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    4. SEC and Congress explore updates to exempt offering rules

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    Alert / Securities

    SEC and Congress explore updates to exempt offering rules

    June 9, 2025

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    By Tiana Walters and John Partigan

    Recent discussions at the SEC and bills introduced in Congress consider ways to support small business capital formation through changes to the accredited investor definition and Regulation A.

    What’s the impact?

    • Congress and the SEC are actively exploring new ways to help small businesses gain access to capital.
    • Potential changes could allow individuals to qualify as accredited investors through education and testing.
    • Potential Regulation A reforms may streamline reporting and expand federal pre-emption for secondary sales.

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    PDF: SEC and Congress explore updates to exempt offering rules

    Leadership at the US Securities and Exchange Commission (SEC) and members of Congress appear to be considering changes to the exempt offering rules. At the SEC Small Business Capital Formation Advisory Committee (“Committee”) meeting on May 6, 2025, SEC Chair Paul S. Atkins and several SEC Commissioners underscored the importance of providing meaningful pathways for entrepreneurs to gain access to capital while maintaining robust investor protections. And on May 20, 2025, the US House of Representatives Committee on Financial Services advanced a number of bills with similar aims. Currently, these efforts appear to be focused on changes to the accredited investor definition and increasing the utility of Regulation A.

    Accredited investor definition

    On May 15, 2025, in a statement before the 2025 Conference on Financial Market Regulation, Commissioner Mark T. Uyeda said the SEC should consider changes to the accredited investor definition, stating that “[i]f an individual believes that the risk is appropriate and the framework limits investors to those who are financially sophisticated, can sustain the risk of investment loss, can fend for themselves, and have other relevant characteristics, then our regulatory regime should not deny such individual a source of potential wealth accumulation and portfolio diversification.“

    While it is unclear whether the SEC has specific proposals in mind, the SEC Small Business Capital Formation Advisory Committee recommended changes to the accredited investor definition in a May 1, 2024, letter to then-Chair Gary Gensler. The committee did not recommend any changes to the financial thresholds, but it did recommend changes that would allow a person to qualify as an accredited investor by satisfactorily completing an educational program that would then allow them to invest up to 5% in total of the greater of their income or net worth over a 12-month rolling period.

    Congress is currently considering its own modifications to the accredited investor definition. The Equal Opportunity for All Investors Act of 2025 was introduced in the House of Representatives on May 13, 2025, and passed the House Committee on Financial Services on May 20, 2025. If it ultimately passes Congress, the bill would call upon the SEC to modify the definition of “accredited investor” to include individuals who are able to pass a test developed by the SEC. The Accredited Investor Definition Review Act was also introduced in the House of Representatives on May 13, 2025, and passed the House Committee on Financial Services on May 20, 2025. This bill would amend the term “accredited investor” as defined in the Securities Act of 1933 to provide that an individual will qualify as an accredited investor if they hold certifications, designations, or credentials determined by the SEC.

    Regulation A updates

    Regulation A updates were the main focus of a SEC Small Business Capital Formation Advisory Committee meeting on May 6, 2025. The committee’s discussions highlighted benefits and challenges identified by issuers when considering an exempt offering under Regulation A and considered potential reforms.

    According to data released by the SEC’s Division of Economic and Risk Analysis on May 28, 2025, there were more than 1,400 Regulation A offerings from 2015 to 2024 seeking more than $28 billion in capital, with approximately $9.4 billion in reported proceeds from more than 800 issuers. Despite these figures, Regulation A remains underused compared to Regulation D, which accounted for far greater capital raised in the same period. During its recent meeting, the committee discussed whether changes to Regulation A could improve its usefulness to issuers.

    Based on the committee’s discussions and recent SEC statements, the following updates appear to be under consideration.

    • Federal Pre-emption for Secondary Sales— whether to recommend federal pre-emption from state regulation for secondary resales of securities initially sold under Regulation A.
    • Permitting At-the-Market Offerings— whether to eliminate the prohibition of at-the-market offerings under Regulation A.
    • Revisiting Reporting Requirements— whether to scale or streamline ongoing reporting obligations for Regulation A issuers.

    These discussions follow on the heels of recent modifications by the SEC to Compliance and Disclosure Interpretations relating to exempt offerings that, among other things, offered more clarity into whether certain activities by an issuer are deemed to be “general solicitation” and the extent to which an issuer must confirm an investor’s accredited status.

    The committee is expected to present formal recommendations in upcoming meetings. Any proposed rule changes would be subject to public comment and further SEC review. Stakeholders—including entrepreneurs, investors, and advisors—should monitor these developments closely, because forthcoming regulatory changes could have an impact on the landscape for raising capital in the United States.

    For more information on the content of this alert, please contact your Nixon Peabody attorney or the authors of this alert.

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    The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.

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