Registration Provisions of the Securities Act of 1933 for
Transactions Involving Limited Offers and Sales, Release No. 33-6339
(Aug. 7, 1981) [46 FR 41791 (Aug. 18, 1981)], at Section V.C.1
(referring to uniform six month safe harbor provisions in now
rescinded 17 CFR 230.146(b)(1) and 17 CFR 230.242(b)).
---------------------------------------------------------------------------

    Further, as proposed, we are shortening the current six-month time
frame in Rules 502(a), 251(c), 147(g), and 147A(g) to 30 days by
replacing these existing integration provisions with references to Rule
152.\120\ We believe that the 30-day safe harbor time period we are
adopting in Rule 152(b)(1) is appropriate throughout the exemptions
under the Securities Act. We note that a 30-day safe harbor time period
is consistent with several current integration provisions that also
require 30-day minimum waiting periods between offerings. For example,
in conjunction with certain other requirements, existing Rule 155
requires an issuer to wait at least 30 days between an abandoned
private offering and a subsequent registered offering,\121\ or an
abandoned registered offering followed by a subsequent private
offering.\122\ Similarly, 17 CFR 230.255(e) (``Rule 255(e)''), 17 CFR
230.147(h) (``Rule 147(h)'') and 17 CFR 230.147A(h) (``Rule 147A(h)'')
currently provide safe harbors from integration, if an issuer waits at
least 30 days between the last solicitation of interest in a
subsequently abandoned Regulation A offering, or the last offer made
pursuant to Rule 147 or Rule 147A, and the filing of a registration
statement for a subsequent offering.
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    \120\ See infra Section II.A.4.
    \121\ See Rule 155(b). As discussed below, new Rule 152(b)(1)
supersedes existing Rule 155, which is being removed and reserved.
    \122\ See Rule 155(c).
---------------------------------------------------------------------------

    One commenter stated that a comparison with the 30-day safe harbors
set forth in Rule 155, Rule 147(h), Rule 147A(h) and Rule 255(e) was
not an appropriate justification for decreasing all integration safe
harbors to 30 days, but we believe that in light of the changes in
technology, the markets, and the securities laws over time, the
existing safe harbor time periods need to be shortened and updated to
account for the increasing speed and consumption of electronically
disseminated information in today's financial marketplace. As a result,
we believe that the current six-month safe harbor time period in Rules
502(a), 251(c), 147(g), and 147A(g) is longer than necessary to protect
investors and could inhibit issuers, particularly smaller issuers, from
meeting their capital raising needs.\123\
---------------------------------------------------------------------------

    \123\ Smaller issuers may face capital raising challenges
because they are seeking relatively small amounts of capital. See,
e.g., Transcript of SEC Small Business Capital Formation Advisory
Committee (Nov. 12, 2019), available at https://www.sec.gov/info/smallbus/acsec/sbcfac-transcript-111219.pdf, at 15-62 (discussing
the fact that transaction costs make raising amounts under $750,000
``not worth it''); and Transcript of SEC Small and Emerging
Companies Advisory Committee (Feb. 15, 2017), available at https://www.sec.gov/info/smallbus/acsec/acsec-transcript-021517.pdf, at 144-
145 (indicating that it is easier for issuers to access $100 million
of capital than amounts under $10 million).

---------------------------------------------------------------------------

    As proposed, we are also removing and reserving Rule 155. The new
safe harbors in Rule 152(b) will apply when determining whether
integration of abandoned offerings with subsequent offerings is
required, superseding the current requirements of Rule 155.
Specifically, for an abandoned private offering followed by a
registered offering that would currently be covered by Rule 155(b), an
issuer could look to the safe harbors in new Rule 152(b)(1) or Rule
152(b)(3). For an abandoned registered offering followed by a private
offering that would currently be covered by Rule 155(c), an issuer
could look to the safe harbors in new Rule 152(b)(1) or Rule 152(b)(4).
As a result, we believe the lists of conditions in Rules 155(b) and (c)
are no longer warranted and may be eliminated without compromising
investor protections for the same reasons that support our
determination to reduce the integration safe harbors from six months to
30 days.
    In addition, we are adopting as proposed an amendment to Rule
506(b) to limit the number of non-accredited investors purchasing in
Rule 506(b) offerings to no more than 35 within a 90 calendar day
period. As we stated in the Proposing Release, we are mindful that a
shortened integration time frame could allow issuers to undertake
serial Rule 506(b) exempt offerings each month to up to 35 non-
accredited investors in reliance on a 30-day safe harbor, resulting in
unregistered sales to a significant number of non-accredited investors
in a year.\124\ Several commenters echoed this concern.\125\ As the
Commission stated in 2007, we believe that improper reliance on
exemptions from registration harms investors by depriving them of the
benefits of full and fair disclosure and the civil remedies that flow
from registration.\126\ While recent data suggests that shortening the
safe harbor to 30-days is not likely to result in a large increase in
the number of non-accredited investors participating in Rule 506(b)
offerings,\127\ we have determined that the rule change will prevent
issuers from using the new 30-day safe harbor to effectively conduct a
public distribution of securities to non-accredited investors.
---------------------------------------------------------------------------

    \124\ See Proposing Release, at text accompanying note 93. See
also Regulation D 2007 Proposing Release, at Section II.C.1.
    \125\ See Better Markets Letter; CFA Letter; CFA Institute
Letter; CII Letter; R. Rutkowski Letter; and Md. St. Bar Assoc.
Letter.
    \126\ See Regulation D 2007 Proposing Release, at Section
II.C.1.
    \127\ Based on the analysis of Form D data on initial Form D
filings, we estimate that, in 2019 among all Rule 506(b) offerings
by issuers other than pooled investment funds, between approximately
4.45 percent and 9 percent of offerings included non-accredited
purchasers. This estimated range is based on Division of Economic
and Risk Analysis staff analysis of data in initial Form D filings,
excluding pooled investment funds. In particular, the 4.45 percent
estimate is based on offerings that report that at least one non-
accredited investor already has invested in the offering as of the
Form D filing and may represent a lower bound because it relies on
available Form D filings, and because a final Form D upon the
conclusion of an offering is not required to be filed. If we also
include Rule 506(b) offerings on Form D that accept non-accredited
investors but reported having zero non-accredited investors in the
initial filing, the estimated percentage of offerings involving
accredited investors during 2019 is approximately 9 percent, which
may be viewed as an upper bound estimate.
---------------------------------------------------------------------------

    Finally, in a change from the proposal, we are replacing the
conditions set forth in proposed Rule 152(b)(1), which were similar,
but not identical, to the conditions in proposed Rule 152(a)(1) with
language clarifying that for an exempt offering for which general
solicitation is not permitted that follows by 30 calendar days or more
an offering that allows general solicitation, the provisions of Rule
152(a)(1) shall apply. This means that such an issuer must have a
reasonable belief, based on the facts and circumstances, with respect
to each purchaser in the exempt offering prohibiting general
solicitation, that the issuer (or any person acting on the issuer's
behalf) either did not solicit such purchaser through the use of
general solicitation, or established a substantive relationship with
such purchaser prior to the commencement of the exempt offering
prohibiting general solicitation.
    We also stress that this safe harbor may not be used as a means to
circumvent the prohibition on general solicitation in an exempt
offering to which such prohibition applies. That is, regardless of
whether an issuer meets the requirements of the 30-day safe harbor from
integration, an issuer conducting an offering of securities under an
exemption prohibiting general solicitation, such as Rule 506(b), must
still ensure that it has not engaged in a general solicitation, and
meets the other terms and conditions of the relevant offering
exemption. We are not persuaded by commenters who recommended that such
conditions to the availability of the 30-day safe harbor are not
necessary, given the requirements of the specific exemptions relied
on.\128\
---------------------------------------------------------------------------

    \128\ See Shearman & Sterling Letter (stating that an issuer
should not have to comply with the conditions to the 30-day safe
harbor, because ``an issuer would still need to comply with the
exemption relied upon in connection with the subsequent offering,
but not as part of the integration analysis.'').
---------------------------------------------------------------------------

    We also note that if an issuer waits less than 30 days after
terminating or completing an offering before commencing a subsequent
offering, and therefore cannot rely on the safe harbor in Rule
152(b)(1), it may still avoid integration if it meets the terms and
conditions of the general principle of integration in Rule 152(a).
b. Rule 701, Employee Benefit Plans and Regulation S (Rule 152(b)(2))
    Certain Commission rules currently provide that offers and sales of
securities made pursuant to Rule 701 and other employee benefit plans
will not be integrated with certain other offerings.\129\ Similarly,
the Commission has stated that offshore transactions made in compliance
with Regulation S will not be integrated with registered domestic
offerings or domestic offerings that satisfy the requirements for an
exemption from registration under the Securities Act.\130\
---------------------------------------------------------------------------

    \129\ The safe harbor integration provisions in current Rule
251(c), Rules 147(g), and 147A(g) for these offers or sales do not
cover offers or sales concurrent with another offering. See also 17
CFR 230.701(f) (``Rule 701(f)''). However, the six-month safe harbor
in Rule 502(a) provides an exception to the required six-month
separation between offerings for offers or sales of securities by or
for the issuer that are of the same or a similar class as those
offered or sold under Regulation D that occur during the six-month
time periods under an employee benefit plan, as defined in Rule 405
under the Securities Act.
    \130\ See Offshore Offers and Sales, Release No. 33-6863 (Apr.
24, 1990) [55 FR 18306 (May 2, 1990)] (``Offshore Offers and Sales
Release'') at Section III.C.1.
---------------------------------------------------------------------------

i. Proposed Amendments
    The Commission proposed Rule 152(b)(2) to provide a non-exclusive
safe harbor for all offers and sales made in compliance with Rule
701,\131\ pursuant to an employee benefit plan, or made in compliance
with Regulation S,\132\

regardless of when these offerings occur, including offers and sales
made concurrently with other offerings.\133\
---------------------------------------------------------------------------

    \131\ The Rule 701 exemption is only available to issuers that
are not subject to the reporting requirements of Section 13 or 15(d)
of the Exchange Act. See 17 CFR 230.701(b). The proposed safe harbor
is in accord with Rule 701(f), which provides that an offering under
Rule 701 will not be integrated with any other offering, as offers
and sales exempt under Rule 701 are deemed to be a part of a single,
discrete offering and are not subject to integration with any other
offers or sales, whether registered under the Securities Act or
otherwise exempt from the registration requirements of the
Securities Act.
    \132\ Proposed Rule 152(b)(2) would codify the position that
``[o]ffshore transactions made in compliance with Regulation S will
not be integrated with registered domestic offerings or domestic
offerings that satisfy the requirements for an exemption from
registration under the Securities Act.'' See Offshore Offers and
Sales Release, at Section III.C.1.
    \133\ The safe harbor integration provisions in current Rule
251(c), Rules 147(g) and 147A(g) for these offers or sales do not
cover offers or sales concurrent with another offering.
---------------------------------------------------------------------------

    In conjunction with the proposed safe harbor, the Commission
proposed to amend the definition of ``directed selling efforts'' in 17
CFR 230.902 (``Rule 902'' of Regulation S) in order to address concerns
raised by market participants about whether it is possible to conduct
concurrent Regulation S and Rule 506(c) offerings, particularly when
the offerings are conducted using the internet, and if so, how to
comply with the requirement that separate offering materials be used in
each offering. Under the proposal, an issuer that engages in general
solicitation activity under an exemption that allows general
solicitation would not be considered to have engaged in ``directed
selling efforts'' in connection with an offering under Regulation S, if
the general solicitation activity is not undertaken for the purpose of
conditioning the market in the United States for any of the securities
being offered in reliance on Regulation S. This would be a narrowing of
the current definition of ``directed selling efforts,'' which covers
any activity undertaken for the purpose of, or that could reasonably be
expected to have the effect of, conditioning the market in the United
States for the Regulation S securities.\134\
---------------------------------------------------------------------------

    \134\ See 17 CFR 230.902(c)(1).
---------------------------------------------------------------------------

    The Commission also proposed Rule 906 of Regulation S, applicable
to securities offered and sold in a transaction subject to the
conditions of 17 CFR 230.901 or 903, that would require an issuer that
engages in general solicitation activity covered by the proposed
exclusion from the definition of ``directed selling efforts'' to
prohibit resales to U.S. persons (or for the account or benefit of a
U.S. person) of the Regulation S securities for a period of six months
from the date of sale, except for sales to QIBs or IAIs. The proposed
six-month limitation on resales would apply regardless of the
Regulation S category applicable to the securities, and
notwithstanding, and in addition to, any applicable distribution
compliance period.
ii. Comments
    Commenters that addressed the proposal supported adopting the
integration safe harbor for all offerings made in compliance with Rule
701, pursuant to an employee benefit plan, or in compliance with
Regulation S, as proposed in Rule 152(b)(2).\135\ No commenters opposed
these proposed amendments. Several commenters asked the Commission to
specifically reference Rule 701 in Rule 152(b)(2).\136\
---------------------------------------------------------------------------

    \135\ See, e.g., J. Clarke Letter; Md. St. Bar Assoc. Letter
(noting that the rationale for exempting offers and sales under Rule
701 is also applicable to offers and sales under employee benefit
plans generally); W. Hubbard Letter; D. Burton Letter; CrowdCheck
Letter; Shearman & Sterling Letter; and NASAA Letter.
    \136\ See, e.g., W. Hubbard Letter; D. Burton Letter (suggesting
that referencing Rule 701 clarifies the Commission's intent with
respect to the application of the integration doctrine to offerings
under that rule); and CrowdCheck Letter.
---------------------------------------------------------------------------

    Several commenters supported codifying an explicit integration safe
harbor for offers and sales made in compliance with Regulation S.\137\
One of these commenters stated that including this safe harbor in
proposed Rule 152 would enhance legal certainty and promote more
efficient capital raising.\138\
---------------------------------------------------------------------------

    \137\ See, e.g., SIFMA Letter; Shearman & Sterling Letter; Md.
St. Bar Assoc. Letter; and ABA Letter (supporting the codification,
in proposed Rule 152(b)(2), of the Commission's guidance in the 1990
Regulation S Adopting Release that ``[o]ff shore transactions made
in compliance with Regulation S will not be integrated with
registered domestic offerings or domestic offerings that satisfy the
requirements for an exemption from registration under the Securities
Act.'') (citing Offshore Offers and Sales Release, at Section
III.C.1).
    \138\ See Shearman & Sterling Letter.
---------------------------------------------------------------------------

    Some commenters, however, opposed the proposed revisions to the
definition of ``directed selling efforts'' in Regulation S to exclude
activities that are ``reasonably expected'' to condition the U.S.
market for the Regulation S securities.\139\ One of these commenters
questioned the feasibility of determining what activities would
condition the market, and what problems preventing such activities
would avoid.\140\ Another of these commenters raised concerns that the
proposed changes would restrict the current market practice of
concurrently making Regulation S and 17 CFR 230.144A (``Rule 144A'')
offers.\141\ This commenter also raised concerns about the discussion
in the Proposing Release with respect to widely accessible internet or
similar communications in connection with concurrent Regulation S and
Rule 506(c) offerings, noting that the conclusion that such
communications would be deemed directed selling efforts would
effectively preclude combining an exempt offering that permits general
solicitation with a contemporaneous offshore offering under Regulation
S.\142\
---------------------------------------------------------------------------

    \139\ See Shearman & Sterling Letter; ABA Letter; and CrowdCheck
Letter.
    \140\ See CrowdCheck Letter.
    \141\ See Shearman & Sterling Letter (expressing concern that if
communications that may be considered general solicitation in Rule
144A offerings are presumed to constitute directed selling efforts
that trigger a six-month distribution compliance period, issuers
would in many cases have to forgo the concurrent offshore offering
because imposing a distribution compliance period is often not
practicable).
    \142\ See id.
---------------------------------------------------------------------------

    One commenter expressed support for an amendment to Rule 902 as a
means to address uncertainty among market participants regarding
whether it is possible to conduct concurrent Regulation S and Rule
506(c) offerings, but recommended that the rule expressly provide that
the prohibition on directed selling efforts is not applicable when the
Regulation S offering is made concurrently with an offering in reliance
on an exemption that permits general solicitation, so long as the
issuer does not engage in such general solicitation for the purpose of
conditioning the market in the United States for any securities being
offered in reliance on Regulation S or registered under the Securities
Act.\143\ Other commenters stated that they had not experienced
significant uncertainty in determining the absence or presence of
directed selling efforts in connection with exempt offerings permitting
general solicitation.\144\
---------------------------------------------------------------------------

    \143\ See Fried Frank Letter (recommending that the Commission
clarify that the issuer is not required to provide evidence for its
intent, and also recommending that the Commission state that
concurrent Rule 506(c) and Regulation S offerings will not be
integrated even if the issuer uses the same (or substantially
identical) offering materials).
    \144\ See Shearman & Sterling Letter; and CrowdCheck Letter.
---------------------------------------------------------------------------

    Commenters were divided in their support for,\145\ or opposition
to,\146\ the proposed Rule 906 resale restrictions. Some commenters
opposing the proposed amendment expressed concern that it would be
difficult to implement or add unnecessary complexity to Regulation
S.\147\ Commenters also noted that the existing distribution compliance
period in Regulation S already protects against the

risk of flowback of Regulation S securities to the United States.\148\
Another commenter opposing the proposed rule recommended that the
resale limitation should limit resales in the first year to QIBs and
IAIs to align the rule with Regulation Crowdfunding.\149\
---------------------------------------------------------------------------

    \145\ See Md. St. Bar Assoc. Letter (expressing support for the
proposal to codify a safe harbor for offers and sales made in
compliance with Regulation S and noting with favor proposed Rule 906
as a means to prevent flowback of securities to the United States);
and Republic Letter (supporting the proposal as a whole with respect
to Regulation S offerings).
    \146\ See J. Clarke Letter; SIFMA Letter; Fried Frank Letter;
CrowdCheck Letter; and Shearman & Sterling Letter.
    \147\ See, e.g., ABA Letter; SIFMA Letter (expressing concern
that issuers and other offering participants would find the
requirements of proposed Rule 906 burdensome and difficult to
implement, and would simply avoid relying on exemptions that allow
for general solicitation); and CrowdCheck Letter.
    \148\ See SIFMA Letter (stating its belief that proposed Rule
906 is unnecessary and inconsistent with prior Commission guidance
on Regulation S, and that Regulation S already applies a
distribution compliance period to protect against flowback that is
calibrated, in duration and certain other respects, based on the
likelihood of flowback); CrowdCheck Letter (questioning whether
flowback was likely to occur given the resale restrictions); and ABA
Letter.
    \149\ See J. Clarke Letter.
---------------------------------------------------------------------------

iii. Final Amendments
    After considering the comments, we are adopting new Rule 152(b)(2),
to provide a non-exclusive safe harbor for all offers and sales made in
compliance with Rule 701, pursuant to an employee benefit plan, or in
compliance with Regulation S, regardless of when these offerings occur,
including offers and sales made concurrently with other offerings. For
the reasons discussed below, we have decided not to adopt the proposed
changes to Regulation S itself.
    Offers and sales pursuant to Rule 701 and employee benefit plans
are limited to investors, such as employees, consultants, and advisors,
with whom the issuer has written compensation plans or agreements. We
continue to believe, given the relationship between these investors and
the issuer, that these offers and sales do not raise the same level of
investor protection concerns as offerings to other investors.
    With respect to Regulation S offerings, Rule 152(b)(2) codifies the
long-standing Commission position that ``[o]ffshore transactions made
in compliance with Regulation S will not be integrated with registered
domestic offerings or domestic offerings that satisfy the requirements
for an exemption from registration under the Securities Act.'' \150\
Therefore, as noted in the Proposing Release, concurrent offshore
offerings that are conducted in compliance with Regulation S are not
currently, and will not be, integrated with registered domestic
offerings or domestic offerings that are conducted in compliance with
any exemption.\151\ When determining the availability of this safe
harbor, it will still be necessary to assess each transaction
separately for compliance with the applicable exemption.
---------------------------------------------------------------------------

    \150\ See Offshore Offers and Sales Release, at Section III.C.1.
    \151\ In addressing the offshore transaction component of the
Regulation S safe harbor, the Commission stated, ``Offers made in
the United States in connection with contemporaneous registered
offerings or offerings exempt from registration will not preclude
reliance on the safe harbors.'' Id. at note 36. Likewise, in
addressing directed selling efforts, the Commission stated,
``Offering activities in contemporaneous registered offerings or
offerings exempt from registration will not preclude reliance on the
safe harbors.'' Id. at note 47. See also Rule 500(g) of Regulation D
(formerly Preliminary Note No. 7 to Regulation D) (``Regulation S
may be relied upon for such offers and sales even if coincident
offers and sales are made in accordance with Regulation D inside the
United States.''); and Note to Rule 502(a) (``Generally,
transactions otherwise meeting the requirements of an exemption will
not be integrated with simultaneous offerings being made outside the
United States in compliance with Regulation S.'').
---------------------------------------------------------------------------

    In light of certain perceived concerns about the ability of an
issuer to conduct concurrent Regulation S and Rule 506(c) offerings,
particularly when the offerings are conducted using the internet, we
proposed an amendment to the definition of ``directed selling efforts''
in Rule 902, and related proposed Rule 906, which would have applied to
issuers relying on the amended definition. After considering the
comments received, we have determined not to adopt the proposed
amendments to Regulation S. We are persuaded by commenters who asserted
that the existing regulatory framework appropriately addresses concerns
relating to the risk of flowback of Regulation S securities to the
United States or the use of general solicitation in an exempt offering
to condition the market in the United States for the Regulation S
securities and acknowledge commenters who expressed concern that the
proposal may disrupt existing market practices.
    In light of the concerns expressed by commenters about the
implications of the proposed amendments and the related discussion in
the Proposing Release, we are also clarifying that we do not believe
that general solicitation activity for exempt domestic offerings would
preclude reliance on Regulation S for concurrent offshore offerings,
and reaffirm our existing guidance with respect to concurrent
Regulation S and domestic offerings.\152\
---------------------------------------------------------------------------

    \152\ See id.
---------------------------------------------------------------------------

    We are aware that issuers have conducted domestic exempt or
registered offerings concurrently with a Regulation S offering under
our existing guidance. Compliance with the terms of both Regulation S
and another applicable exemption, such as Rule 506(c), will depend on
the facts and circumstances of a particular situation. For example, the
use of the same website to solicit U.S. investors under Rule 506(c) and
offshore investors under Regulation S could raise concerns about the
issuer's compliance with the prohibition on directed selling efforts in
Regulation S because the offering material on the website could be
deemed to have the effect of conditioning the market in the United
States. In such situations, we believe an issuer can take certain steps
to distinguish the Regulation S and domestic offering materials, as the
Commission has previously discussed.\153\
---------------------------------------------------------------------------

    \153\ See Statement of the Commission Regarding Use of internet
websites to Offer Securities, Solicit Securities Transactions, or
Advertise Investment Services Offshore, Release No. 33-7516 (Mar.
23, 1998) [63 FR 14806 (Mar. 27, 1998)].
---------------------------------------------------------------------------

c. Subsequent Registered Offerings (Rule 152(b)(3))
    Existing Rule 152 provides that the phrase ``transactions by an
issuer not involving any public offering'' in Section 4(a)(2) shall be
deemed to apply to transactions that did not involve any public
offering at the time of the unregistered offering even if the issuer
decides subsequently to make a public offering and/or files a
registration statement. In 2007, the Commission clarified that an
issuer's contemplation of filing a Securities Act registration
statement at the same time that it is conducting an unregistered
offering under Section 4(a)(2) would not cause the Section 4(a)(2)
exemption to be unavailable for that unregistered offering.\154\ So
long as all of the applicable requirements of the exemption prohibiting
general solicitation were met for offers and sales that occurred prior
to the use of general solicitation in connection with the registered
public offering, the offers and sales of the exempt offering
prohibiting general solicitation would not be integrated with the
subsequent registered offering.\155\ Once the public offering is
commenced or the registration statement is filed, the safe harbor in
existing Rule 152 is no longer available for any concurrent or
subsequent offers or sales made in connection with an exempt offering
prohibiting general solicitation.
---------------------------------------------------------------------------

    \154\ See Regulation D 2007 Proposing Release, at text
accompanying note 124. See also Concept Release, at text
accompanying note 499.
    \155\ In these circumstances, companies should be careful to
avoid any pre-filing communications regarding the contemplated
public offering that could render the Section 4(a)(2) exemption
unavailable for what would be an otherwise exempt private placement.
See Regulation D 2007 Proposing Release, at note 124.
---------------------------------------------------------------------------

i. Proposed Amendments
    The Commission proposed Rule 152(b)(3) to provide a non-exclusive
safe harbor for certain offerings made prior to the commencement of an
offering for which a Securities Act registration statement has been
filed, thus

permitting companies to conduct certain offerings shortly before the
filing of a Securities Act registration statement without concern that
the two offerings would be integrated. Proposed Rule 152(b)(3)(i) would
provide that an offering for which a Securities Act registration
statement has been filed will not be integrated with terminated or
completed offerings for which general solicitation is not permitted.
Proposed Rule 152(b)(3)(ii) would provide that an offering for which a
Securities Act registration statement has been filed will not be
integrated with a terminated or completed offering for which general
solicitation is permitted made only to QIBs and IAIs. Finally, proposed
Rule 152(b)(3)(iii) would make clear that an offering for which a
registration statement has been filed will not be integrated with any
offering for which general solicitation is permitted that terminated or
completed more than 30 calendar days prior to the registered offering.
ii. Comments
    No commenters opposed the safe harbor in proposed Rule 152(b)(3),
and several commenters supported adopting proposed Rule
152(b)(3)(i).\156\ In support, one commenter noted that the proposed
safe harbor ``appears to be generally consistent with existing Rule
152, updated mainly to account for the fact that general solicitation
is now permitted for offerings conducted under Rule 506(c).'' \157\
Another commenter asked the Commission not to include the 30-day
cooling-off period contemplated as a condition for use of proposed Rule
152(b)(3)(iii), because the commenter believed it undercuts the
objective of the rules to ``encourage use of registration to the
maximum extent possible.'' \158\ Alternatively, the commenter suggested
that proposed Rule 152(b)(3)(ii) should be revised to refer to a
terminated or completed offering for which general solicitation is
permitted in which sales are made only to the specified institutional
investors.\159\
---------------------------------------------------------------------------

    \156\ See, e.g., Md. St. Bar Assoc. Letter; W. Hubbard Letter;
and NASAA Letter (not objecting to the proposed safe harbor).
    \157\ See Md. St. Bar Assoc. Letter.
    \158\ See ABA Letter (stating that the 30-day cooling-off period
serves ``no real practical purpose,'' noting that ``[i]n these
situations, investors in the registered offering will have the
benefit of the liability provisions set forth in Section 11 and
12(a)(2) of the Securities Act.'').
    \159\ See id.
---------------------------------------------------------------------------

iii. Final Amendments
    After considering these comments, we are adopting new Rule
152(b)(3), as proposed, providing a non-exclusive safe harbor for
certain offerings made prior to the commencement of an offering for
which a Securities Act registration statement has been filed. New 17
CFR 230.152(b)(3)(i) (``Rule 152(b)(3)(i)'') provides that an offering
for which a Securities Act registration statement has been filed will
not be integrated with terminated or completed offerings for which
general solicitation is not permitted.\160\ New 17 CFR
230.152(b)(3)(ii) (``Rule 152(b)(3)(ii)'') provides that an offering
for which a Securities Act registration statement has been filed will
not be integrated with a terminated or completed offering for which
general solicitation is permitted made only to QIBs and IAIs.\161\
Finally, new Rule 152(b)(3)(iii) provides that an offering for which a
registration statement under the Securities Act has been filed will not
be integrated with any offering for which general solicitation is
permitted that terminated or completed more than 30 calendar days prior
to the registered offering.\162\
---------------------------------------------------------------------------

    \160\ New Rule 152(b)(3)(i) builds on the Commission's prior
integration guidance relating to offerings for which general
solicitation is not permitted. Offers and sales preceding registered
offerings that do not involve general solicitation are generally not
the type of offerings that, when taken together, appear to be
susceptible to concerns relating to the prior offers and sales
conditioning the market for the registered offering.
    \161\ New Rule 152(b)(3)(ii) builds on current Rule 255(e) of
Regulation A, and current Rules 147(h) and 147A(h), which provide
that offerings limited to QIBs and IAIs are not integrated with a
subsequently filed registered offering. Similarly, where an issuer
has solicited interest in a contemplated, but subsequently abandoned
Regulation A offering only to QIBs or IAIs, the abandoned Regulation
A offering would not be subject to integration with a subsequently
filed registered offering. We do not believe it is appropriate, as
suggested by a commenter, that we revise this provision to refer
only to offerings in which sales are made to QIBs and IAIs, as to do
so would expand the scope of this safe harbor to effectively permit
broad use of general solicitation at any time, including immediately
prior to commencement of a registered offering, so long as the
issuer limits sales in the exempt offerings to the specified
institutional investors, thereby raising concerns about the prior
offers conditioning the market for the registered offering.
    \162\ New Rule 152(b)(3)(iii) will work in coordination with new
Rule 152(b)(1) to clarify the application of the 30-day safe harbor
to subsequent registered offerings. As discussed with respect to the
non-exclusive safe harbor in new Rule 152(b)(1) in Section II.A.2,
if an issuer files a registration statement under the Securities Act
less than 30 calendar days after a terminated or completed offering
for which general solicitation is permitted, although new Rule
152(b)(3)(iii) would not be available, integration would depend on
the availability of the general principle of integration in Rule
152(a).
---------------------------------------------------------------------------

    We continue to believe that capital raising around the time of a
public offering, in particular an initial public offering, including
immediately before the filing of a registration statement, is often
critical if issuers are to have sufficient funds to continue to operate
while the public offering process is ongoing.\163\ We believe that Rule
152 as currently written is unnecessarily restrictive, given the
changing financial requirements and circumstances of issuers,
particularly smaller issuers, immediately prior to a registered public
offering and may be revised without compromising investor protections.
A lengthy waiting period prior to a registered offering combined with a
potentially uncertain registration process are particular concerns for
smaller issuers contemplating a registered public offering, whose
financing needs are often erratic and unpredictable, due in part to
limited amounts of working capital, cash reserves, and access to
credit.\164\ However, we are not persuaded by a commenter's suggestion
that we eliminate the 30-day period applicable to an offering for which
a registration statement under the Securities Act has been filed
subsequent to a terminated or completed offering for which general
solicitation is permitted. New Rule 152(b)(3)(iii) does not impose an
additional requirement beyond that set forth in the 30-day safe harbor
of new Rule 152(b)(1), but rather is meant to clarify the application
of that provision to subsequent registered offerings. As discussed
above, we believe a 30-day time frame is sufficient to mitigate
concerns that an exempt offering may condition the market for a
subsequent registered offering. For this reason, we are adopting new
Rule 152(b)(3) as proposed to permit issuers to conduct offerings
shortly before the filing of a Securities Act registration statement
without concern that the two offerings would be integrated.\165\
---------------------------------------------------------------------------

    \163\ See Regulation D 2007 Proposing Release, at Section II.C.
    \164\ See, e.g., Final Report of the Advisory Committee on
Smaller Public Companies to the U.S. Securities and Exchange
Commission (Apr. 23, 2006), available at https://www.sec.gov/info/smallbus/acspc/acspc-finalreport.pdf, at 96. See also Regulation D
2007 Proposing Release, at note 116 and accompanying text.
    \165\ We note that, as discussed above, the plan or scheme to
evade restrictions in the introductory language to Rule 152 apply to
all the provisions of new Rule 152, including the safe harbors in
Rule 152(b), as well as the general principle of integration in new
Rule 152(a) when the safe harbors in new Rule 152(b) are not
available. In this regard, none of the provisions of new Rule 152
may be used as a means to circumvent the communication restrictions
prior to a registered offering, for example, for communications
occurring within 30 days of a registered offering. Section 5(c) of
the Securities Act prohibits any written or oral offers prior to the
filing of a registration statement. Generally, written and oral
offers prior to filing a registration statement are prohibited,
absent an exemption. Rule 163B, for example, provides an exemption
to issuers, and those authorized to act on their behalf, to gauge
market interest in a possible initial public offering or other
registered securities offering through discussions with certain
institutional investors prior to, or following, the filing of a
registration statement.

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d. Offers or Sales Preceding Exempt Offerings Permitting General
Solicitation (Rule 152(b)(4))
    Rule 251(c) of Regulation A, and the intrastate offering safe
harbor and exemption in Rule 147(g) and Rule 147A(g), respectively,
currently provide that offers and sales made pursuant to these
exemptive provisions and safe harbors that permit general solicitation
will not be integrated with terminated or completed offers and sales
made prior to the commencement of these exempt offerings.\166\
---------------------------------------------------------------------------

    \166\ These integration provisions also provide that offers and
sales subsequent to these exempt offerings will not be integrated if
they are: (1) Registered under the Securities Act; (2) exempt from
registration under Rule 701; (3) made pursuant to an employee
benefit plan; (4) exempt from registration under Regulation S; (5)
exempt from registration under Section 4(a)(6) of the Securities
Act; (6) made more than six months after completion of the offering;
or (7) limited to QIBS and IAIs. See Rule 251(c); Rule 255(e); Rule
147(g) and (h); and Rule 147A(g) and (h).
---------------------------------------------------------------------------

i. Proposed Amendments
    The Commission proposed Rule 152(b)(4) to provide a safe harbor for
all offers and sales made in reliance on an exemption for which general
solicitation is permitted that follow any other terminated or completed
offering. The proposed safe harbor would expand the current integration
safe harbors in Regulation A and Rules 147 and 147A to include
offerings relying on: Regulation Crowdfunding; Rules 504(b)(1)(i),
(ii), or (iii) that, depending on State registration requirements,
permit general solicitation; and Rule 506(c).
ii. Comments
    Several commenters supported the safe harbor in proposed Rule
152(b)(4) that would apply to any offering in reliance on an exemption
for which general solicitation is permitted made subsequent to an
offering that has been terminated or completed,\167\ while others
opposed the proposed safe harbor.\168\
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    \167\ See W. Hubbard Letter; D. Burton Letter; CrowdCheck Letter
(expressing concern about issuer compliance with disclosure
requirements of Regulation Crowdfunding); and NASAA Letter (not
objecting to the proposed safe harbor).
    \168\ See Md. St. Bar Assoc Letter; and CFA Letter.
---------------------------------------------------------------------------

    One commenter supporting the proposal recommended that the
integration safe harbor should be the same whether the new or
terminated offering involves general solicitation or not.\169\ Another
commenter recommended an additional safe harbor providing that any
offering commenced in reliance on an exemption that does not permit
general solicitation may be continued in reliance on an exemption that
does permit general solicitation.\170\ According to this commenter,
such a safe harbor would be particularly beneficial to issuers
commencing an offering in reliance on Rule 506(b) and desiring to
continue it in reliance on Rule 506(c) and would permit the issuer to
use the same or substantially identical materials to continue the
offering in reliance on Rule 506(c).\171\ In contrast, one commenter
opposing the safe harbor in proposed Rule 152(b)(4) suggested that
permitting a Rule 506(c) offering to commence immediately following the
completion of a Rule 506(b) offering for the same securities at the
same price is essentially like permitting general solicitation in a
Rule 506(b) offering conducted in two phases.\172\ One commenter
questioned the Commission's basis for claiming that the exemptions
allowing general solicitation are sufficiently protective.\173\
---------------------------------------------------------------------------

    \169\ See D. Burton Letter.
    \170\ See Fried Frank Letter (stating that this additional safe
harbor would be consistent with the Commission's guidance in its
2013 release adopting Rule 506(c)) (citing Eliminating the
Prohibition Against General Solicitation and General Advertising in
Rule 506 and Rule 144A Offerings, Release No. 33-9415 (July 10,
2013) [78 FR 44771 (July 24, 2013)] (``Rule 506(c) Adopting
Release'')).
    \171\ See id.
    \172\ See Md. St. Bar Assoc. Letter.
    \173\ See CFA Letter (additionally expressing concern over fraud
in the Regulation A market and non-compliance in the Regulation
Crowdfunding market). See also CrowdCheck Letter.
---------------------------------------------------------------------------

iii. Final Amendments
    After considering comments, we are adopting new Rule 152(b)(4), as
proposed, to provide a non-exclusive safe harbor for all offers and
sales made in reliance on an exemption for which general solicitation
is permitted that follow any other terminated or completed offering.
This new safe harbor expands on the current integration safe harbors in
Regulation A and Rules 147 and 147A to include offerings relying on:
Regulation Crowdfunding; Rules 504(b)(1)(i), (ii), or (iii) that,
depending on State registration requirements, permit general
solicitation; and Rule 506(c). The following table summarizes the types
of offerings that will not be integrated under this new safe harbor:

  Table 3--Summary of Types of Offerings Not Integrated Under the Safe
                                 Harbor
------------------------------------------------------------------------
                Offering 1                           Offering 2
------------------------------------------------------------------------
Any offering, which includes:               Exempt offering permitting
Exempt offering permitting general           general solicitation,
 solicitation, including:                    including:
 Regulation A.                       Regulation A.
 Regulation Crowdfunding.            Regulation
 Rule 147 or 147A.                   Crowdfunding.
 Rules 504(b)(1)(i), (ii), or        Rule 147 or 147A.
 (iii).                                      Rules 504(b)(1)(i),
 Rule 506(c).                        (ii), or (iii).
                                             Rule 506(c).
Exempt offering prohibiting general
 solicitation, including:
 17 CFR 230.504(b)(1).
 Rule 506(b).
 Section 4(a)(2).
Securities Act registered offering.
------------------------------------------------------------------------

    Exempt offerings that permit general solicitation and follow other
offers and sales are generally not the type of offerings that appear to
be susceptible to concerns about the prior offers and sales
conditioning the market for the subsequent exempt offering. We do not
believe integrating any type of offers or sales with a subsequent
exempt offering permitting general solicitation, such as an offering
pursuant to Regulation A, Rule 147, Rule 147A, Rules 504(b)(1)(i),
(ii), or (iii), Rule 506(c), or Regulation Crowdfunding, is necessary
to further investor protection.

    In response to a commenter's request,\174\ we are providing
guidance with respect to an issuer's ability to rely on Rule 152(b)(4)
with respect to an offering that was commenced in reliance on an
exemption that does not permit general solicitation, but that the
issuer wishes to continue in reliance on an exemption that does permit
general solicitation. We are of the view that an issuer may rely on the
safe harbor in new Rule 152(b)(4) if, for example, the issuer commences
an offering under Rule 506(b) and thereafter engages in general
solicitation in reliance on Rule 506(c) so long as once the issuer
engages in general solicitation, it relies on Rule 506(c) for all
subsequent sales, thereby effectively terminating the Rule 506(b)
offering, including by selling exclusively to accredited investors and
taking reasonable steps to verify the accredited investor status of
each purchaser.\175\ The use of general solicitation in reliance on
Rule 506(c) will not affect the exempt status of prior offers and sales
of securities made in reliance on Rule 506(b).\176\ It is also not
necessary for an issuer to use different offering materials for
offerings that rely on different exemptions, so long as the issuer
satisfies the disclosure and other requirements of each applicable
exemption.
---------------------------------------------------------------------------

    \174\ See Fried Frank Letter.
    \175\ We do not believe that this approach will permit general
solicitation in a Rule 506(b) offering conducted in two phases, in
light of the significant investor protections of Rule 506(c) that
become applicable as soon as the issuer commences general
solicitation activity.
    \176\ This guidance is consistent with the Commission's 2013
guidance in implementing Rule 506(c). See Rule 506(c) Adopting
Release, at Section II.A.3.
---------------------------------------------------------------------------

3. Commencement, Termination, and Completion of Offerings (Rules 152(c)
and 152(d))
    Existing rules under the Securities Act do not clearly define
commencement or completion with respect to exempt and registered
offerings, although several rules state when exempt offerings under
Regulation A \177\ and Regulation Crowdfunding terminate under certain
circumstances,\178\ as well as when registered offerings
terminate.\179\
---------------------------------------------------------------------------

    \177\ See, e.g., 17 CFR 230.257(a) (``Rule 257(a)'') (requiring
filing of ``an exit report on [17 CFR 239.94 (``Form 1-Z'')] not
later than 30 calendar days after the termination or completion of
[a Regulation A/Tier I] offering.''); 17 CFR 230.259(b) (``Rule
259(b)'') (declaration by the Commission that the offering statement
has been abandoned); and 17 CFR 230.251(d)(3)(i)(F) (``Rule
251(d)(3)(i)(F)'') (required termination of the offering by the
third anniversary of the initial qualification date of the offering
statement).
    \178\ See, e.g., 17 CFR 230.201(g) (``Rule 201(g)'') (disclosure
required of the ``target offering amount and the deadline to reach
the target offering amount''); and 17 CFR 227.304(b) (``Rule
304(b)'') (notice provided by the Regulation Crowdfunding
intermediary of the early completion of an offering).
    \179\ See, e.g., 17 CFR 230.477 (``Rule 477'') (withdrawal of
the registration statement after application granted by the
Commission); 17 CFR 230.479 (``Rule 479'') (order by the Commission
that the registration statement has been abandoned); and 17 CFR
230.415(a)(5) (``Rule 415(a)(5)'') (on the third anniversary of the
initial effective date of the registration statement).
---------------------------------------------------------------------------

a. Proposed Amendments
    To provide greater certainty to issuers as to the availability of
the safe harbors under proposed Rule 152(b) that require the prior
offering to be ``terminated or completed,'' \180\ the Commission
proposed Rule 152(c) to define ``terminated or completed'' in the
context of Rule 152 as follows:
---------------------------------------------------------------------------

    \180\ See proposed Rules 152(b)(1), (b)(3), and (b)(4).
---------------------------------------------------------------------------

     Offerings of securities made under Section 4(a)(2),
Regulation D, Rule 147 or 147A would be considered ``terminated or
completed,'' on the later of: (i) The date the issuer entered into a
binding commitment to sell securities under the offering (subject only
to conditions outside of the investor's control); or (ii) the date the
issuer and its agents ceased efforts to make further offers to sell the
issuer's securities.\181\
---------------------------------------------------------------------------

    \181\ Efforts to sell securities through the offering include,
but are not limited to, the distribution of any offering materials.
For purposes of exemptions permitting the use of general
solicitation, the cessation of selling efforts would require the
removal of any publicly available general solicitation materials, to
the extent possible.
---------------------------------------------------------------------------

     Offerings under Regulation A would be considered
``terminated or completed'': (i) Upon the withdrawal of an offering
statement under 17 CFR 230.259(a) (``Rule 259(a)'' of Regulation A);
(ii) upon the filing of 17 CFR 239.94 (``Form 1-Z'') with respect to
that offering; (iii) upon the declaration by the Commission that the
offering statement has been abandoned under Rule 259(b) of Regulation
A; or (iv) on the third anniversary of the initial qualification date
of the offering statement, in the case of continuous or delayed
offerings.
     Offerings under Regulation Crowdfunding would be
considered ``terminated or completed'' on the deadline of the offering
identified in the offering materials pursuant to Rule 201(g) of
Regulation Crowdfunding, or indicated by the Regulation Crowdfunding
intermediary in any notice to investors delivered under Rule 304(b) of
Regulation Crowdfunding.
     Offerings for which a Securities Act registration
statement has been filed would be considered, ``terminated or
completed,'' for purposes of the proposed safe harbors: (i) Upon the
withdrawal of the registration statement after the Commission grants
such application under Rule 477; (ii) upon the filing of an amendment
or supplement to the registration statement indicating that the
registered offering has been terminated or completed and the
deregistering of any unsold securities if required by 17 CFR
229.512(a)(3); (iii) the entry of an order by the Commission declaring
that the registration statement has been abandoned under Rule 479; or
(iv) as set forth in Rule 415(a)(5).
b. Comments
    Commenters provided various recommendations on how to provide
greater certainty to issuers as to the availability of the proposed
safe harbors that require a determination as to when an offering should
be considered ``terminated or completed.'' \182\ While one commenter
supported our proposed definitions of ``terminated or completed,''
\183\ another commenter recommended that the Commission provide
guidance for determining when offerings might be considered
``terminated or completed'' instead of defining the terms, as ``the
definitions might not catch all possible circumstances.'' \184\ In
order to facilitate an issuer terminating an offering of securities in
reliance on one exemption, for example, such as Rule 506(b) that
prohibits general solicitation, and simultaneously commencing an
offering of securities in reliance on another exemption, for example,
such as Rule 506(c) that permits general solicitation, one commenter
recommended revising the proposed definition of ``terminated or
completed'' in 17 CFR 230.152(c)(1)(ii) to clarify that the requirement
to cease selling efforts is limited only to a particular offering, as
opposed to the more general language ``to make further offers to sell
the issuer's securities,'' as proposed.\185\
---------------------------------------------------------------------------

    \182\ One comment letter supported the definitions as proposed.
See W. Hubbard Letter. Several other commenters either opposed or
suggested alternative definitions or approaches. See, e.g., Shearman
& Sterling Letter; CrowdCheck Letter; and J. Clarke Letter.
    \183\ See W. Hubbard Letter (stating that under other
alternatives too many ``complications otherwise would arise.'').
    \184\ See CrowdCheck Letter.
    \185\ See Fried Frank Letter (stating that this may occur
because the issuer initially believes that it can raise capital
without engaging in general solicitation, but subsequently
determines that it is unable to raise the capital without engaging
in general solicitation and that the issuer should be able to
seamlessly, using the same (or substantially identical) offering
materials continue the offering in reliance on an exemption
permitting general solicitation, such as Rule 506(c)).

---------------------------------------------------------------------------

    Several commenters provided further recommendations with regard to
specific sections of the definitions on when an offering is considered
terminated or completed.\186\ In regard to continuous Regulation A Tier
2 offerings that have not been withdrawn or abandoned, one of these
commenters noted that under the proposed definition the offering would
be deemed completed on the third anniversary of qualification, which
would present a problem for purposes of the safe harbors, if the
offering by its own terms indicated that it will terminate earlier, for
example, one year after qualification.\187\
---------------------------------------------------------------------------

    \186\ See Shearman & Sterling Letter; and CrowdCheck Letter
(suggesting that the definition with regard to Section 4(a)(2),
Regulation D, or Rules 147 and 147A should reference ``conditions
outside the issuer's control'' instead of ``outside the investor's
control'').
    \187\ See CrowdCheck Letter.
---------------------------------------------------------------------------

    Some commenters asked the Commission to provide guidance on when an
offering is considered to be ``commenced,'' \188\ including one
commenter who stated that such guidance would be useful, especially in
the context of testing the waters or seeking indications of interest in
a contemplated securities offering.\189\
---------------------------------------------------------------------------

    \188\ See CrowdCheck Letter; Shearman & Sterling Letter; and ABA
Letter (expressing concern that it is unclear how the
``commencement'' of an offering would be applied to continuous
offerings).
    \189\ See CrowdCheck Letter. See also ABA Letter (stating that
determining the meaning of ``commencement'' of an offering can cause
uncertainty).
---------------------------------------------------------------------------

    Another commenter raised concerns with respect to termination and
commencement in the context of shelf registration statements, and noted
that if a registered offering is deemed commenced with the filing of
the registration statement, the 30-day safe harbor may be effectively
unavailable for shelf registration statements.\190\ Accordingly, this
commenter suggested that in the case of shelf registration statements
on 17 CFR 239.13 (``Form S-3'') or 17 CFR 239.33 (``Form F-3''), the
relevant commencement date should be the commencement of public efforts
to sell the issuer's securities, rather than the filing or existence of
a shelf registration statement, and that a particular delayed
registered offering, commonly referred to as a take-down (or off the
shelf) from an effective shelf registration statement, should be deemed
terminated or completed when the distribution of the registered
securities has been completed or public efforts to sell the issuer's
securities in the proposed registered offering have been
abandoned.\191\ This commenter also suggested that the completion of
the distribution in a registered offering could be determined, for
example, by reference to the completion of the distribution within the
meaning of 17 CFR 242.100 through 105 (``Regulation M'') under the
Exchange Act.\192\
---------------------------------------------------------------------------

    \190\ See Shearman & Sterling Letter (stating that requiring
issuers to wait 30 days after the termination of a shelf
registration statement before commencing an exempt offering
prohibiting general solicitation, or requiring issuers that are
engaged in an exempt offering to postpone filing a new shelf
registration statement for 30 days after the termination of the
exempt offering in order for the safe harbor to be available, would
be burdensome for issuers and would not provide incremental
protections for investors).
    \191\ See id.
    \192\ See id.
---------------------------------------------------------------------------

c. Final Amendments
    We agree with many of the commenters' suggestions, and, as adopted,
we have modified Rule 152 accordingly. We are adopting the provisions
of proposed Rule 152(c) regarding when an offering is terminated or
completed as new 17 CFR 230.152(d) (``Rule 152(d)''). We also are
adopting provisions for determining when an offering has commenced as
new Rule 152(c). In addition, we have structured new Rules 152(c) and
152(d) as factors to consider, rather than definitions. We share the
concern expressed by a commenter that definitions might not catch all
possible circumstances so, consistent with this commenter's suggestion,
the rule includes factors to consider, instead of definitions.\193\ We
believe that this will provide more flexibility to issuers applying the
safe harbors to various offering scenarios and, should make both the
rule's general principle of integration and the safe harbors more
workable.
---------------------------------------------------------------------------

    \193\ See CrowdCheck Letter.
---------------------------------------------------------------------------

    New Rule 152(c) provides a non-exclusive list of factors to
consider in determining when an offering will be deemed to be commenced
for purposes of both the general principle of integration in Rule
152(a) and the safe harbors in Rule 152(b). Specifically, regardless of
the type of offering, new Rule 152(c) states that an offering of
securities will be deemed to be commenced for purposes of Rule 152 at
the time of the first offer of securities in the offering by the issuer
or its agents, and includes a non-exclusive list of factors that should
be considered in determining when an offering is deemed to be
commenced. The list of factors covers registered and exempt offerings,
noting that an issuer or its agents may commence an offering in
reliance on:
     Rule 241, on the date the issuer first made a generic
offer soliciting interest in a contemplated securities offering for
which the issuer has not yet determined the exemption under the
Securities Act under which the offering of securities would be
conducted;
     Section 4(a)(2), Regulation D, or Rule 147 or 147A, on the
date the issuer first made an offer of its securities in reliance on
these exemptions;
     Regulation A, on the earlier of the date the issuer first
made an offer soliciting interest in a contemplated securities offering
in reliance on Rule 255, or the public filing of a Form 1-A offering
statement;
     Regulation Crowdfunding, on the earlier of the date the
issuer first made an offer soliciting interest in a contemplated
securities offering in reliance on new Rule 206, or the public filing
of a Form C offering statement; and
     A registration statement filed under the Securities Act
for:
    [cir] A continuous offering that will commence promptly on the date
of initial effectiveness, on the date the issuer first filed its
registration statement for the offering with the Commission, or
    [cir] A delayed offering, on the earliest date on which the issuer
or its agents commenced public efforts to offer and sell the
securities, which could be evidenced by the earlier of the first filing
of a prospectus supplement with the Commission describing the delayed
offering, or the issuance of a widely disseminated public disclosure,
such as a press release, confirming the commencement of the delayed
offering.
    Due to their non-public nature, communications between an issuer,
or its agents and underwriters, and QIBs and IAIs, including those that
would qualify for the safe harbor in 17 CFR 230.163B (``Rule 163B''),
will not be considered as the commencement of a registered public
offering for purposes of new Rule 152. In contrast, the commencement of
private communications between an issuer, or its agents, including
private placement agents, and prospective investors in an exempt
offering in which general solicitation is prohibited, such as under
Rule 506(b) or Section 4(a)(2), may be considered as the commencement
of the non-public exempt offering for purposes of new Rule 152, if such
private communication involves an offer of securities.
    We believe that the safe harbors in new Rule 152(b)(1) and (3)
should accommodate and facilitate seasoned

issuers filing shelf registration statements with the Commission.
Accordingly, consistent with one commenter's recommendation,\194\ for a
continuous registered offering that will commence promptly on the date
of initial effectiveness,\195\ we have included guidance that the
commencement of such an offering is likely to occur on the date the
issuer first filed its registration statement for the offering with the
Commission.\196\ However, in the case of a delayed registered offering,
we agree that the mere filing or existence of a shelf registration
statement, without any actual selling effort or description of the
securities to be offered and sold, is unlikely to meaningfully
condition the market for a subsequent exempt offering. Therefore, based
on the facts and circumstances, the initial public filing of a shelf
registration statement with the Commission will not necessarily be
deemed to be the commencement of the offering. Rather, commencement of
such an offering is likely to occur upon commencement of the public
efforts by the issuer, or its agents and underwriters, to offer and
sell the securities in the particular delayed registered offering,
including the issuance of a widely disseminated public disclosure, such
as a press release, or the public filing of a prospectus supplement
with the Commission.
---------------------------------------------------------------------------

    \194\ See Shearman & Sterling Letter (``In the past three years,
3,697 Form S-3 registration statements were filed by domestic
issuers and 405 Form F-3 registration statements by foreign private
issuers.''). In this regard, we note the critical importance of
shelf registration statements to capital formation. Based on staff
analysis of EDGAR filings, during calendar year 2019, we estimate
that there were 816 filings on Form S-3 and 273 filings on Form F-3.
In addition, we estimate that during this period there were 2,126
domestic automated shelf registration filings (S-3ASR) and 61
foreign automated shelf registration filings (F-3ASR).
    \195\ See, e.g., 17 CFR 230.415(a)(1)(ix).
    \196\ Confidentially submitted registration statements and
related materials would not be considered as filed for purposes of
these rules until they are publicly filed on the Commission's EDGAR
system.
---------------------------------------------------------------------------

    We are adopting new Rule 152(d) to provide a non-exclusive list of
factors to consider in determining when an offering is deemed to be
``terminated or completed,'' substantially as proposed, but with
modifications consistent with commenters' recommendations. Instead of
definitions, new Rule 152(d) provides a list of factors to consider in
determining when an offering will be deemed to be ``terminated or
completed.'' Regardless of the type of offering, Rule 152(d) states
that termination or completion of an offering is likely to occur when
the issuer and its agents cease efforts to make further offers to sell
the issuer's securities under such offering. The rule includes a non-
exclusive list of factors that should be considered in determining when
an offering is deemed to be terminated or completed, including for
offerings made in reliance on:
     Section 4(a)(2), Regulation D, or Rule 147 or 147A, on the
later of the date:
    [cir] The issuer entered into a binding commitment to sell all
securities to be sold under the offering (subject only to conditions
outside of the investor's control) \197\; or
---------------------------------------------------------------------------

    \197\ By limiting the conditions to those outside the investor's
control, an issuer may take the position that an offering is
terminated or completed at a point in time prior to the actual
closing of the transaction, so long as the only remaining conditions
are solely within the issuer's control.
---------------------------------------------------------------------------

    [cir] The issuer and its agents ceased efforts to make further
offers to sell the issuer's securities under such offering;
     Regulation A, on:
    [cir] The withdrawal of an offering statement under Rule 259(a);
    [cir] The filing of a Form 1-Z with respect to a Tier I offering
under Rule 257(a);
    [cir] The declaration by the Commission that the offering statement
has been abandoned under Rule 259(b); or
    [cir] The date, after the third anniversary of the date the
offering statement was initially qualified, on which Rule
251(d)(3)(i)(F) prohibits the issuer from continuing to sell securities
using the offering statement, or any earlier date on which the offering
terminates by its terms;
     Regulation Crowdfunding, on the deadline of the offering
identified in the offering materials pursuant to Rule 201(g), or
indicated by the Regulation Crowdfunding intermediary in any notice to
investors delivered under Rule 304(b); or
     A registration statement filed under the Securities Act,
on:
    [cir] The withdrawal of the registration statement after an
application is granted or deemed granted under Rule 477;
    [cir] The filing of a prospectus supplement or amendment to the
registration statement indicating that the offering, or particular
delayed offering in the case of a shelf registration statement, has
been terminated or completed;
    [cir] The entry of an order of the Commission declaring that the
registration statement has been abandoned under Rule 479;
    [cir] The date, after the third anniversary of the initial
effective date of the registration statement, on which Rule 415(a)(5)
prohibits the issuer from continuing to sell securities using the
registration statement, or any earlier date on which the offering
terminates by its terms; or
    [cir] Any other factors that indicate that the issuer has abandoned
or ceased its public selling efforts in furtherance of the offering, or
particular delayed offering in the case of a shelf registration
statement, which could be evidenced by:
    [ssquf] The filing of a Current Report on Form 8-K; or
    [ssquf] The issuance of a widely disseminated public disclosure by
the issuer, or its agents, informing the market that the offering, or
particular delayed offering, in the case of a shelf registration
statement, has been terminated or completed.
    In response to a commenter's suggestion to facilitate reliance on
the proposed rule by issuers wishing to terminate an offering of
securities in reliance on one exemption and simultaneously commence an
offering of the same securities in reliance on another exemption that
may not be able to say that the issuer has ``ceased efforts to make
further offers to sell'' its securities,\198\ we are clarifying in new
17 CFR 230.152(d)(1)(ii) that an issuer and its agents must cease
efforts to make further offers to sell the issuer's securities under a
particular exempt offering.
---------------------------------------------------------------------------

    \198\ See Fried Frank Letter.
---------------------------------------------------------------------------

    In new 17 CFR 230.152(d)(2)(iv) (``Rule 152(d)(2)(iv)''), we have
also clarified that the date after the third anniversary of the date a
Regulation A offering statement was qualified may constitute the
termination or completion of an offering for Rule 152 purposes, due to
the operation of Rule 251(d)(3)(i)(F). In addition, in response to a
commenter's suggestion,\199\ we have also further clarified that a
Regulation A offering may terminate on any earlier date on which the
offering terminates by its terms.
---------------------------------------------------------------------------

    \199\ See CrowdCheck Letter.
---------------------------------------------------------------------------

    With respect to a registration statement filed under the Securities
Act, in accord with suggestions by another commenter to facilitate
issuers undertaking shelf offerings, we have provided that the
abandonment or cessation of public selling efforts may be evidenced by
the filing of a current report on Form 8-K, or the issuance of a widely
disseminated public disclosure by the issuer or its agents, informing
the market about the termination of a registered offering, or in the
case of a shelf registration statement, a particular

delayed offering.\200\ We note that a particular delayed offering may
be deemed terminated or completed, even though the issuer's shelf
registration statement may still have unused capacity, or an aggregate
amount of securities available to offer and sell in a later delayed
registered offering.
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    \200\ See Shearman & Sterling Letter. We have not, however,
adopted this commenter's suggestion that the completion of
distribution in a registered offering could be determined by
reference to the completion of the distribution within the meaning
of Regulation M under the Exchange Act. We believe including such
language in the list of factors to be considered would add an
unnecessary layer of complexity to new Rule 152(d), and may also
cause unnecessary confusion with respect to the proper scope and
application of Regulation M (e.g., market participants may assume
incorrectly that Regulation M applies only to registered public
offerings, which is not the case).
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4. Conforming Amendments to Securities Act Exemptions
a. Proposed Amendments
    The Commission proposed to replace the integration provisions of
several Securities Act exemptions with references to proposed Rule 152.
Specifically, the Commission proposed to amend current Rules 502(a),
251(c), 147(g), and 147A(g) to provide cross-references to the new Rule
152. Although Regulation Crowdfunding has no codified integration
provision, in the 2015 adopting release, the Commission provided
guidance on integration using the same facts-and-circumstances analysis
set forth in the Commission's 2015 amendments to Regulation A and 2016
amendments to Rule 147 and adoption of new Rule 147A.\201\ The
Commission proposed to amend Rule 100 of Regulation Crowdfunding to
cross-reference proposed Rule 152(b), which would codify the
Commission's existing guidance on integration.
---------------------------------------------------------------------------

    \201\ Securities Act Section 4A(g) states that ``[n]othing in
the exemption shall be construed as preventing an issuer from
raising capital through means other than [S]ection 4(a)(6).'' Given
this statutory language, the Commission provided guidance in the
Crowdfunding Adopting Release that an offering made in reliance on
Section 4(a)(6) is not required to be integrated with another exempt
offering made by the issuer to the extent that each offering
complies with the requirements of the applicable exemption that is
being relied on for that particular offering. See Crowdfunding
Adopting Release, at text accompanying notes 1343-1344.
---------------------------------------------------------------------------

    The Commission additionally proposed to eliminate Rules 255(e),
147(h), and 147A(h) as the relief provided by these rules would be
provided by proposed Rule 152(b)(3).
b. Comments
    Commenters that addressed the proposal generally preferred our
proposed approach to replace the current integration provisions in each
Securities Act exemption with a cross-reference to proposed Rule 152,
instead of revising each exemption's current integration provisions to
reflect the provisions of proposed Rule 152.\202\
---------------------------------------------------------------------------

    \202\ See W. Hubbard Letter; D. Burton Letter; and CrowdCheck
Letter.
---------------------------------------------------------------------------

    Commenters also supported codifying in Rule 100 of Regulation
Crowdfunding, as proposed, the Commission's existing integration
guidance providing that offers and sales made in reliance on Regulation
Crowdfunding will not be integrated with other exempt offerings made by
the issuer, provided that each offering complies with the requirements
of the applicable exemption that is being relied on for the particular
offering.\203\ One commenter, however, stated that this change was
unnecessary if proposed Rule 152 is adopted.\204\ Due to the
requirements in proposed Rule 152(a)(1) and (b)(1), another commenter
stated its belief that applying proposed Rule 152 to Regulation
Crowdfunding offerings would be an incomplete solution to Regulation
Crowdfunding issuers' concerns.\205\ Another commenter asked the
Commission to conform existing Rule 500(g) to clarify that the rule
applies in addition to, and is not a concept separate from, the general
integration rules in Rule 152, such as by cross-referencing Rule
152(b)(2) in Rule 500(g).\206\
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    \203\ See J. Clarke Letter; Netcapital Letter; W. Hubbard
Letter; R. Campbell Letter; and D. Burton Letter.
    \204\ See CrowdCheck Letter.
    \205\ See R. Campbell Letter (explaining that due to the
requirements in proposed Rule 152(a)(1) and (b)(1), ``[a]n issuer
combining a crowdfunding offering with, for example, an offering
under Section 4(a)(2) would not be entitled to the integration
protection of proposed Rule 152.'').
    \206\ See ABA Letter.
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c. Final Amendments
    We are replacing the integration provisions of several Securities
Act exemptions with references to Rule 152, as proposed. Specifically,
we are amending Rule 502(a), Rule 251(c), Rule 147(g), and Rule 147A(g)
to provide cross-references to the new general principle of integration
and safe harbors for integration in Rule 152.We are also similarly
amending current Rule 500(g), consistent with a commenter's suggestion.
Although we did not propose amending Rule 500(g), we believe a cross-
reference to the safe harbor for offers and sales made in compliance
with Regulation S in new Rule 152(b)(2) is appropriate to avoid any
potential confusion about the intersection between those provisions.
This amendment will make it clear that Rule 500(g) provides specific
guidance in addition to, and not separate from, the general integration
rules in new Rule 152.
    We are additionally eliminating Rule 255(e), Rule 147(h), and Rule
147A(h) as the relief provided by these rules is provided by new Rule
152(b)(3). All of these existing integration provisions currently refer
to a facts-and-circumstances analysis when their enumerated safe
harbors do not apply, and the new Rule 152(b) safe harbors are
generally consistent with the current safe harbors in the individual
rules.
    As proposed, we are also codifying the Commission's guidance on
integration of Regulation Crowdfunding offerings by adding a cross-
reference to new Rule 152 in a new provision in Rule 100 of Regulation
Crowdfunding, which we believe will provide greater certainty to
issuers contemplating a Regulation Crowdfunding offering who also may
be considering other offerings under the Securities Act. Codification
of this guidance should provide issuers that may wish to conduct a
Regulation Crowdfunding offering concurrent with a Rule 506(c) offering
with certainty and flexibility to help them meet their capital needs.

B. General Solicitation and Offering Communications

    The Securities Act defines, and the Commission historically has
interpreted, the term ``offer'' broadly.\207\ The Commission has
explained that ``the publication of information and publicity efforts,
made in advance of a proposed financing which have the effect of
conditioning the public mind or arousing public interest in the issuer
or in its securities constitutes an offer.'' \208\ Although the terms
``general solicitation'' and ``general advertising'' are not defined in
Regulation D, 17 CFR 230.502(c) (``Rule 502(c)'') does provide examples
of general solicitation and general advertising, including
advertisements published in newspapers and magazines, communications
broadcast over television and radio, and seminars where attendees have
been invited by general solicitation or general

advertising.\209\ The Commission has stated that other uses of publicly
available media, such as unrestricted websites, also constitute general
solicitation and general advertising.\210\
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    \207\ See Securities Offering Reform, Release No. 33-8591 (July
19, 2005) [70 FR 44722 (Aug. 3, 2005)] (``Securities Offering Reform
Release''), at note 88 (``The term `offer' has been interpreted
broadly and goes beyond the common law concept of an offer.'')
(citing Diskin v. Lomasney & Co., 452 F.2d 871 (2d. Cir. 1971) and
SEC v. Cavanaugh, 1 F. Supp. 2d 337 (S.D.N.Y. 1998)). See also
Section 2(a)(3) of the Securities Act (noting that an offer includes
every attempt to dispose of a security or interest in a security,
for value; or any solicitation of an offer to buy a security or
interest in a security).
    \208\ See Securities Offering Reform Release, at note 88.
    \209\ See Rule 502(c).
    \210\ See Use of Electronic Media for Delivery Purposes, Release
No. 33-7233 (Oct. 6, 1995) [60 FR 53458 (Oct. 13, 1995)], at Section
II.A.D; and Use of Electronic Media Release, at Section II.C.2.
---------------------------------------------------------------------------

    Whether a transaction is one not involving any public offering
\211\ is essentially a question of fact and necessitates a
consideration of the surrounding circumstances, including factors such
as the relationship between the offerees and the issuer, and the
nature, scope, size, type, and manner of the offering. The Commission
adopted Rule 506 of Regulation D in 1982 as a non-exclusive safe harbor
under Section 4(a)(2), providing objective standards on which an issuer
could rely to meet the requirements of the Section 4(a)(2) exemption,
including a prohibition on the use of general solicitation to market
the securities.\212\
---------------------------------------------------------------------------

    \211\ Section 4(a)(2) of the Securities Act exempts from the
registration requirements ``transactions by an issuer not involving
any public offering,'' but does not define the phrase. 15 U.S.C.
77d(a)(2).
    \212\ See Regulation D Adopting Release, at Section III.C.
---------------------------------------------------------------------------

1. Exemption From General Solicitation for ``Demo Days'' and Similar
Events
    ``Demo days'' and similar events are generally organized by a group
or entity (such as a university, angel investors, an accelerator, or an
incubator) that invites issuers to present their businesses to
potential investors, with the aim of securing investment. As the
Commission stated in the Proposing Release, if the issuer's
presentation at a ``demo day'' or similar event constitutes an offer of
securities, the issuer would not be deemed to have engaged in general
solicitation if the organizer of the event has limited participation in
the event to individuals or groups of individuals with whom the issuer
or the organizer has a pre-existing substantive relationship or that
have been contacted through an informal, personal network of
experienced, financially sophisticated individuals, such as angel
investors.\213\ However, we understand that in many cases it may not be
practical for the organizer of the event to limit participation in such
a manner.
---------------------------------------------------------------------------

    \213\ See Proposing Release, at Section II.B.1.
---------------------------------------------------------------------------

a. Proposed Amendments
    The Commission proposed new Rule 148 to provide that certain ``demo
day'' communications would not be deemed general solicitation or
general advertising.\214\ Specifically, as proposed, an issuer would
not be deemed to have engaged in general solicitation if the
communications are made in connection with a seminar or meeting
sponsored by a college, university, or other institution of higher
education, a local government, a nonprofit organization, or an angel
investor group,\215\ incubator, or accelerator.
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    \214\ Because communications that comply with proposed Rule 148
would not be deemed a general solicitation or general advertising,
the limitations on the manner of offering in Rule 502(c) of
Regulation D would not apply.
    \215\ A proposed instruction to Rule 148 provided that for
purposes of the rules the term ``angel investor group'' means a
group: (A) Of accredited investors; (B) that holds regular meetings
and has written processes and procedures for making investment
decisions, either individually or among the membership of the group
as a whole; and (C) is neither associated nor affiliated with
brokers, dealers, or investment advisers.
---------------------------------------------------------------------------

    With respect to the organization and conduct of the event, proposed
Rule 148 stated that a sponsor would not be permitted to:
     Make investment recommendations or provide investment
advice to attendees of the event;
     Engage in any investment negotiations between the issuer
and investors attending the event;
     Charge attendees of the event any fees, other than
reasonable administrative fees;
     Receive any compensation for making introductions between
attendees and issuers, or for investment negotiations between the
parties;
     Receive any compensation with respect to the event that
would require it to register as a broker or dealer under the Exchange
Act or as an investment adviser under the Advisers Act.
    In addition, proposed Rule 148 specified that the advertising for
the event may not reference any specific offering of securities by the
issuer and that the information conveyed at the event regarding the
offering of securities by or on behalf of the issuer would be limited
to:
     Notification that the issuer is in the process of offering
or planning to offer securities;
     The type and amount of securities being offered; and
     The intended use of the proceeds of the offering.
b. Comments
    The comments we received on the proposed exemption from general
solicitation for ``demo days'' and similar events were mixed. Many
commenters expressed support for the proposal.\216\ Some of the
commenters generally supported an exemption, but recommended fewer
limitations on the exemption.\217\ Commenters provided various views on
the limitations for entities organizing the events, with some
supporting the proposed limits \218\ and others recommending targeted
expansions, such as including State governments, or broad expansions of
the entities permitted to rely on the exemption.\219\ One commenter
also recommended limiting the pool of investors who may attend the
events, noting that the sponsors are likely to attract many non-
accredited investors who will be ineligible for many of the exempt
offerings that may be presented at an event.\220\ Some of the
commenters supporting the proposal recommended further clarification of
the language used in proposed Rule 148.\221\
---------------------------------------------------------------------------

    \216\ See, e.g., ABA Letter; Letter from Brandon Andrews, et al.
dated May 1, 2020 (``B. Andrews, et al. Letter''); Letter from Angel
Capital Association dated May 26, 2020 (``ACA Letter''); SEC SBCFAC
Letter; Geraci Law Letter; Md. St. Bar Assoc. Letter; Letter from
NextSeed Securities LLC dated June 1, 2020 (``NextSeed Letter'');
S[omacr].Capital Letter; W. Hubbard Letter; Letter from Shareholder
Advocacy Forum dated June 1, 2020 (``SAF Letter''); Letter from
Investment Adviser Association dated June 1, 2020 (``IAA Letter'');
Letter from SSTI dated June 1, 2020 (``SSTI Letter''); Invesco
Letter; D. Burton Letter; Letter from Morningstar, Inc. dated June
1, 2020 (``Morningstar Letter''); Letter from Crowdwise, LLC dated
June 8, 2020 (``Crowdwise Letter''); CrowdCheck Letter; Ketsal
Letter; and Letter from Pat Toomey, U.S. Senator dated July 1, 2020
(``Sen. Toomey Letter'').
    \217\ See, e.g., CrowdCheck Letter (stating concern that the
proposed limits on issuer communications would render issuers unable
to answer any of the common questions posed by potential investors
and recommending only limitations on types of entities permitted to
sponsor events); IAA Letter (recommending permitting disclosure of
the unsubscribed amount in the offering); ACA Letter (recommending
that the Commission permit organizations other than those listed in
the proposal to sponsor events, revise the definition of angel
investor group, and permit disclosure of the unsubscribed amount in
an offering); and Ketsal Letter (recommending fewer limitations on
the scope of information conveyed).
    \218\ See, e.g., CrowdCheck Letter; and Geraci Law Letter.
    \219\ See, e.g., IAA Letter (recommending broadening the
exemption to permit SEC-registered investment advisers that are
sponsors of private funds to be included as an entity that may
sponsor an event); SSTI Letter (recommending adding ``state
governments'' and ``instrumentalities of state and local
governments''); ACA Letter (recommending permitting groups of any
type, including those associated or affiliated with investment
advisers, venture forums, venture capital associations, trade
associations, and professional organizations); and D. Burton Letter
(recommending including any business or organization other than a
broker-dealer or investment adviser).
    \220\ See Geraci Law Letter. See also CFA Letter; and NASAA
Letter.
    \221\ See ABA Letter (recommending the rule be expressly framed
as a non-exclusive ``safe harbor'' such that the issuer may rely on
other existing Commission guidance, and that the term ``information
regarding an offering'' be clarified to provide that content
limitations in the rule do not relate to or prevent communication of
factual business information); ACA Letter (recommending use of
``defined processes and procedures'' instead of ``written processes
and procedures'' in the definition of ``angel investor group'' to
better provide for how angel groups work); Morningstar Letter
(recommending that information provided to third parties conducting
independent analysis not constitute an offering); S[omacr].Capital
Letter (seeking clarification that traditional events, such as a
university-sponsored prominent speaker series, for which a fee is
typically charged, which may be supplemented by the sponsor to
include a ``demo day''-type event at no charge, would not be
prohibited); and SSTI Letter (recommending clarification of the
duration of the prohibition on investment negotiations, whether the
sponsor may negotiate with issuers or investors separately, and the
difference between providing advice and investment negotiations).
See also IAA Letter (recommending that the Commission provide
guidance that communications not intended for public consumption do
not constitute general solicitation).

---------------------------------------------------------------------------

    In contrast, a number of commenters opposed the proposed exemption,
expressing concerns about insufficient investor protections.\222\ One
of these commenters recommended limiting the exemption by prohibiting
any form of control or affiliation with the issuer or group of issuers,
prohibiting entities whose sole or primary purpose is to attract
investors to private issuers, and limiting an issuer's discussion to
factual business information and prohibiting discussion of any
potential securities offering.\223\
---------------------------------------------------------------------------

    \222\ See, e.g., NASAA Letter; AFREF Letter; Better Markets
Letter; CFA Letter; R. Rutkowski Letter; and CFA Institute Letter.
    \223\ See NASAA Letter.
---------------------------------------------------------------------------

c. Final Amendments
    We are adopting Rule 148 substantially as proposed, with certain
modifications in response to commenter feedback. For the reasons
discussed in the Proposing Release and below, we believe that exempting
certain ``demo day'' communications from the registration requirements
of the Securities Act will further the public interest while being
consistent with the protection of investors.
    As discussed above, the Commission proposed to include local
governments in the list of entities permitted to rely on the exemption.
In response to comments, we are expanding the types of entities that
may sponsor an event to include State governments and instrumentalities
of State and local governments. We are also revising the definition of
``angel investor group'' to specify that such a group must have
``defined'' processes and procedures for making investment decisions,
but that such processes and procedures do not necessarily need to be
written. In addition, to address concerns raised by commenters with
respect to the possibility of offering-related communications being
made broadly to non-accredited investors, we are adopting certain
limitations on the types of investors that may attend virtual events as
a condition to the availability of Rule 148. In a change from the
proposal, we have also added a requirement that more than one issuer
participate in the seminar or meeting in order for new Rule 148 to
apply.
    As adopted, an issuer will not be deemed to have engaged in general
solicitation if the communications are made in connection with a
seminar or meeting sponsored by a college, university, or other
institution of higher education, a State or local government or
instrumentality of a State or local government, a nonprofit
organization, or an angel investor group, incubator, or accelerator. We
believe it is appropriate to add State governments and
instrumentalities of State or local governments to the list of eligible
sponsors, because, as mentioned by commenters, State as well as local
governments, and special entities created by such governments, may
conduct significant economic development activities. Due to their
similarities, we do not believe it is necessary to differentiate
between State and local governments for this purpose.
    With respect to the definition of angel investor groups, we are
persuaded by commenters who recommended that such groups be required to
have ``defined processes and procedures'' for investment decisions
rather than requiring written processes and procedures. We understand
from such commenters that there are established angel investor groups
that have well-settled and defined, but not necessarily written,
processes and procedures for investment decisions. Therefore, this
change from the proposal will reflect the way that many angel groups
are organized and administered, and will not disrupt existing angel
investor group practices by requiring them to formally memorialize
their established processes and procedures.
    We do not believe it is appropriate to further expand the list of
eligible sponsors, as suggested by some commenters, to include entities
such as sponsors of private funds, venture forums, venture capital
associations, trade associations, and professional organizations. In
addition, we do not believe it is appropriate to expand the proposed
definition of angel investor groups to include groups associated or
affiliated with brokers, dealers, or investment advisers, and therefore
are adopting the proposed instruction to Rule 148 that excludes such
groups from the definition.\224\ We note that some of these
organizations may be able to qualify as eligible sponsors under the
proposed categories, for example, if they are organized as non-profit
organizations. We also do not agree with commenters who recommended
that we exclude from the scope of the exemption any sponsors that
control or are affiliated with the issuer or group of issuers, in light
of the limits on the sponsors' activities. We believe the tailored list
of organizations eligible to act as event sponsors and the exclusion of
brokers, dealers and investment advisers from the scope of the
exemption will help to limit the application of Rule 148 to events
sponsored by organizations less likely to have a profit motive for
their involvement in the event or whose sole or primary purpose is to
attract investors to private issuers. In order to address commenters'
concerns about the potential misuse of the exemption and clarify the
nature of the events covered by new Rule 148, we have also added a
requirement that more than one issuer participate in the seminar or
meeting. This requirement will help to prevent an organization from
attempting to hold an event that is, in essence, a sales pitch for the
securities of one issuer, while characterizing the event as a ``demo
day.''
---------------------------------------------------------------------------

    \224\ We acknowledge that members of angel investor groups may
include individuals who are employed as brokers, dealers, or
investment advisers. Such an individual's membership in the group
will not, by itself, result in the angel investor group being deemed
to be associated or affiliated with brokers, dealers, or investment
advisers for the purpose of new Rule 148.
---------------------------------------------------------------------------

    As proposed, under the final rule the sponsor will not be permitted
to:
     Make investment recommendations or provide investment
advice to attendees of the event;
     Engage in any investment negotiations between the issuer
and investors attending the event;
     Charge attendees of the event any fees, other than
reasonable administrative fees;
     Receive any compensation for making introductions between
event attendees and issuers, or for investment negotiations between the
parties; or
     Receive any compensation with respect to the event that
would require it to register as a broker or dealer under the Exchange
Act, or as an investment adviser under the Advisers Act.
    In addition, as proposed, the advertising for the event may not
reference any specific offering of securities by the issuer.
    We believe that these limitations on the sponsors' activities
provide

important investor protections by limiting the potential for a sponsor
to profit from its involvement or to have a potential conflict of
interest due to its relationships with either the issuer or investors
attending the event and that it is not necessary to adopt additional
restrictions on the relationship between sponsors and the issuers
involved in the event. Similarly, although some commenters sought
clarification, we are not providing bright-line rules as to whether the
administrative fees charged by the sponsor are reasonable, but
emphasize that the limitation on fees should be construed consistent
with our goal of limiting the potential for a sponsor to profit from
its involvement. We note that the limitation on fees charged to
attendees of an event is not intended to limit a sponsoring
organization's ability to collect membership dues or similar fees from
individuals.
    As noted above, some commenters raised concerns about these events
allowing for broad offering-related communications to non-accredited
investors. We share this concern, particularly in light of the
increasing prevalence of virtual ``demo days'' that are more accessible
and widely attended by the general public. In light of these concerns,
we are persuaded that an incremental approach to relaxing ``demo day''
communication restrictions is warranted with respect to events that are
conducted, in whole or in part, in a virtual format. Accordingly, we
are narrowing the scope of the proposed exemption so that online
participation in the event is limited to: (a) Individuals who are
members of, or otherwise associated with the sponsor organization (for
example, members of an angel investor group or students, faculty, or
alumni of a college or university); (b) individuals that the sponsor
reasonably believes are accredited investors; or (c) individuals who
have been invited to the event by the sponsor based on industry or
investment-related experience reasonably selected by the sponsor in
good faith and disclosed in the public communications about the event.
    In contrast to an online event, the number of potential investors
who can attend an in-person ``demo day'' event is limited by factors
such as venue size, administrative capacity, and distance from the
event. The limitations we are adopting will help prevent broad offering
communications over the internet to unlimited numbers of non-accredited
investors by requiring the sponsor to limit participation to a
population of potential investors related to the sponsor or about whose
qualifications the sponsor has some knowledge, but at the same time
will provide sponsors with ample flexibility to continue to conduct
such events.
    We are adopting the limitations on the information conveyed at the
event regarding the offering of securities by or on behalf of the
issuer as proposed, with one expansion in response to comment. As
adopted the issuer is allowed to convey only:
     Notification that the issuer is in the process of offering
or planning to offer securities;
     The type and amount of securities being offered;
     The intended use of the proceeds of the offering; and
     The unsubscribed amount in an offering.
    We believe that permitting an issuer to disclose the unsubscribed
amount in an offering will provide investors with useful information,
but is unlikely to affect investor protection in light of the limits on
the overall information about the offering that may be conveyed, and
the fact that potential investors will be able to seek additional
disclosure about the investment opportunity outside of the event
setting. We do not agree with commenters who suggested other expansion
of the information that issuers may convey about an offering of
securities. The exemption provided by new Rule 148 is not intended to
provide for broad communication about a securities offering at a ``demo
day'' event. Rather, the rule is intended to allow issuers, in
discussing their business plans with potential investors at these
events, the flexibility to note that they are seeking capital without
uncertainty as to whether they have jeopardized their ability to rely
on a certain exemption from registration.\225\
---------------------------------------------------------------------------

    \225\ We understand that small businesses may face challenges in
accessing capital when they are not able to note that they are
seeking capital when pitching their business to potential investors.
See, e.g., Transcript of SEC Small Business Capital Formation
Advisory Committee (May 8, 2020), available at https://www.sec.gov/info/smallbus/acsec/sbcfac-transcript-050820.pdf, at 70
(``Entrepreneurs, when they leave out this vital information, they
are pitching with one arm behind their back, and this is a deterrent
to accessing the capital from professional sources that help these
companies scale, create jobs and grow the U.S. economy.'').
---------------------------------------------------------------------------

    Overall, we believe that expanding the information permitted to be
conveyed beyond the limits in the final rules may undermine the
prohibition on general solicitation that is an important condition of
certain exemptions. The limited scope of the offering-related
communications permitted under the exemption, along with the
limitations on online participation and a sponsor's ability to profit
from the event, should help to address commenters' concerns about the
potential for increased risk of fraud or misconduct. Moreover, issuers
may continue to rely on our previously issued guidance, and not be
subject to the conditions of Rule 148, including the limit on
communications, if the organizer of the event has limited participation
in the event to individuals or groups of individuals with whom the
issuer or the organizer has a pre-existing substantive relationship or
that have been contacted through an informal, personal network of
experienced, financially sophisticated individuals.\226\
---------------------------------------------------------------------------

    \226\ See Proposing Release, at Section II.B.1.
---------------------------------------------------------------------------

2. Solicitations of Interest
    As discussed in the Proposing Release, we believe that it is
helpful for issuers to be able to gauge interest in a securities
offering prior to incurring the expense of preparing and conducting an
offering. Securities Act Rule 163B permits issuers and those authorized
to act on their behalf to gauge market interest in a registered
securities offering through discussions with QIBs and IAIs prior to, or
following, the filing of a registration statement.\227\ Regulation A
also permits issuers to test the waters with, or solicit interest in a
potential offering from, the general public either before or after the
filing of the offering statement.\228\ These solicitations of interest
are deemed to be offers of a security for sale for purposes of the
antifraud provisions of the Federal securities laws.\229\
---------------------------------------------------------------------------

    \227\ See Solicitations of Interest Prior to a Registered Public
Offering, Release No. 33-10699 (Sep. 25, 2019) [84 FR 53011 (Oct. 4,
2019)] (``Solicitations of Interest Release''). Securities Act
Section 5(d) [15 U.S.C. 77e(d)] statutorily provides these
accommodations to emerging growth companies. Securities Act Rule
163B extends these accommodations to all issuers, including fund
issuers.
    \228\ See 17 CFR 230.255.
    \229\ See Solicitations of Interest Release; and 17 CFR
230.255(a).
---------------------------------------------------------------------------

a. Generic Solicitation of Interest Exemption
i. Proposed Amendments
    The Commission proposed new Rule 241 to permit an issuer to use
generic solicitation of interest materials for an offer of securities
prior to a making a determination as to the exemption under which the
offering may be conducted.\230\ As proposed, Rule 241 would not permit
an issuer to identify the specific exemption from registration on which
it intends to rely for a subsequent offer and sale of the securities.
Proposed Rule 241(b) would

require the generic testing-the-waters materials to provide specific
disclosures notifying potential investors about the limitations of the
generic solicitation of interest.
---------------------------------------------------------------------------

    \230\ Proposed Rule 241 was substantially based on Rule 255 of
Regulation A.
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    As proposed, these solicitations would be deemed to be offers of a
security for sale for purposes of the antifraud provisions of the
Federal securities laws.\231\ Furthermore, depending on the method of
dissemination of the information, such offers may be considered a
general solicitation. Proposed Rule 241 would provide an exemption from
registration only with respect to the generic solicitation of interest,
not for a subsequent offer or sale. Should the issuer move forward with
an exempt offering following the generic solicitation of interest, the
issuer would need to comply with an available exemption for the
subsequent offering, and investors would have the benefit of the
investor protections encompassed in such exemption.
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    \231\ Proposed Rule 241(a).
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    In the event that the issuer commences an offering under Regulation
A or Regulation Crowdfunding within 30 days of the generic
solicitation, in addition to the information currently required to be
disclosed under Regulation A and Regulation Crowdfunding, the
Commission proposed to require that the generic solicitation materials
be made publicly available as an exhibit to the offering materials
filed with the Commission.\232\ The Commission also proposed to require
an issuer that sells securities under Rule 506(b) to any purchaser that
is not an accredited investor within 30 days of the generic
solicitation of interest to provide such purchaser with any written
communication used under proposed Rule 241.
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    \232\ See proposed Rule 201(z); and proposed paragraph 13 of
Form 1-A, Part III, Item 17. Currently, an issuer that solicits
indications of interest in reliance on Rule 255 of Regulation A is
required to submit or file solicitation materials to the Commission
as an exhibit when the offering statement is either submitted for
non-public review or filed (and update for substantive changes in
such material after the initial nonpublic submission or filing).
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ii. Comments
    Commenters' views were mixed. Many commenters expressed support for
the proposal.\233\ Some commenters that supported the proposal
recommended that the Commission permit use of the exemption even if an
issuer has identified the exemption on which it intends to rely.\234\
One of these commenters stated that determining when an issuer has
decided to proceed with a specific exemption is difficult and could
work counter to thoughtful exploration of which exemption to use.\235\
This commenter recommended permitting issuers to use Rule 241 so long
as an offering statement under Regulation A or Regulation C has not
been filed. Some commenters that were generally supportive of the
proposal recommended that the exemption permit a generic public
solicitation followed by a private offering.\236\
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    \233\ See, e.g., ABA Letter; B. Andrews, et al. Letter; Letter
from Crowdfunding Professional Association dated May 22, 2020
(``CfPA Letter''); SEC SBCFAC Letter; J. Clarke Letter; Republic
Letter; S[omacr].Capital Letter; Letter from Michael H. Shuman, Esq.
dated June 1, 2020 (``M. Shuman Letter''); W. Hubbard Letter; SAF
Letter; IAA Letter; Invesco Letter; D. Burton Letter; R. Campbell
Letter; and CrowdCheck Letter.
    \234\ See, e.g., ABA Letter; SIFMA Letter; and Invesco Letter.
    \235\ See ABA Letter.
    \236\ See, e.g., ABA Letter (recommending permitting an issuer
to conduct an offering for which general solicitation is not
permitted 20 days following termination of the generic solicitation
or, in the alternative, another specific period of time such as 90
days as provided in proposed Rule 506(b)(2)(i)); CfPA Letter
(recommending a 90-day safe harbor after which a private offering
could be made following a generic public solicitation); SIFMA Letter
(recommending permitting a private offering to QIBs and IAIs after a
generic public solicitation); R. Campbell Letter (recommending
eliminating the requirements in proposed Rule 152(a)(1) and (b)(1),
so that issuers may rely on proposed Rule 152 for integration
protection, if the offering following the generic solicitation was
made pursuant to an exemption provided by Section 4(a)(2), Rule 504
or Rule 506(b)); and M. Shuman Letter (recommending permitting
private offerings after the generic solicitation).
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    A number of commenters opposed the proposal.\237\ Some of these
expressed concern that expanding the testing-the-waters provisions
would weaken investor protection.\238\ One of these commenters
suggested that a generic testing-the-waters provision that provides
information without indicating what kind of offering is to follow blurs
the line between what is acceptable for a Rule 506(b) offering and what
constitutes general solicitation.\239\ One commenter expressed concern
that the proposed rule would permit an issuer to engage in testing-the-
waters communications with all types of investors prior to a registered
offering.\240\
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    \237\ See, e.g., NASAA Letter; AFREF Letter; Better Markets
Letter (questioning the Commission's authority to adopt the rule);
CFA Letter; R. Rutkowski Letter; CFA Institute Letter; and IPA
Letter.
    \238\ See, e.g., NASAA Letter (suggesting the rules would be
evaded and exploited); and CFA Letter.
    \239\ See IPA Letter.
    \240\ See Better Markets Letter.
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    Commenters generally supported the proposed requirements to file
generic solicitation materials when followed by a Regulation A or
Regulation Crowdfunding offering \241\ and to provide those materials
to non-accredited investors in a Rule 506(b) exempt offering within 30
days of the generic solicitation.\242\ However, one commenter expressly
opposed requiring the filing of generic solicitation materials.\243\
Several commenters also recommended that the Commission preempt State
securities law registration and qualification requirements for offers
made under proposed Rule 241.\244\
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    \241\ See, e.g., J. Clarke Letter; W. Hubbard Letter; CrowdCheck
Letter (recommending not requiring the filing of materials used more
than 30 days prior to the offering); and Ketsal Letter.
    \242\ See, e.g., Geraci Law Letter; J. Clarke Letter
(recommending filing all solicitation materials); W. Hubbard Letter;
and CrowdCheck Letter (supporting providing the materials to
investors, but not filing with the Commission).
    \243\ See NextSeed Letter (acknowledging, however, the potential
benefit of requiring the filing of materials that occurred
immediately prior to the offering).
    \244\ See, e.g., D. Burton Letter; W. Hubbard Letter; CrowdCheck
Letter (suggesting lack of preemption would affect utility); R.
Campbell Letter (suggesting lack of preemption could subject the
issuer to civil and criminal liabilities under State securities laws
and legal counsel to risks relating to professional ethical rules);
and Ketsal Letter (suggesting there is no practical reason to
distinguish between communications made pursuant to any of Rule 506,
Rule 255, or proposed Rule 206, all of which preempt, or will
preempt, State securities law requirements, and proposed Rule 241).
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iii. Final Amendments
    We are adopting the proposed amendments substantially as proposed,
using our exemptive authority under Section 28 of the Securities Act to
create a new offering exemption. New Rule 241 exempts the class of
persons who are issuers and use generic solicitation of interest
materials pursuant to the conditions of the rule from the prohibitions
on offers prior to filing a registration statement in Section 5(c) of
the Securities Act.\245\ As discussed in the Proposing Release and
below, we believe that the proposed amendments include appropriate
investor protections and further the public interest by allowing
issuers to gauge market interest, tailor the size and other terms

of the offering (possibly with input from potential investors), and
reduce the costs of conducting an exempt offering.\246\
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    \245\ As noted above, one commenter questioned the Commission's
authority to adopt Rule 241. See Better Markets Letter. Section 28
of the Securities Act gives the Commission broad authority to
``conditionally or unconditionally exempt any person . . . or any
class or classes of persons . . . from any provision or provisions
of'' the Securities Act and rules or regulations issued thereunder
``to the extent that such exemption is necessary or appropriate in
the public interest, and is consistent with the protection of
investors.'' 15 U.S.C. 77z-3. Notwithstanding the commenter's
suggestion, nothing in the JOBS Act indicates that Congress sought
to limit the Commission's ability to extend the accommodations
currently available to emerging growth companies to other issuers,
nor does Section 28 include any such limitation. The final rule's
use of exemptive authority is thus consistent with the plain
language of Section 28.
    \246\ See, e.g., Transcript of SEC Small Business Capital
Formation Advisory Committee (May 8, 2020), available at https://www.sec.gov/info/smallbus/acsec/sbcfac-transcript-050820.pdf, at 70
(``Startups and young companies, by their nature, are capital
constrained. Expanding that test-the-waters rule provides them
flexibility to explore the optimal avenue for raising capital before
spending multiple thousands of dollars on legal fees.'').
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    As noted above, commenters that addressed the proposal were
generally supportive of the proposed changes. We are not persuaded by
commenters who recommended that we revise the rule to permit an issuer
to conduct a general solicitation of interest after the issuer has
identified the specific exemption on which it intends to rely. We
believe that limiting generic solicitations of interest to
solicitations prior to the issuer's determination of which exemption to
use appropriately and adequately differentiates these testing-the-
waters communications, which are meant to gauge preliminary market
interest, from offers that occur closer to the time of sale. Because
the determination of which exemption will be used is within the
issuer's control, we believe that issuers and their advisers should be
able to apply the new rule to their specific circumstances. We disagree
with the suggestion from a commenter that an issuer should be permitted
to rely on new Rule 241 after determining to conduct a Regulation
Crowdfunding or Regulation A offering, so long as the issuer has not
filed a Form C for a Regulation Crowdfunding offering or a Form 1-A for
a Regulation A offering. To do so would undermine the utility of the
existing Regulation A testing-the-waters provision and the new
Regulation Crowdfunding testing-the-waters provision we are adopting in
this release, and may lead to potential confusion for issuers and
investors over which rule applies once an issuer has determined the
exemption on which it will rely.
    Under new Rule 241, an issuer or any person authorized to act on
behalf of an issuer may communicate orally or in writing to determine
whether there is any interest in a contemplated offering of securities
exempt from registration under the Securities Act.\247\ The rule
provides an exemption from registration only with respect to the
generic solicitation of interest and the solicitation will be deemed to
be an offer of a security for sale for purposes of the antifraud
provisions of the Federal securities laws. In addition, no solicitation
or acceptance of money or other consideration, nor of any commitment,
binding or otherwise, from any person is permitted until the issuer
makes a determination as to the exemption on which it will rely and
commences the offering in compliance with the exemption.
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    \247\ To avoid any confusion with respect to the scope of the
exemption, we have revised Rule 241 from the proposal to make it
clear that it applies only to solicitations of interest relating to
contemplated offerings of securities exempt from registration under
the Securities Act.
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    If the issuer moves forward with an exempt offering following the
generic solicitation of interest, it will be required to comply with an
applicable exemption for the subsequent offering, and investors will
have the benefit of the investor protections included in such
exemption. We are not persuaded by commenters that recommended
expanding the generic solicitation of interest rules to permit private
offerings immediately following public solicitations of interest or to
provide a safe harbor that would permit private offerings after a
prescribed period of time following a public solicitation of interest.
Similarly, we do not believe it is necessary to provide, as suggested
by a commenter, that testing-the-waters activity limited to QIBs and
IAIs would not result in the Rule 241 offer being integrated with a
subsequent private placement that does not permit general solicitation.
We believe, as the commenter noted, that an issuer may reasonably
conclude on its own that testing-the-waters activity so limited would
not constitute general solicitation, depending on the facts and
circumstances.
    As discussed in the Proposing Release, if the generic solicitation
is done in a manner that would constitute general solicitation, and the
issuer ultimately decides to conduct an unregistered offering under an
exemption that does not permit general solicitation, the issuer will
need to analyze whether that solicitation and the subsequent private
offering will be integrated, thereby making unavailable an exemption
that does not permit general solicitation. Under the new integration
rules adopted in this release, an issuer will not be able to follow a
generic solicitation of interest that constituted a general
solicitation with an offering pursuant to an exemption that does not
permit general solicitation, such as Rule 506(b), unless the issuer has
a reasonable belief, based on the facts and circumstances, with respect
to each purchaser in the exempt offering prohibiting general
solicitation, that the issuer (or any person acting on the issuer's
behalf) either did not solicit such purchaser through the use of
general solicitation or established a substantive relationship with
such purchaser prior to the commencement of the exempt offering
prohibiting general solicitation.\248\
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    \248\ See new Rules 152(a)(1) and 152(b)(1); and supra Sections
II.A.1 and II.A.2.
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    Rule 241 further requires the generic testing-the-waters materials
to provide specified disclosures notifying potential investors about
the limitations of the generic solicitation. The issuer's
communications must state that:
    (1) The issuer is considering an offering of securities exempt from
registration under the Act, but has not determined a specific exemption
from registration the issuer intends to rely on for the subsequent
offer and sale of the securities;
    (2) No money or other consideration is being solicited, and if sent
in response, will not be accepted;
    (3) No offer to buy the securities can be accepted and no part of
the purchase price can be received until the issuer determines the
exemption under which the offering is intended to be conducted and,
where applicable, the filing, disclosure, or qualification requirements
of such exemption are met; and
    (4) A person's indication of interest involves no obligation or
commitment of any kind. The rule additionally provides that the
communication may include a means for a person to indicate interest in
a potential offering and an issuer may require such indication to
include the person's name, address, telephone number, and/or email
address. We are adopting these provisions as proposed as commenters
were generally supportive of this aspect of Rule 241, providing no
recommendation to further revise these requirements.
    In addition, we are adopting amendments to Regulation A and
Regulation Crowdfunding as proposed to require that the Rule 241
generic solicitation materials be made publicly available as an exhibit
to the offering materials filed with the Commission if the Regulation A
or Regulation Crowdfunding offering is commenced within 30 days of the
generic solicitation.\249\ As discussed above, commenters generally
supported this aspect of the proposed rules. Although some commenters
expressed the view that such a requirement would be unnecessary, we
believe that issuers should be accountable for the content of
solicitation materials and that the

requirement will help ensure that issuers use solicitation materials
with appropriate caution. We are requiring issuers to file these
materials only during the 30-day time period because once 30 days
elapses following a terminated or completed generic solicitation, that
offer would not be subject to integration with a subsequent Regulation
Crowdfunding offering in accordance with new Rule 152(b)(1).
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    \249\ See new Rule 201(z) and paragraph 13 of Form 1-A, Part
III, Item 17. In connection with this amendment to Rule 201, we are
also renumbering current paragraph (z), which is a temporary
provision, as paragraph (aa).
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    We are also adopting, as proposed, the requirement that an issuer
provide purchasers with any written generic solicitation of interest