Expanded SEC Rules Increase Funding Opportunities for Small Businesses and AML Liability for Broker-Dealers

In 2015, the Securities and Exchange Commission (SEC) finalized new rules expanding opportunities for small businesses to raise capital through public offerings as mandated by Title IV of the Jumpstart Our Businesses Startups Act of 2012 (“JOBS Act”). The new rules, published on April 20, 2015, amend the already existing small business issue exemption of Section 3(b) of the Securities Act of 1933, commonly known as “Regulation A,” and aim to revitalize this often neglected capitalization option for qualifying small businesses. Through these changes, collectively referred to as “Regulation A+,” the SEC seeks to “provide an effective, workable path to raising capital” for small businesses, while “also provid[ing] strong investor protections” Regulation A+ will also extend broker-dealers’ AML obligations to cover activities in these less-familiar securities. As a result, a thorough understanding of Regulation A+ offerings, and their resultant publicly traded markets, will be crucial to deploying an effective AML compliance program to meet the expectations of regulators.

In the paper Expanded SEC Rules Increase Funding Opportunities for Small Businesses and AML Liability for Broker-Dealers, Navigant expert Ryan Duvall explains Regulation A+’s new exemption thresholds. He also explains how these exemptions will provide certain businesses and industries with new avenues to seek funding and provide liquidity to investors. Duvall also discusses key AML considerations for broker-dealers in light of Regulation A+’s exemptions.

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