited offerings of securities to accredited investors but differ in a few key respects – namely, whether general solicitation or advertising is permitted (permitted for Rule 506(c) offerings, not permitted for Rule 506(b) offerings), whether any nonaccredited investors are permitted to participate (up to 35 “sophisticated” unaccredited investors for Rule 506(b), none for Rule 506(c)) and the accreditation process. According to studies referred to by the Commission, Rule 506(b) was one of the most commonly used private exemptions in terms of amount of capital raised in 2018.

The concept release discusses the background and requirements of Section 4(a)(2) and Regulation D, covering topics such as the concept of restricted securities, the prohibition on general solicitation and general advertising (in Rule 506(b) offerings), disclosure requirements for nonaccredited investors, limitations on resale, the bad actor disqualification provisions applicable to Rule 506(b) and Rule 506(c) offerings, the Rule 506 market and the relationship of the exemptions with state securities laws. The 14 questions that follow range from a request for data regarding the use of Regulation D, including whether there has been a change in fraudulent activity in the Rule 506 market as a result of the adoption of Rule 506(c), to the broad question of what, if any, changes should be made to Regulation D. See questions 33-46 of the concept release. These questions include:

• Should the requirements for Rule 506(b) and Rule 506(c) offerings be combined in one exemption? If so, which aspects of each rule should be retained in the combined exemption and why?
• Should Regulation D be amended to clarify or define “general solicitation” or “general advertising”?
• Are issuers hesitant to rely on Rule 506(c), as suggested by the data on amounts raised under that exemption as compared to other exemptions? Should changes be considered to encourage capital formation under Rule 506(c), consistent with the protection of investors?
• Does the requirement to take reasonable steps to verify accredited investor status have an impact on the willingness of issuers to use Rule 506(c)?
• Should any rule changes be considered to allow nonaccredited investors to purchase securities in an offering that involves general solicitation? If so, what types of investor protection conditions should apply?

Other Exemptions: Regulation A, Rule 504 of Regulation D, Intrastate Offerings, Regulation Crowdfunding and Micro-Offerings

The concept release also discusses, and solicits feedback on, a few additional exemptions for smaller issuers. Regulation A permits offers and sales of up to $20 million (Regulation A Tier 1) or $50 million (Regulation A Tier 2) over a 12-month period. Rule 504 of Regulation D exempts offers and sales of up to $5 million of securities in a 12-month period. The intrastate exemptions in Section 3(a)(11) of the Securities Act, Rule 147 and Rule 147A, exempt offerings occurring only within a certain state. Section 4(a)(6) of the Securities Act (Crowdfunding) permits certain crowdfunding offerings. In each of these exemptions, additional conditions apply, such as size limits, limitations on how the offerings are conducted, issuer requirements, investor requirements, Commission filing requirements, resale restrictions and state preemption. Offerings under these exemptions, in the aggregate, represented a small portion of the overall exempt market in 2018.

Consistent with the questions related to the other exemptions, the 57 aggregate questions relating to these exemptions primarily deal with whether changes (fundamental or minor) should be made to these exemptions to promote capital formation while still ensuring adequate investor protection. The concept release also solicits feedback on a potential new exemption for “micro-offerings” for small businesses that may not be able to realistically or cost-effectively conduct an exempt offering under the existing framework, as well as other perceived gaps in the current exempt offering framework that the Commission should address. See questions 47-103 of the concept release. Some questions worth noting:

Regulation A

• Should the offering limits for Tier 1 ($20 million) and Tier 2 ($50 million) be increased? If so, what limits would be appropriate?
• Should eligibility to rely on Regulation A be extended to additional categories of issuers (e.g., investment companies)?
• Should the individual investment limits for nonaccredited investors in Tier 2 offerings be eliminated or changed?
• Are there other changes that should be considered specifically with respect to the use of Regulation A by Exchange Act reporting companies in light of the recent amendments to allow such issuers to rely on the exemption?

Rule 504 of Regulation D

• Should the offering limit for Rule 504 ($5 million) be increased? If such increase occurs, should any additional investor protections be imposed, such as individual investment limits?
• Should eligibility to rely on Rule 504 be extended to additional categories of issuers (e.g., Exchange Act reporting companies or investment companies)?

Intrastate Offerings

• Do the issuer requirements related to principal place of business and doing business appropriately capture the “intrastate” issuers for purposes of Rules 147 and 147A? If not, how should they be changed?
• Does the requirement that an individual purchaser have his or her principal residence in a state or territory to be deemed a resident of such state or territory appropriately capture the “intrastate” investors for purposes of Rules 147 and 147A?

Regulation Crowdfunding

• Should the offering limit for Regulation Crowdfunding ($1.07 million) be increased? If so, what limit is appropriate?
• Should issuers be permitted to offer securities through special purpose vehicles? Should other ways be considered to allow investors to invest in pooled crowdfunding vehicles advised by a registered investment adviser?
• Should the individual investment limits be eliminated, increased or otherwise amended? What limits would be appropriate and why?
• Should issuers be allowed to test the waters or engage in general solicitation and advertising prior to filing their offering statement on Form C?

Micro-Offerings

• Should a micro-offering or microloan exemption be added?
• For such an exemption, should there be limits on the types of securities being offered (e.g., debt only)? What would be the appropriate aggregate offering limit? What type of investor protections should be required?
• Should the issuer be prohibited from engaging in general solicitation or advertising to market the securities? Should there be disclosure requirements or notice filing requirements?
• Should the offering take place through a registered intermediary, such as a broker-dealer or funding portal?

Integration

The integration doctrine determines when concurrent or successive offerings (completed or abandoned) will be considered a part of the same offering for the registration and exemption analysis. The purpose of the doctrine is to prevent issuers from avoiding registration by improperly splitting up offerings.

The integration doctrine requires a facts and circumstances determination. Since 1962, the Commission has identified five factors to consider: whether (1) the different offerings are part of a single plan of financing, (2) the offerings involve issuance of the same class of security, (3) the offerings are made at or about the same time, (4) the same type of consideration is to be received and (5) the offerings are made for the same general purpose.

No-action letters, interpretive releases and other Commission guidance over the years have provided additional clarity on the analysis and, more importantly, created nonexclusive safe harbors for a few common integration scenarios.

For instance, in the Black Box and Squadron Ellenoff no-action letters, the Commission’s staff indicated that as a matter of policy, considering the nature and number of offerees, it would not integrate a registered offering with a private offering made only to qualified institutional buyers and a few large accredited institutional investors.

Safe harbors from the application of the integration doctrine include:

• Rule 502(a) of Regulation D for all offers and sales that take place at least six months before the start, or after the termination, of a Regulation D offering
• Rule 152 for cases when an issuer conducts a Section 4(a)(2) private placement followed by a public offering
• Rule 155 for certain abandoned offerings
• Anti-integration provisions in Regulation A, Rule 147 and Rule 147A for certain prior offers or sales of securities and certain subsequent offers or sales of securities

The Commission has also provided guidance in other scenarios, such as offshore transactions made in reliance on Regulation S and offerings made pursuant to Regulation Crowdfunding. The seven questions relating to integration vary from broad queries about whether the Commission should articulate one unified integration doctrine or adopt additional safe harbors to specific questions, such as whether to shorten the current six-month safe harbor period in Rule 502(a) of Regulation D. See questions 104-110 of the concept release. Key questions highlighted by the concept release include:

• Should the five-factor test used when a safe harbor does not apply be replaced with a test that assesses whether each offering complies with the requirements of the exemption being relied on for the particular offering, or are there other integration analyses that should be considered?
• Should Rule 152 be specifically revised to clarify that offers and sales not involving any form of general solicitation or advertising would not be integrated with subsequent offers and sales of securities that use general solicitation or advertising?

Pooled Investment Funds

Retail investors currently have limited access to exempt offerings through pooled investment funds, generally through registered investment companies and business development companies (BDCs) that acquire securities in exempt offerings. However, the liquidity and valuation requirements of these funds discourage investment in securities issued through exempt offerings that tend to be illiquid and difficult to value. The concept release explores ways to mitigate these limiting factors in facilitating indirect investment into exempt offerings through pooled investment funds.

Private funds invest substantial capital into exempt offerings. Because private funds offer their interests in a private placement, these funds generally rely on Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act of 1940 (Investment Company Act) for exclusions from registration. With limited exceptions, investors that are not qualified purchasers are prevented from participating in private funds relying on Section 3(c)(7), and private funds relying on Section 3(c)(1) are limited to 100 beneficial owners who must be accredited investors (although these beneficial owners need not be qualified purchasers). Lowering the requirements for an investor to qualify as an accredited investor (as discussed above) would allow certain retail investors to access exempt offerings through private funds that rely on Section 3(c)(1). The concept release also proposes a “periodic reassessment” of which investors would be considered qualified purchasers. If such periodic reassessments result in lower financial requirements, certain retail investors could also access exempt offerings through funds that rely on Section 3(c)(7).

Investors can access exempt offerings through a BDC or a small business investment company (SBIC). While BDCs do not have the same liquidity and valuation restraints as registered investment companies, the concept release notes that “there can be challenges for investors … in BDCs to convert any profits from successful growth-stage exempt issuers held … in a BDC’s portfolio.” Retail investors face similar issues with the use of SBICs, which can be publicly offered, although none are currently so offered.

The concept release also addresses the prevalence of digital investment advisory programs (also known as “robo-advisers”), which have become more broadly available to retail clients. These services typically provide investment advice and asset allocation programs based on information such as an expected retirement date and life expectancy. The concept release notes that these services generally allocate assets to liquid investments and may allocate only a small portion of an investment portfolio to exempt offerings because such exempt offerings are still limited to accredited investors and, potentially, qualified purchasers.

Alternatively, retail investors can participate in interval funds and/or tender offer funds. Interval funds are registered closed-end funds that must make periodic repurchase offers at certain times throughout the year. Similarly, tender offer funds are registered closed-end funds that are permitted to repurchase tendered shares after providing a reasonable opportunity to all shareholders to submit tenders, but, unlike interval funds, there is no requirement for tender offer funds to offer to repurchase shares at specific intervals. Because interval funds and tender offer funds are not subject to the same level of liquidity requirements as registered open-end funds, retail investors can gain some exposure to privately placed securities through these funds. However, neither of these options has attracted significant capital, which has led the Commission to consider ways to make both vehicles more attractive to retail investors and sponsors.

See questions 111-129 of the concept release. Noteworthy questions the Commission asks regarding the current pooled investment fund framework include:

• What restrictions should there be, if any, on the ability of closed-end funds, including BDCs, to invest in private funds, including private equity funds and hedge funds, and to offer their shares to retail investors? For example, should there be a maximum percentage of assets that closed-end funds and BDCs can invest in private funds? Should such closed-end funds be required to diversify their investments across a minimum number of private funds, if they are not restricting their offerings to accredited investors?
• If a target date retirement fund were to seek a limited amount of exposure to exempt offerings in its portfolio, what measures, if any, should the Commission consider taking to enable this? Similarly, if investment advisory services, including robo-advisers, that are focused on retirement savings seek to include a limited amount of exposure to securities from exempt offerings as part of a diversified retirement portfolio that they recommend to retail investors, should the Commission consider making any changes to its rules to enable this? If so, what types of changes?
• How do the restrictions on performance fees under the Investment Advisers Act of 1940 (Advisers Act) affect the offering of venture strategies by registered investment companies and BDCs? Should the Commission make changes to the restrictions on performance fees?
• The definition of “qualified client” under the Advisers Act specifically includes a “qualified purchaser” as defined by the Investment Company Act. Should the Commission similarly define an “accredited investor” under Regulation D to specifically include a “qualified purchaser”? Would that be a less costly approach for regulating offerings of Section 3(c)(7) funds?
• The rules implementing the accredited investor and qualified client definitions have provisions for periodic reassessment of the quantitative thresholds, but the qualified purchaser definition does not. Should the Commission consider a similar periodic reassessment for the qualified purchaser definition? If so, should the periodic reassessment for the three definitions occur at the same time?

Secondary Trading of Certain Securities

Investors who want to resell the securities they acquire from an issuer, whether in a registered offering or exempt offering, must either register the resale or rely on an exemption.
The most common resale exemptions include:

• Section 4(a)(1), available to any person other than an issuer, underwriter or dealer
• Rule 144, a nonexclusive safe harbor from the definition of “underwriter” as used in Section 4(a)(1), primarily relied on for resales of restricted and control securities
• Rule 144A, a nonexclusive safe harbor for unregistered resales of certain securities to qualified institutional buyers
• Section 4(a)(1½), a set of practices developed for resale of restricted securities where Rule 144 is unavailable; these are modeled after Section 4(a)(2) requirements (Section 4(a)(2) is an issuer exemption and not available to investors)
• Sections 4(a)(3) and (4), for transactions by dealers or brokers not acting as underwriters
• Section 4(a)(7), added by the JOBS Act, which allows for resales to accredited investors
• Regulation S, a nonexclusive safe harbor for resales of securities outside the U.S., so long as no directed selling efforts are made in the U.S. and certain other conditions are met

These exemptions are subject to conditions set out in the law itself, Commission rules, regulations and guidance and case law, and, in some cases, through developed industry practice.

Although these exemptions are important for resales, some of them, such as Rule 144A and Regulation S, are also important components of issuer offerings. For example, many high-yield and convertible notes offerings are structured as a two-step process involving an initial Section 4(a)(2) private placement by the issuer to the initial purchasers that is followed by an immediate resale of the securities by the initial purchasers to qualified institutional buyers pursuant to Rule 144A or in offshore transactions pursuant to Regulation S.

Although many of these resale exemptions are preempted from state securities regulation, some are not, and investors seeking to resell securities may be required to register the transaction with any applicable state regulator or rely on an exemption from such state’s registration requirements.

The nine questions relating to resale exemptions focus on ways to potentially expand or otherwise change the existing resale exemptions as well as, more broadly, any additional steps to improve secondary trading liquidity. See questions 130-138 of the concept release. These questions include:

• Do concerns about secondary market liquidity have a significant effect on issuers’ decision-making with respect to primary capital-raising options? Does secondary market liquidity affect the decision-making of individual investors?
• What effect would an exemption from Section 12(g) registration for certain exempt offerings, if introduced, extended or made permanent, have on issuers’ access to capital or secondary market liquidity? Would such an exemption provide benefits that could outweigh a decline in the rate at which issuers may become reporting companies?
• Should the Rule 144 nonexclusive safe harbor be revised? In particular, should the holding periods for securities of all types of issuers be reduced?
• Should federal preemption of state blue-sky regulation be extended to additional types of secondary offers and sales of securities?

Conclusion

The concept release and questions are very broad in coverage and touch on almost all aspects of the exempt offering framework. The conclusion of the concept release includes an open-ended invitation to provide comment on “any other aspect of the exempt offering framework that commenters believe may be improved.” Although the Commission proposed no specific rule changes in the concept release, it is likely that some of the responses that the Commission collects will form the basis of future proposed rulemaking.

Thank you to Sidley Associate Jorge Mancillas for his significant contributions to this Sidley Update.