On September 9th, the SEC announced that it has approved rules to adjust the annual gross revenue thresholds in the definition of “emerging growth company” (EGC). The SEC also adopted rules to increase certain dollar amounts in Regulation Crowdfunding to make effective inflation adjustments required under Titles I and III of the Jumpstart Our Business Startups (JOBS) Act.
Title I of the JOBS Act added Securities Act Section 2(a)(19) and Exchange Act Section 3(a)(80) to adjust the thresholds in the definition of “emerging growth company”. Every five years, under the statutory definition, the SEC must index to inflation the annual gross revenue amount used to determine EGC status to reflect the change in inflation. The 2022 amendments increase that amount to $1,235,000,000 from the 2017 adjustment of $1,070,000,000.
Title III of the JOBS Act added Securities Act Section 4(a)(6), which allows certain crowdfunding transactions exemption from the registration requirements of Securities Act Section 5. Sections 4(a)(6) and 4A of the Securities Act set the dollar amounts used in connection with the crowdfunding exemption. Like the EGC definition in Title I, Section 4A(h)(1) provides that the SEC must adjust these dollar amounts every five years to reflect the change in inflation.
In March 2021, Regulation Crowdfunding’s offering limit was increased from $1,070,000 to $5,000,000, a substantial increase of $3,930,000. The SEC considers the current offering limit (which remains at $5,000,000) more than accounts for inflation and will not make any further inflation adjustments at this time.
The rulemaking regarding inflation adjustments under Titles I and III of the JOBS Act becomes effective upon publication of the release in the Federal Register.
For further details on the adopted amendments, see the final rule on the SEC’s website.