54 OPPORTUNITY ZONE MAGAZINE | VOLUME 2 • ISSUE 1
amount of money from an unlimited number of “ accredited investors ” and up to 35 non-accredited investors . But if any non-accredited investor is to participate in the offering , the issuer has regulatory-prescribed disclosure obligations that includes requirements like audited financial statements . However , those requirements are inapplicable to offerings exclusive to accredited investors ( subject to general antifraud rules ). For years , entrepreneurial founders , sponsors , and securities lawyers have been disappointed to learn that the potential to include non-accredited investors is practically a mirage . In many cases , it was simply uneconomical to comply with the disclosure obligations necessary to include nonaccredited investors . Under the new framework , however , that may be less true .
Under the SEC ’ s final rule ( which is expected to be effective early this spring ), the financial disclosure requirements for offerings with non-accredited investors in the mix are harmonized with those available under other rules and regulations , particularly Regulation A . For example , an issuer need only include unaudited financial statements in offerings up to $ 20 million to meet its financial disclosure obligations . Together with the revised safe harbor for separate treatment ( i . e ., nonintegration ) of offerings , an issuer could now raise up to $ 100 million ( and maybe even more ) through multiple offerings during a single year , if structured appropriately , without paying for a financial statement audit .
An offering that starts more than 30 days after the conclusion of a prior offering , will be honored as a separate offering . That means that an issuer could do relatively back to back to back Rule 506 ( b ) offerings , including up to 35 non-accredited investors in each one . To stifle the opportunity for abuse of this “ non-integration ” safe harbor , the SEC limits the number of non-accredited investors that could be included in a series of offerings to no more than 35 in any 90-day period . But even with that limitation , an issuer could still include up to 100 or more non-accredited investors in Rule 506 ( b ) offerings in one year . That ’ s a significant expansion in the number of potential investors .
HOW TO RUN SIMULTANOUS OFFERINGS UNDER NEW SEC RULE
In addition to sequential offerings , new SEC rules also now permit parallel , or simultaneous , offerings under certain circumstances that are not subject to integration ( that is , being viewed as one and the same offering ). This enables an issuer to raise money through a private offering that includes non-accredited investors potentially at the same time that the issuer conducts an offering that includes general solicitation , such as those under Rule 506 ( c ) exclusively to accredited investors , or Regulation Crowdfunding to smaller dollar
New SEC rules also now permit parallel , or simultaneous , offerings under certain circumstances that are not subject to integration
investors . Naturally , the new rules contain a healthy dose of nuance that an experienced securities attorney is best suited to apply , the general rule is that as long each offering complies with the rules applicable to that particular offering , it should not be integrated with another offering – even if conducted at the same time .
THE BENEFIT OF REGULATION CROWDFUNDING
Regulation Crowdfunding ( or Reg CF ), the particular form of offering that permits general solicitation of investors without regard to their accredited investor status , may also become notably more useful to fund sponsors beginning this year . Prior to the implementation of the new SEC rules , an issuer was limited to raising no more than $ 1.07 million over any 12-month period . Under the new rule , that cap will be raised to $ 5 million . Also , accredited investors participating in a Reg CF offering will not be subject to the same investment amount limitations that nonaccredited Reg CF investors are
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