On March 31, 2017, the Securities and Exchange Commission (the “SEC”) issued a final rule, available here, adopting several technical amendments to forms and rules under the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), to conform to the Jumpstart Our Business Startups (“JOBS”) Act. The SEC also approved amendments that adjust for inflation the threshold used to qualify as an emerging growth company (an “EGC”) under the JOBS Act. The final rules became effective on April 12, 2017.
Changes to SEC Form Cover Pages
Although the technical amendments are most relevant to EGCs, they also make changes to the covers of numerous SEC forms used by all companies (including the covers of registration statements under the Securities Act, current and periodic reports under the Exchange Act and corresponding forms for foreign issuers). Pursuant to the amendments, companies must now include two checkboxes, indicating (1) whether the company is an EGC at the time of filing and (2) whether the company has elected not to use the extended EGC transition period for complying with any new or revised financial accounting standards.
Going forward, companies need to update the cover pages of the relevant forms filed with the SEC.
Inflation-Adjusted Thresholds and Offering Amounts
When initially passed and signed into law, the JOBS Act provided certain benefits, such as reduced disclosure requirements, to any company classified as an EGC. In order to qualify as an EGC, a company was required to have less than $1 billion in total annual gross revenues during its most recently completed fiscal year. Under the amendments, this threshold increased by $70 million. This adjustment was mandated by the JOBS Act, which requires the SEC to index to inflation the annual gross revenue threshold every five years.
The amendments also adjust certain threshold amounts and maximum offering sizes under Rules 100 and 201(t) of Regulation Crowdfunding, which exempts securities offerings that qualify as “crowdfundings” from SEC registration. Under the amended Regulation Crowdfunding, companies may now sell up to $1.07 million (raised from $1 million) in securities during a 12-month period. The amendments similarly raised the offering threshold amounts used to determine financial statement Fried Frank Client Memorandum New York Washington, DC London Paris Frankfurt friedfrank.com 2 requirements under Rule 201(t) of Regulation Crowdfunding from $100,000, $500,000 and $1 million to $107,000, $535,000 and $1.07 million, respectively.