While the Economic Growth, Regulatory Relief, and Consumer Protection Act, which was just signed into law, is focused primarily on providing regulatory relief to banks under Dodd-Frank, there are a few provisions of more general interest in Title V, “Encouraging Capital Formation”:
- Requires the SEC, not later than 60 days after enactment of the new Act, to revise Section (e) of Rule 701, the exemption for issuances to employees, to increase the threshold to trigger the requirement for delivery of additional disclosure to investors from $5,000,000 to $10,000,000 in aggregate sales price or amount of securities sold during any consecutive 12-month period. The amount will be indexed for inflation every five years to reflect the change in the Consumer Price Index for All Urban Consumers, rounding to the nearest $1,000,000.
- Requires the SEC to amend Reg A/A+ to allow public companies to use the exemption by eliminating the eligibility requirement in Section 251 that the issuer not be subject to Section 13 or 15(d) of the Exchange Act immediately before the offering. For Reg A+ offerings, the provision also amends Section 257 to deem any issuer that is subject to, and current under, those public reporting requirements to have met the periodic and current reporting requirements of Section 257. (See this PubCo post.)
- Provides parity among national securities exchanges by changing the definition of “covered security” for purposes of federal preemption of state blue sky laws under NSMIA. The provision eliminates the specific references to particular named exchanges and instead refers to “a security designated as qualified for trading in the national market system pursuant to section 11A(a)(2) of the Securities Exchange Act of 1934 that is listed, or authorized for listing, on a national securities exchange (or tier or segment thereof).”
- Requires the SEC to submit a report to Congress on the effect of algorithmic trading on the markets, along with recommendations for any necessary regulations.
- Requires the SEC to review annually the findings and recommendations of the Government-Business Forum on Capital Formation and disclose the actions the SEC intends to take with regard to those findings or recommendations.
- Amends the Investment Company Act of 1940 to exempt from the definition of “investment company,” for purposes of specified limitations applicable under the 1940 Act, a qualifying venture capital fund that has no more than 250 investors (an increase from 100 investors) and less than $10 million in aggregate capital contributions and uncalled committed capital.
