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A Summer Address

A Summer Address“Crowdfunding is the new black.”

Rowena Wiseman

The Securities and Exchange Commission (“SEC”) Advisory Committee on Small and Emerging Companies met again in July and it’s a perfect follow-up to our review of Chair Mary Jo White’s notable address in March.

In her recent address, Ms. White once again discussed crowdfunding developments as well as the financial thresholds for small businesses and the updated definitions of accredited investors. Let’s quickly recap what was established from the meeting and how these updates can impact your business and mine.

Redefining Small Business

The committee is again reconsidering the parameters of a “smaller reporting company.” They have accepted some proposed amendments that would increase the financial maximums for their qualifications. One of these financial maximum involves a public float. The public float is the regular, publicly-issued shares available for investors to trade in the market (actually, on deposit with the DTCC). The proposal says that if you have a public float threshold of up to $250 million (as opposed to the current, $75 million) or, in absence of a public float, annual revenues of up to $100 million (instead of the current $50 million maximum), your business could qualify as a smaller reporting company.

“The objective of the proposal,” said White during her address, “is to promote capital formation and reduce compliance costs for smaller companies while maintaining important investor protections, such as those provided by section 404(b) of Sarbanes-Oxley,” which requires issuers to publish annual reports about their internal control structure and procedures for financial reporting.

Brinen & Associates likes that idea because it will increase the pool of small cap/microcap companies who can be treated as small reporting issuers. If that became the case then those issuers will have more time to report their quarterly and annual reports.

Having that extra time is a welcome commodity that will ultimately save these companies money, which is good for growth.


The SEC has been adapting and reacting to crowdfunding, which we’ve covered a few times this year. It wants to give small businesses the boost but they need to keep everything above board — from the amounts to the investors themselves.

Regulation Crowdfunding became effective in May, an exemption that means a company can raise up to $1 million in a 12-month period without having to register its securities. Ms. White reported that between the May enaction of Regulation Crowdfunding through July 18th, more than 60 offerings with a total of $4.4 million in funds were committed by investors.

We also discussed those boring ol’ funding portals — which are actually very necessary to ensure the validity of companies and investors — and a dozen have registered and become members of the Financial Industry Regulatory Authority (FINRA). Whether you’re an entrepreneur, investor, or owner, this is welcome news, because it’s intended to keep the fraud rate down.

There’s no crystal ball when it comes to crowdfunding, and thankfully, it seems like the SEC is only a few steps behind the changes in the modern business world.

Contact Brinen & Associates to discuss how these updates impact your small business and new ventures.



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