[Federal Register Volume 86, Number 9 (Thursday, January 14, 2021)]
[Rules and Regulations]
[Pages 3496-3605]
[FR Doc No: 2020-24749]

Vol. 86

Thursday,

No. 9

January 14, 2021

Part III

Securities and Exchange Commission

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17 CFR Parts 227, 229, 230, et al.

Facilitating Capital Formation and Expanding Investment Opportunities
by Improving Access to Capital in Private Markets; Final Rule

Federal Register / Vol. 86 , No. 9 / Thursday, January 14, 2021 /
Rules and Regulations

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 227, 229, 230, 239, 240, 249, 270, and 274

[Release Nos. 33-10884; 34-90300; IC-34082; File No. S7-05-20]
RIN 3235-AM27

Facilitating Capital Formation and Expanding Investment
Opportunities by Improving Access to Capital in Private Markets

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

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SUMMARY: We are adopting amendments to facilitate capital formation and
increase opportunities for investors by expanding access to capital for
small and medium-sized businesses and entrepreneurs across the United
States. Specifically, the amendments simplify, harmonize, and improve
certain aspects of the exempt offering framework to promote capital
formation while preserving or enhancing important investor protections.
The amendments also seek to close gaps and reduce complexities in the
exempt offering framework that may impede access to investment
opportunities for investors and access to capital for businesses and
entrepreneurs.

DATES:
    General: This final rule is effective on March 15, 2021.
    Exceptions: 1. Revised 17 CFR 227.100(b)(7) (amendatory instruction
2), previously effective until Sept. 1, 2021 at 85 FR 27132, May 7,
2020, is now effective from January 14, 2021, to March 1, 2023.
    2. Newly redesignated and revised 17 CFR 227.201(aa) (amendatory
instruction 4) is effective from January 14, 2021, and remains
effective until September 1, 2021.
    3. 17 CFR 227.201(bb) (amendatory instruction 5) and 17 CFR
227.301(e) (amendatory instruction 10) are effective from January 14,
2021, to March 1, 2023.
    4. Amendments to 17 CFR 227.303(g) (amendatory instruction 11) and
17 CFR 227.304(e) (amendatory instruction 12) are effective from
January 14, 2021, and remain effective until September 1, 2021.
    5. The amendments to the introductory paragraph in the Optional
Question and Answer Format for an Offering Statement of Form C
(referenced in Sec.  239.900) are applicable from January 14, 2021, to
March 1, 2023.

FOR FURTHER INFORMATION CONTACT: Anthony Barone or John Byrne, Special
Counsel, Office of Small Business Policy, or Steven G. Hearne, Senior
Special Counsel, Office of Rulemaking, at<PHONE_NUMBER>, Division of
Corporation Finance; Jennifer Songer, Branch Chief, or Lawrence Pace,
Senior Counsel, at<PHONE_NUMBER>, Investment Adviser Regulation
Office, Division of Investment Management; U.S. Securities and Exchange
Commission, 100 F Street NE, Washington, DC 20549.

SUPPLEMENTARY INFORMATION: We are adopting amendments to:
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    \1\ 15 U.S.C. 77a et seq.
    \2\ 15 U.S.C. 78a et seq.
    \3\ 15 U.S.C. 80a-1 et seq.

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           Commission Reference                 CFR citation (17 CFR)
------------------------------------------------------------------------
Regulation Crowdfunding:
  Rules 100 through 504...................  Sec.  Sec.   227.100 through
                                             227.504.
  Rule 100................................  Sec.   227.100.
  Rule 201................................  Sec.   227.201.
  Rule 203................................  Sec.   227.203.
  Rule 204................................  Sec.   227.204.
  Rule 206................................  Sec.   227.206.
  Rule 301................................  Sec.   227.301.
  Rule 303................................  Sec.   227.303.
  Rule 304................................  Sec.   227.304.
  Rule 503................................  Sec.   227.503.
                                            Sec.   227.504.
Securities Act of 1933 (Securities Act):
 \1\
  Rule 147................................  Sec.   230.147.
  Rule 147A...............................  Sec.   230.147A.
  Rule 148................................  Sec.   230.148.
  Rule 152................................  Sec.   230.152.
  Rule 155................................  Sec.   230.155.
  Rule 241................................  Sec.   230.241.
Regulation A:
  Rules 251 through 263...................  Sec.  Sec.   230.251 through
                                             230.263.
  Rule 251................................  Sec.   230.251.
  Rule 255................................  Sec.   230.255.
  Rule 259................................  Sec.   230.259.
  Rule 262................................  Sec.   230.262.
Regulation D:
  Rules 500 through 508...................  Sec.  Sec.   230.500 through
                                             230.508.
  Rule 500................................  Sec.   230.500.
  Rule 502................................  Sec.   230.502.
  Rule 504................................  Sec.   230.504.
  Rule 506................................  Sec.   230.506.
Regulation S-K:
  Items 10 through 1305...................  Sec.  Sec.   229.10 through
                                             229.1305.
  Item 601................................  Sec.   229.601.
  Form S-6................................  Sec.   239.16.
  Form N-14...............................  Sec.   239.23.
  Form 1-A................................  Sec.   239.90.
  Form C..................................  Sec.   239.900.
Securities Exchange Act of 1934 (Exchange
 Act): \2\
  Rule 12g-6..............................  Sec.   240.12g-6.
  Rule 12g5-1.............................  Sec.   240.12g5-1.
  Form 20-F...............................  Sec.   249.220f.
  Form 8-K................................  Sec.   249.308.
Investment Company Act of 1940 (Investment
 Company Act): \3\
  Rule 3a-9...............................  Sec.   270.3a-9.
  Form N-8B-2.............................  Sec.   274.12.
Securities Act and Investment Company Act:
  Form N-1A...............................  Sec.  Sec.   239.15A and
                                             274.11A.
  Form N-2................................  Sec.  Sec.   239.14 and
                                             274.11a-1.
  Form N-3................................  Sec.  Sec.   239.17a and
                                             274.11b.
  Form N-4................................  Sec.  Sec.   239.17b and
                                             274.11c.
  Form N-5................................  Sec.  Sec.   239.24 and
                                             274.5.
  Form N-6................................  Sec.  Sec.   239.17c and
                                             274.11d.
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Table of Contents

I. Introduction and Background
II. Discussion of Final Amendments
    A. Integration
    1. Integration Principles and Application (Rule 152(a) General
Principle and Introductory Language to Rule 152)
    2. Integration Safe Harbors
    3. Commencement, Termination, and Completion of Offerings (Rules
152(c) and 152(d))
    4. Conforming Amendments to Securities Act Exemptions
    B. General Solicitation and Offering Communications
    1. Exemption From General Solicitation for ``Demo Days'' and
Similar Events
    2. Solicitations of Interest
    3. Other Regulation Crowdfunding Offering Communications
    C. Rule 506(c) Verification Requirements
    1. Proposed Amendments
    2. Comments
    3. Final Amendments
    D. Harmonization of Disclosure Requirements
    1. Rule 502(b) of Regulation D
    2. Proposed Amendments To Simplify Compliance With Regulation A
    3. Confidential Information Standard
    E. Offering and Investment Limits
    1. Regulation A
    2. Rule 504
    3. Regulation Crowdfunding
    F. Regulation Crowdfunding and Regulation A Eligibility
    1. Regulation Crowdfunding Eligible Issuers
    2. Regulation Crowdfunding Eligible Securities
    3. Regulation A Eligibility Restrictions for Delinquent Exchange
Act Filers
    G. Bad Actor Disqualification Provisions
    1. Proposed Amendments
    2. Comments
    3. Final Amendments
III. Other Matters
IV. Economic Analysis
    A. Broad Economic Considerations
    B. Baseline
    C. Economic Effects of the Final Amendments
    1. Integration
    2. General Solicitation and Offering Communications
    3. Rule 506(c) Verification Requirements
    4. Disclosure Requirements
    5. Offering and Investment Limits
    6. Eligibility Requirements in Regulation Crowdfunding and
Regulation A
    7. Bad Actor Disqualification Provisions
V. Paperwork Reduction Act
VI. Final Regulatory Flexibility Analysis
VII. Statutory Authority

I. Introduction and Background

    On March 4, 2020, the Securities and Exchange Commission (the
``SEC'' or ``Commission'') proposed amendments

to simplify, harmonize, and improve certain aspects of the exempt
offering framework to promote capital formation while preserving or
enhancing important investor protections.\4\ Specifically, the
Commission proposed amendments that (1) address the ability of issuers
to move from one exemption to another, (2) set clear and consistent
rules governing offering communications between investors and issuers,
(3) address potential gaps and inconsistencies in our rules relating to
offering and investment limits, and (4) harmonize certain disclosure
requirements and bad actor disqualification provisions.
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    \4\ See Facilitating Capital Formation and Expanding Investment
Opportunities by Improving Access to Capital in Private Markets,
Release No. 33-10763 (Mar. 4, 2020) [85 FR 17956 (Mar. 31, 2020)]
(``Proposing Release'').
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    The Securities Act requires that every offer \5\ and sale of
securities be registered with the Commission, unless an exemption from
registration is available. The Securities Act, however, also contains a
number of exemptions from its registration requirements and authorizes
the Commission to adopt additional exemptions. Section 3 of the
Securities Act generally provides exemptions that are based on
characteristics of the securities themselves.\6\ Section 4 of the
Securities Act identifies transactions that are exempt from the
registration requirements.\7\ In addition, Section 28 of the Securities
Act authorizes the Commission to exempt other persons, securities, or
transactions to the extent necessary or appropriate in the public
interest and consistent with the protection of investors.\8\ The
current exempt offering framework is complex and made up of differing,
exemption-specific requirements and conditions. The scope of the exempt
offering framework has evolved over time through Commission rules and
legislative changes, including most recently through the Jumpstart Our
Business Startups Act of 2012 (``JOBS Act''),\9\ the Fixing America's
Surface Transportation Act of 2015,\10\ and the Economic Growth,
Regulatory Relief, and Consumer Protection Act of 2018.\11\ On June 18,
2019, the Commission issued a concept release that solicited public
comment on possible ways to simplify, harmonize, and improve the exempt
offering framework under the Securities Act to promote capital
formation and expand investment opportunities while maintaining
appropriate investor protections.\12\ While commenters on the Concept
Release expressed many perspectives on what changes would best serve
the interests of emerging companies raising capital, a consistent theme
in many comments was that many elements of the current structure work
effectively and a major restructuring is not needed.\13\
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    \5\ See 15 U.S.C. 77b(a)(3) (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).
    \6\ See 15 U.S.C. 77c. However, some Section 3 exempted
securities are identified based on the transaction in which they are
offered or sold. For example, Section 3(b)(1) of the Securities Act
authorizes the Commission to exempt certain issues of securities
where the aggregate amount offered does not exceed $5 million. 15
U.S.C. 77c(b)(1).
    \7\ See 15 U.S.C. 77d.
    \8\ 15 U.S.C. 77z-3.
    \9\ Public Law 112-106, 126 Stat. 306 (2012). The JOBS Act,
among other things: (1) Directed the Commission to revise Rule 506
to eliminate the prohibition against general solicitation or general
advertising for offers and sales of securities to accredited
investors (See Section 201(a)(1)); (2) Added Section 4(a)(6) [15
U.S.C. 77d(a)(6)] and Section 4A [15 U.S.C. 77d-1(b)] to the
Securities Act and directed the Commission to issue rules to permit
certain crowdfunding offerings (See Section 302); and (3) Directed
the Commission to expand Regulation A (See Section 401).
    \10\ Public Law 114-94, 129 Stat. 1312 (2015).
    \11\ Public Law 115-174, 132 Stat. 1296 (2018).
    \12\ See Concept Release on Harmonization of Securities Offering
Exemptions, Release No. 33-10649 (June 18, 2019) [84 FR 30460 (June
26, 2019)] (``Concept Release'').
    \13\ See, e.g., Letter from AngelList Advisors, LLC dated Sept.
25, 2019; Letter from CrowdCheck, Inc. dated Oct. 30, 2019; and
Letter from Crowdfund Capital Advisors dated Sept. 24, 2019, in
response to the Concept Release, available at https://www.sec.gov/comments/s7-08-19/s70819.htm. See also Recommendation of the SEC
Small Business Capital Formation Advisory Committee regarding the
exemptive offering framework (Dec. 13, 2019), available at https://www.sec.gov/spotlight/sbcfac/recommendation-harmonization-general-principles.pdf (``2019 Small Business Advisory Committee
Recommendation on the Exemptive Offering Framework''); and Report of
the 2019 SEC Government-Business Forum on Small Business Capital
Formation (Dec. 2019), available at https://www.sec.gov/files/small-business-forum-report-2019.pdf (``2019 Forum Report'').
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    Building on the comments received in response to the Concept
Release and other comments and recommendations received from the SEC
Small Business Capital Formation Advisory Committee, the SEC Investor
Advisory Committee, the annual Government-Business Forums on Small
Business Capital Formation (each a ``Small Business Forum''), and other
market participants, the Commission proposed a set of amendments that
would generally retain the current exempt offering structure and reduce
potential friction points. The proposed amendments were intended to
facilitate capital formation while preserving and in some cases
enhancing investor protections. The proposed amendments were further
intended to address gaps and complexities in the exempt offering
framework and help provide viable alternatives to the dominant capital
raising tools.
    We received many comment letters on the Proposing Release
expressing a range of views.\14\ We also received comments and
recommendations on the Proposing Release from the SEC Small Business
Capital Formation Advisory Committee \15\ and the 2020 Small Business
Forum.\16\ After considering the public comments received and the other
comments and recommendations, we are adopting the amendments
substantially as proposed but with certain modifications in response to
commenters' feedback. We believe that the final rules will facilitate
the use of the exempt offering framework, particularly by smaller
issuers.\17\ We acknowledge concerns about and recommendations relating
to transparency and investor protections in the private securities
marketplace.\18\ We further acknowledge concerns that by encouraging
exempt offerings, these amendments could reduce incentives for issuers
to conduct registered public offerings. However, we estimate, as
discussed further in Section IV (Economic Analysis) below, that while
these amendments may encourage more exempt offerings, these offerings
will

have only a marginal impact on the number of registered offerings.\19\
Commenters' views on different aspects of the proposed amendments, as
well as their effects, are discussed topically below.
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    \14\ Unless otherwise indicated, comments cited in this release
are to comment letters received in response to the Proposing
Release, which are available at https://www.sec.gov/comments/s7-05-20/s70520.htm.
    \15\ See Letter from SEC Small Business Capital Formation
Advisory Committee dated May 28, 2020 (``SEC SBCFAC Letter'').
    \16\ See Final Report of the 2020 SEC Government-Business Forum
on Small Business Capital Formation (June 2020), available at
https://www.sec.gov/files/2020-oasb-forum-report-final_0.pdf (``2020
Forum Report'').
    \17\ We are mindful of concerns expressed in the Recommendation
of the SEC Small Business Capital Formation Advisory Committee
regarding how our capital markets are serving underrepresented
founders and investors (Aug. 26, 2020), available at https://www.sec.gov/spotlight/sbcfac/underrepresented-founders-recommendation.pdf. The recommendation states that minority- and
women-owned businesses and funds face barriers to entry due to less
access to capital than their peers. We believe that the amendments
adopted in this release will enable small businesses generally to
access capital through exempt offerings more effectively and we
encourage further specific, tangible suggestions for action by the
Commission and are committed to continued engagement on this topic.
    \18\ See Letter from North American Securities Administrators
Association, Inc. dated October 21, 2020 (``NASAA Letter II'').
NASAA Letter II recommended requiring the filing of a Form D
concurrent with the beginning of a general solicitation, expanding
the Form D to capture additional information about the offering, the
filing of a closing Form D amendment, and certain legends for Rule
506(c) offerings. While we did not propose and are not adopting
these recommended changes, we are committed to continued engagement
to enhance small business capital formation and investor protection.
    \19\ See discussion of the Broad Economic Considerations in
Section IV.A. below, noting among other things that the amendments
with the greatest potential to expand the use of individual
exemptions affect the smallest market segments (Regulation
Crowdfunding and Regulation A), whose issuers tend to be at a much
earlier stage of development than those that conduct a traditional
initial public offering. In addition, based on data collected on
Regulation D offerings from 2009 through 2019, given the small size
of a typical Regulation D issuer and offering, the amendments,
including the adoption of a new comprehensive integration framework,
are unlikely to reduce the incentives or need of issuers
contemplating registered offerings. See infra note 596, infra Table
7 and related discussion.
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II. Discussion of Final Amendments

    We are amending the exempt offering framework to close gaps and
reduce complexities that may impede access to capital for issuers and
thereby limit investment opportunities, while preserving or enhancing
important investor protections. The amendments generally:
     Modernize and simplify the Securities Act integration
framework for registered and exempt offerings;
     Set clear and consistent rules governing offering
communications between issuers and investors;
     Increase offering and investment limits for certain
exemptions; and
     Harmonize certain disclosure requirements and bad actor
disqualification provisions.
    Table 1 summarizes key characteristics of the most commonly used
exemptions \20\ from registration, as amended by this release.\21\
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    \20\ Commission rules also provide exemptions for certain
offerings where the purpose of the offering is other than to raise
capital. For example, 17 CFR 230.701 (``Rule 701'') exempts certain
sales of securities made to compensate employees, consultants, and
advisors.
    \21\ Generally, Table 1 is organized by typical offering size
from largest to smallest. The information in this table is not
comprehensive and is intended only to highlight some of the more
significant aspects of the current rules. Certain regulatory
exemptions from registration provide specific frameworks or safe
harbors to comply with statutory exemptions. For example, offers and
sales of securities by an issuer that satisfy the conditions in
paragraphs (b) and (c) of Rule 506 are deemed to be transactions not
involving any public offering within the meaning of Section 4(a)(2)
of the Securities Act [15 U.S.C. 77d(a)(2)]. See 17 CFR 230.506(a).
Similarly, Rule 147 provides a safe harbor under Section 3(a)(11) of
the Securities Act [15 U.S.C. 77c(a)(11)]. In contrast, for example,
Rule 147A is a stand-alone exemption promulgated by the Commission
pursuant to its authority under Section 28 of the Securities Act [15
U.S.C. 77z-3]. See 17 CFR 230.147A(a).

                                                     Table 1--Overview of Capital-Raising Exemptions
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                                                                                Preemption of
                                Offering limit                                                                                state
       Type of offering         within 12-month       General           Issuer           Investor         SEC filing    Restrictions on    registration
                                    period         solicitation      requirements      requirements      requirements        resale            and
                                                                                qualification
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Section 4(a)(2)..............  None............  No..............  None............  Transactions by   None...........  Yes. Restricted  No.
                                                                                an issuer not                      securities.
                                                                                involving any
                                                                                public
                                                                                offering. See
                                                                                SEC v. Ralston
                                                                                Purina Co.
17 CFR 230.506(b) (``Rule      None............  No..............  ``Bad actor''     Unlimited         17 CFR 239.500   Yes. Restricted  Yes.
 506(b)'' of Regulation D).                                         disqualificatio   accredited        (``Form D'').    securities.
                                                                    ns apply.         investors. Up
                                                                                to 35
                                                                                sophisticated
                                                                                but non-
                                                                                accredited
                                                                                investors in a
                                                                                90-day period.
17 CFR 230.506(c) (``Rule      None............  Yes.............  ``Bad actor''     Unlimited         Form D.........  Yes. Restricted  Yes.
 506(c)'') of Regulation D.                                         disqualificatio   accredited                         securities.
                                                                    ns apply.         investors.
                                                                                Issuer must
                                                                                take reasonable
                                                                                steps to verify
                                                                                that all
                                                                                purchasers are
                                                                                accredited
                                                                                investors *.
Regulation A: Tier 1.........  $20 million.....  Permitted;        U.S. or Canadian  None............  Form 1-A,        No.............  No.
                                                  before            issuers.                            including two
                                                  qualification,    Excludes blank                      years of
                                                  testing the       check                               financial
                                                  waters            companies,                          statements.
                                                  permitted         registered                         Exit report....
                                                  before and        investment
                                                  after the         companies,
                                                  offering          business
                                                  statement is      development
                                                  filed.            companies,
                                                                    issuers of
                                                                    certain
                                                                    securities,
                                                                    certain issuers
                                                                    subject to a
                                                                    Section 12(j)
                                                                    order, and
                                                                    Regulation A
                                                                    and Exchange
                                                                    Act reporting
                                                                    companies that
                                                                    have not filed
                                                                    certain
                                                                    required
                                                                    reports. ``Bad
                                                                    actor''
                                                                    disqualificatio
                                                                    ns apply.* No
                                                                    asset-backed
                                                                    securities.
Regulation A: Tier 2.........  $75 million.....  ................  ................  Non-accredited    Form 1-A,        No.............  Yes.
                                                                                investors are     including two
                                                                                subject to        years of
                                                                                investment        audited
                                                                                limits based on   financial
                                                                                the greater of    statements.
                                                                                annual income     Annual, semi-
                                                                                and net worth,    annual,
                                                                                unless            current, and
                                                                                securities will   exit reports.
                                                                                be listed on a
                                                                                national
                                                                                securities
                                                                                exchange.

Rule 504 of Regulation D.....  $10 million.....  Permitted in      Excludes blank    None............  Form D.........  Yes. Restricted  No.
                                                  limited           check                                                securities
                                                  circumstances.    companies,                                           except in
                                                                    Exchange Act                                         limited
                                                                    reporting                                            circumstances.
                                                                    companies, and
                                                                    investment
                                                                    companies.
                                                                    ``Bad actor''
                                                                    disqualificatio
                                                                    ns apply.
Regulation Crowdfunding;       $5 million......  Testing the       Excludes non-     No investment     Form C,          12-month resale  Yes.
 Section 4(a)(6).                                 waters            U.S. issuers,     limits for        including two    limitations.
                                                  permitted         blank check       accredited        years of
                                                  before Form C     companies,        investors. Non-   financial
                                                  is filed.         Exchange Act      accredited        statements
                                                  Permitted with    reporting         investors are     that are
                                                  limits on         companies, and    subject to        certified,
                                                  advertising       investment        investment        reviewed or
                                                  after Form C is   companies.        limits based on   audited, as
                                                  filed. Offering   ``Bad actor''     the greater of    required.
                                                  must be           disqualificatio   annual income     Progress and
                                                  conducted on an   ns apply.         and net worth.    annual reports.
                                                  internet
                                                  platform
                                                  through a
                                                  registered
                                                  intermediary.
Intrastate: Section 3(a)(11).  No Federal limit  Offerees must be  In-state          Offerees and      None...........  Securities must  No.
                                (generally,       in-state          residents         purchasers must                    come to rest
                                individual        residents.        ``doing           be in-state                        with in-state
                                State limits                        business'' and    residents.                         residents.
                                between $1 and                      incorporated in-
                                $5 million).                        state; excludes
                                                                    registered
                                                                    investment
                                                                    companies.
Intrastate: Rule 147.........  No Federal limit  Offerees must be  In-state          Offerees and      None...........  Yes. Resales     No.
                                (generally,       in-state          residents         purchasers must                    must be within
                                individual        residents.        ``doing           be in-state                        State for six
                                State limits                        business'' and    residents.                         months.
                                between $1 and                      incorporated in-
                                $5 million).                        state; excludes
                                                                    registered
                                                                    investment
                                                                    companies.
Intrastate: Rule 147A........  No Federal limit  Yes.............  In-state          Purchasers must   None...........  Yes. Resales     No.
                                (generally,                         residents and     be in-state                        must be within
                                individual                          ``doing           residents.                         State for six
                                State limits                        business'' in-                                       months.
                                between $1 and                      state; excludes
                                $5 million).                        registered
                                                                    investment
                                                                    companies.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    We discuss specific aspects of the final amendments in detail
below.

A. Integration

    The integration doctrine seeks to prevent an issuer from improperly
avoiding registration by artificially dividing a single offering into
multiple offerings such that Securities Act exemptions would apply to
the multiple offerings that would not be available for the combined
offering.\22\ The Securities Act integration framework for registered
and exempt offerings consists of a mixture of rules and Commission
guidance for determining whether multiple securities transactions
should be considered part of the same offering. As the number of
exemptions from registration available to issuers has evolved over
time, the integration framework has grown more complex.\23\
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    \22\ See, e.g., Revisions of Limited Offering Exemptions in
Regulation D, Release No. 33-8828 (Aug. 3, 2007) [72 FR 45116 (Aug.
10, 2007)] (``Regulation D 2007 Proposing Release''), at Section
II.C.1.
    \23\ See Proposing Release, at Section II.A.
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    The Commission first articulated the integration concept in 1933
and further developed it in two interpretive releases issued in the
1960s.\24\ The interpretive releases state that determining whether a
particular securities offering should be integrated with another
offering requires an analysis of the specific facts and circumstances
of the offerings. The Commission identified the following five factors
to consider in determining whether the offerings should be integrated:
(1) Whether the different offerings are part of a single plan of
financing; (2) Whether the offerings involve issuance of the same class
of security; (3) Whether the offerings are made at or about the same
time; (4) Whether the same type of consideration is to be received; and
(5) Whether the offerings are made for the same general purpose.\25\
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    \24\ See Release No. 33-97 (Dec. 28, 1933); Section 3(a)(11)
Exemption for Local Offerings, Release No. 33-4434 (Dec. 6, 1961)
[26 FR 11896 (Dec, 13, 1961)] (``Section 3(a)(11) Release''); and
Non-Public Offering Exemption, Release No. 33-4552 (Nov. 6, 1962)
[27 FR 11316 (Nov. 16, 1962)] (``Non-Public Offering Exemption
Release'').
    \25\ See Section 3(a)(11) Release; and Non-Public Offering
Exemption Release.
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    In adopting Regulation D in 1982, the Commission relied on the
five-factor test in establishing a framework used to determine whether
two offerings that fall outside of the 17 CFR 230.502(a) (``Rule
502(a)'') safe harbor should be integrated and treated as one
offering.\26\ The Rule 502(a) safe harbor provided that offers and
sales more than six months before a Regulation D offering or more than
six months after the completion of a Regulation D offering will not be
considered part of the same offering. This provided issuers with a
bright-line test on which they could rely to avoid the integration of
multiple offerings. However, for offerings occurring within six months
of each other, the determination as to whether separate sales of
securities were part of the same offering (i.e., were considered
integrated) depended on the particular facts and circumstances of the
offerings, including an analysis of the five-factor test.\27\
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    \26\ See Revision of Certain Exemptions From Registration for
Transactions Involving Limited Offers and Sales, Release No. 33-6389
(Mar. 8, 1982) [47 FR 11251 (Mar. 16, 1982)] (``Regulation D
Adopting Release''). See also Rule 502(a).
    \27\ Notwithstanding the fact that Rule 502(a) only applies to
Regulation D offerings, the integration framework in Rule 502(a)--
including the use of the five-factor test for determining the
integration of offerings occurring within six months of each other--
is often referred to when considering integration issues arising in
other exempt offerings that do not have their own integration
guidelines, such as Section 4(a)(2).
---------------------------------------------------------------------------

    In 2007, the Commission issued guidance setting forth a framework
for analyzing the integration of simultaneous registered and private
offerings, where the five-factor test does not apply.\28\ The
Commission noted that the determination as to whether the filing of a
registration statement should be considered to be a general

solicitation or general advertising \29\ that would affect the
availability of the Section 4(a)(2) exemption for a concurrent private
placement should be based on a consideration of whether the investors
in the private placement were solicited by the registration statement
or through some other means that would not foreclose the availability
of the Section 4(a)(2) exemption.\30\
---------------------------------------------------------------------------

    \28\ See Regulation D 2007 Proposing Release, at Section II.C.1.
    \29\ See Section II.B. infra for a discussion of the terms
``general solicitation'' and ``general advertising.'' In this
release, we sometimes refer to both general solicitation and general
advertising as they relate to an offer of securities as ``general
solicitation.''
    \30\ See Regulation D 2007 Proposing Release. The Commission
stated that issuers should analyze whether the offering is exempt
under Section 4(a)(2) ``on its own,'' including whether securities
were offered and sold to the private placement investors through the
means of a general solicitation in the form of the registration
statement. The Commission provided the following examples: If an
issuer files a registration statement and then seeks to offer and
sell securities without registration to an investor who became
interested in the purportedly private placement offering by means of
the registration statement, then the Section 4(a)(2) exemption would
not be available for that offering. If the prospective private
placement investor became interested in the concurrent private
placement through some means other than the registration statement
that was consistent with Section 4(a)(2), such as through a
substantive, pre-existing relationship with the issuer or direct
contact by the issuer or its agents outside of the public offering
effort, then the filing of the registration statement generally
would not impact the potential availability of the Section 4(a)(2)
exemption for that private placement and the private placement could
be conducted while the registration statement for the public
offering was on file with the Commission. Similarly, if the issuer
is able to solicit interest in a concurrent private placement by
contacting prospective investors who (1) were not identified or
contacted through the marketing of the public offering, and (2) did
not independently contact the issuer as a result of the general
solicitation by means of the registration statement, then the
private placement could be conducted in accordance with Section
4(a)(2) while the registration statement for a separate public
offering was pending. See id.
---------------------------------------------------------------------------

    More recently, in connection with the Regulation A and Regulation
Crowdfunding rulemakings in 2015 and the Rule 147 and Rule 147A
rulemaking in 2016, the Commission set forth a facts-and-circumstances
integration framework in the context of concurrent exempt
offerings.\31\ The facts-and-circumstances integration framework
applies to situations where one offering permits general solicitation
and the other does not, as well as situations where both offerings rely
on exemptions permitting general solicitation. Under this analysis,
where an integration safe harbor is not available, integration of
concurrent or subsequent offers and sales of securities with any
offering conducted under Regulation A, Regulation Crowdfunding, Rule
147, or Rule 147A will depend on the particular facts and
circumstances, including whether each offering complies with the
requirements of the exemption on which the particular offering is
relying.\32\
---------------------------------------------------------------------------

    \31\ See Amendments for Small and Additional Issues Exemptions
under the Securities Act (Regulation A), Release No. 33-9741 (Mar.
25, 2015) [80 FR 21805 (Apr. 20, 2015)] (``2015 Regulation A
Release'') at Section II.B.5; Crowdfunding, Release No. 33-9974
(Oct. 30, 2015) [80 FR 71387 (Nov. 16, 2015)] (``Crowdfunding
Adopting Release'') at Section II.A.1.c; and Exemptions to
Facilitate Intrastate and Regional Securities Offerings, Release No.
33-10238 (Oct. 26, 2016) [81 FR 83494 (Nov. 21, 2016)] (``Intrastate
and Regional Offerings Release'') at Section II.B.5.
    \32\ For a concurrent offering under Rule 506(b), purchasers in
the Rule 506(b) offering could not be solicited by means of a
general solicitation used in connection with an offering under
Regulation A (including any ``testing-the-waters'' communications),
Regulation Crowdfunding, or Rule 147 or 147A. The issuer would need
to establish that purchasers in the Rule 506(b) offering were
solicited through other means. For example, the issuer may have had
a pre-existing substantive relationship with such purchasers. See
2015 Regulation A Release, at Section II.B.5; Crowdfunding Adopting
Release, at Section II.A.1.c; and Intrastate and Regional Offerings
Release, at Section II.B.5.
---------------------------------------------------------------------------

    We believe that statutory and regulatory changes to the Securities
Act exemptive structure, including those arising from the JOBS Act,
developments in the capital markets, and the evolution of
communications technology make it necessary and appropriate for the
Commission to modernize and simplify the Securities Act integration
framework for registered and exempt offerings and its application
throughout the Securities Act rules. New Rule 152 builds on the
approach to integration in the Commission's recent rulemakings and
provides a comprehensive integration framework composed of a general
principle of integration, as set forth in new 17 CFR 230.152(a) (``Rule
152(a)''), and four safe harbors applicable to all securities offerings
under the Securities Act, including registered and exempt offerings, as
set forth in new 17 CFR 230.152(b) (``Rule 152(b)'').
    Tables 2(a) and 2(b) provide an overview of the general integration
principle and safe harbors in new Rule 152, each discussed in more
detail below.
---------------------------------------------------------------------------

    \33\ Revised introductory language has been added to new Rule
152 clarifying that the plan or scheme to evade the registration
requirements language applies to the entire rule, and not just the
safe harbors, as proposed. Specifically, the new introductory
language states that because of the objectives of Rule 152 and the
policies underlying the Securities Act, the provisions of the rule
will not have the effect of avoiding integration for any transaction
or series of transactions that, although in technical compliance
with the rule, is part of a plan or scheme to evade the registration
requirements of the Securities Act.

  Table 2(a)--Overview of the General Integration Principle in New Rule
                                 152 33
------------------------------------------------------------------------

------------------------------------------------------------------------
                Integration Principle in New Rule 152(a)
------------------------------------------------------------------------
General Principle of Integration..  If the safe harbors in Rule 152(b)
                                     do not apply, in determining
                                     whether two or more offerings are
                                     to be treated as one for the
                                     purpose of registration or
                                     qualifying for an exemption from
                                     registration under the Securities
                                     Act, offers and sales will not be
                                     integrated if, based on the
                                     particular facts and circumstances,
                                     the issuer can establish that each
                                     offering either complies with the
                                     registration requirements of the
                                     Securities Act, or that an
                                     exemption from registration is
                                     available for the particular
                                     offering.
Application of the General          The issuer must have a reasonable
 Principle to an exempt offering     belief, based on the facts and
 prohibiting general solicitation.   circumstances, with respect to each
 17 CFR 230.152(a)(1) (``Rule        purchaser in the exempt offering
 152(a)(1)'').                       prohibiting general solicitation,
                                     that the issuer (or any person
                                     acting on the issuer's behalf)
                                     either:
                                    (i) Did not solicit such purchaser
                                     through the use of general
                                     solicitation; or
                                    (ii) Established a substantive
                                     relationship with such purchaser
                                     prior to the commencement of the
                                     exempt offering prohibiting general
                                     solicitation.
Application of the General          In addition to satisfying the
 Principle to concurrent exempt      requirements of the particular
 offerings that each allow general   exemption relied on, general
 solicitation. 17 CFR                solicitation offering materials for
 230.152(a)(2) (``Rule               one offering that include
 152(a)(2)'').                       information about the material
                                     terms of a concurrent offering
                                     under another exemption may
                                     constitute an offer of the
                                     securities in such other offering,
                                     and therefore the offer must comply
                                     with all the requirements for, and
                                     restrictions on, offers under the
                                     exemption being relied on for such
                                     other offering, including any
                                     legend requirements and
                                     communications restrictions.
------------------------------------------------------------------------

 Table 2(b)--Overview of the Integration Safe Harbors in New Rule 152 34
------------------------------------------------------------------------

------------------------------------------------------------------------
        Non-Exclusive Integration Safe Harbors in New Rule 152(b)
------------------------------------------------------------------------
Safe Harbor 1: 17 CFR               Any offering made more than 30
 230.152(b)(1) (``Rule               calendar days before the
 152(b)(1)'').                       commencement of any other offering,
                                     or more than 30 calendar days after
                                     the termination or completion of
                                     any other offering, will not be
                                     integrated with such other
                                     offering; provided 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.
Safe Harbor 2: 17 CFR               Offers and sales made in compliance
 230.152(b)(2) (``Rule               with Rule 701, pursuant to an
 152(b)(2)'').                       employee benefit plan, or in
                                     compliance with 17 CFR 230.901
                                     through 230.905 (``Regulation S'')
                                     will not be integrated with other
                                     offerings.
Safe Harbor 3: 17 CFR               An offering for which a Securities
 230.152(b)(1) (``Rule               Act registration statement has been
 152(b)(3)'').                       filed will not be integrated if it
                                     is made subsequent to: (i) A
                                     terminated or completed offering
                                     for which general solicitation is
                                     not permitted; (ii) a terminated or
                                     completed offering for which
                                     general solicitation is permitted
                                     that was made only to qualified
                                     institutional buyers (``QIBs'') and
                                     institutional accredited investors
                                     (``IAIs''); or (iii) an offering
                                     for which general solicitation is
                                     permitted that terminated or
                                     completed more than 30 calendar
                                     days prior to the commencement of
                                     the registered offering. See 17 CFR
                                     230.144(a)(1) for the definition of
                                     ``qualified institutional buyer,''
                                     and 17 CFR 230.501(a)(1), (2), (3),
                                     (7), (8), (9), (12), and (13) for a
                                     list of entities that are
                                     considered ``institutional
                                     accredited investors.''
Safe Harbor 4: 17 CFR               Offers and sales made in reliance on
 230.152(b)(1) (``Rule               an exemption for which general
 152(b)(4)'').                       solicitation is permitted will not
                                     be integrated if made subsequent to
                                     any terminated or completed
                                     offering.
------------------------------------------------------------------------

1. Integration Principles and Application (Rule 152(a) General
Principle and Introductory Language to Rule 152)
---------------------------------------------------------------------------

    \34\ No integration analysis under Rule 152(a) is required if
any of the non-exclusive safe harbors in Rule 152(b) apply. In
addition, the revised introductory language to new Rule 152
clarifies that the plan or scheme to evade the registration
requirements language encompasses the entire rule, including the
safe harbors.
---------------------------------------------------------------------------

a. Proposed Amendments
    The Commission proposed to revise the integration framework by
establishing a general principle of integration in a revised Rule 152
that would require an issuer to consider the particular facts and
circumstances of each offering, including whether the issuer can
establish that each offering either complies with the registration
requirements of the Securities Act, or that an exemption from
registration is available for the particular offering.\35\ The general
principle of integration, as set forth in proposed Rule 152(a), would
be available for all offers and sales of securities not covered by one
of the four safe harbors set forth in proposed Rule 152(b).
---------------------------------------------------------------------------

    \35\ This proposed facts-and-circumstances analysis of
integration would replace the traditional five-factor test first
articulated by the Commission in 1962.
---------------------------------------------------------------------------

    The Commission also proposed to include two provisions applying the
general integration principles that would supplement and provide
greater specificity and guidance in applying the facts-and-
circumstances analysis. Proposed Rule 152(a)(1) would codify and build
on Commission guidance \36\ setting forth a framework for analyzing how
an issuer can conduct simultaneous registered and private offerings by
providing that for an exempt offering for which general solicitation is
not permitted, offers and sales would not be integrated with other
offerings if the issuer has a reasonable belief, based on the facts and
circumstances, that the purchasers in each exempt offering were not
solicited through the use of general solicitation, or the purchasers in
each exempt offering established a substantive relationship with the
issuer (or person acting on the issuer's behalf) prior to the
commencement of the offering prohibiting general solicitation. Proposed
Rule 152(a)(2) would clarify that for an exempt offering permitting
general solicitation that includes information about the material terms
of a concurrent exempt offering also permitting general solicitation,
the offering materials must comply with all the requirements for, or
restrictions on, offers under each exemption, including any legend
requirements or communications restrictions.
---------------------------------------------------------------------------

    \36\ See Regulation D 2007 Proposing Release, at Section II.C.1.
---------------------------------------------------------------------------

    In addition, consistent with the introductory language of Rule 155,
the introductory language in proposed Rule 152 specified that the four
proposed safe harbors would not be available to any issuer for any
transaction or series of transactions that, although in technical
compliance with the rule, is part of a plan or scheme to evade the
registration requirements of the Securities Act.
b. Comments
i. Integration Framework and Establishment of General Principle of
Integration
    Consistent with comments that we received on the Concept Release
\37\ and recommendations of the annual Small Business Forums \38\ that
generally supported clarifying and modernizing the existing integration
standards, many commenters supported the proposal to provide a
comprehensive integration framework applicable to all securities

offerings under the Securities Act, including registered and exempt
offerings, by establishing a general principle of integration and four
safe harbors in new Rule 152.\39\ These commenters generally supported
the Commission's proposal to create one broadly applicable framework to
clarify the ability of issuers to engage in contemporaneous or close in
time offerings under independent exemptions or pursuant to an effective
registration statement. Several of these commenters stated that the
structure of proposed Rule 152 would make clear the interaction between
the integration provisions in proposed Rule 152(a) and the non-
exclusive safe harbors in proposed Rule 152(b).\40\ The SEC Small
Business Capital Formation Advisory Committee also supported the
proposed integration framework, specifically stating their belief that
the new general principle of integration and the four proposed non-
exclusive safe harbors would reduce the complexities across the
offering framework by consistently defining and clarifying
integration.\41\
---------------------------------------------------------------------------

    \37\ See, e.g., Letter responding to the Concept Release from
Davis Polk & Wardwell LLP dated Sept. 24, 2019; Letter responding to
the Concept Release from Dechert LLP dated Sept. 24, 2019; Letter
responding to the Concept Release from CrowdCheck dated Oct. 30,
2019 (``CrowdCheck Concept Release Letter''); and Letter responding
to the Concept Release from Securities Industry and Financial
Markets Association dated Sept. 24, 2019. See also 2019 Small
Business Advisory Committee Recommendation on the Exemptive Offering
Framework (stating ``Integration should be revised so that the
exemptions can be better utilized.''). But see Letter responding to
the Concept Release from Public Investors Advocate Bar Association
dated Sept. 24, 2019 (positing that shortening the six month period
in Rule 502(a) would ``serve to promote'' Ponzi schemes); and Letter
responding to the Concept Release from North American Securities
Administrators Association dated Oct. 11, 2019 (positing that
``loosening'' integration safe harbors would ``increase the
likelihood of regulatory arbitrage or create gaps in the investor
protection landscape''). Comment letters received in response to the
Concept Release are available at https://www.sec.gov/comments/s7-08-19/s70819.htm.
    \38\ See Final Report of the 2016 SEC Government-Business Forum
on Small Business Capital Formation (Mar. 2017), available at
https://www.sec.gov/info/smallbus/gbfor35.pdf (``2016 Forum
Report''); Final Report of the 2017 SEC Government-Business Forum on
Small Business Capital Formation (Mar. 2018), available at https://www.sec.gov/files/gbfor36.pdf (``2017 Forum Report''); and Final
Report of the 2018 SEC Government-Business Forum on Small Business
Capital Formation (June 2019), available at https://www.sec.gov/info/smallbus/gbfor37.pdf (``2018 Forum Report'') (all three forums
recommending that the Commission clarify the relationship between
exempt offerings in which general solicitation is not permitted and
exempt offerings in which general solicitation is permitted, and
that Rule 152 applies to a Rule 506(c) offering so that an issuer
using Rule 506(c) may subsequently engage in a registered public
offering without adversely affecting the Rule 506(c) offering
exemption). See also 2019 Forum Report (recommending using
consistent terms in exempt offering rules for ease of understanding,
as well as bright line rules and examples).
    \39\ See, e.g., Letter from Geraci LLP dated May 29, 2020
(``Geraci Law Letter''); Letter from Ketsal dated June 30, 2020
(``Ketsal Letter''); Letter from Netcapital Funding Portal Inc.
dated May 31, 2020 (``Netcapital Letter''); Letter from Republic
dated June 1, 2020 (``Republic Letter''); Letter from
S[omacr].Capital Inc. dated June 1, 2020 (``S[omacr].Capital
Letter''); Letter from William Hubbard, Hubbard Business Counsel
dated June 1, 2020 (``W. Hubbard Letter''); Letter from David R.
Burton, Senior Fellow in Economic Policy, The Heritage Foundation
dated June 1, 2020 (``D. Burton Letter''); Letter from CrowdCheck
Inc. dated June 11, 2020 (``CrowdCheck Letter''); Letter from
Shearman & Sterling LLP dated June 18, 2020 (``Shearman & Sterling
Letter''); Letter from Institute for Portfolio Alternatives dated
June 25, 2020 (``IPA Letter''); and Letter from Federal Regulation
of Securities Committee, the Private Equity and Venture Capital
Committee, and the Commercial Finance Committee of the Business Law
Section of the American Bar Association dated July 27, 2020 (``ABA
Letter''). One commenter supporting the proposal suggested that the
proposal would provide clarifying guidance that would enable issuers
to raise capital in reliance on Rule 506(c) which may reduce the
disparity between the amount of capital raised in reliance on Rule
506(b) versus Rule 506(c). See Letter from Fried, Frank Harris
Shriver & Jacobson LLP dated June 1, 2020 (``Fried Frank Letter'').
    \40\ See, e.g., W. Hubbard Letter; D. Burton Letter; and ABA
Letter (stating that the proposed structure would add clarity,
reduce complexity and provide greater confidence to issuers in
planning and choosing their capital raising options). But see
CrowdCheck Letter (recommending that specific fact patterns be
included in the safe harbors rather than in the provisions that
apply the general principle).
    \41\ See SEC SBCFAC Letter.
---------------------------------------------------------------------------

    A number of commenters opposed the proposed integration
framework.\42\ Some of these commenters expressed concerns that the
proposed amendments would reduce the need or incentive for companies to
go public \43\ or allow issuers to evade the registration requirements
of the Securities Act.\44\ Two of these commenters also raised concerns
about potential abuse of the general principle by an issuer identifying
investors through a general solicitation in one offering and then
selling securities to those investors in an offering for which general
solicitation is prohibited.\45\ Another commenter recommended that the
integration analysis should involve two separate determinations:
Whether offerings are functionally the same offering should be
determined first; followed by an analysis of whether the integrated
offerings satisfy the requirements of an exemption.\46\
---------------------------------------------------------------------------

    \42\ See Letter from Better Markets, et al. dated June 2, 2020
(``Better Markets Letter''); Letter from Consumer Federation of
America dated June 4, 2020 (``CFA Letter''); Letter from CFA
Institute dated June 12, 2020 (``CFA Institute Letter''); Letter
from Robert E. Rutkowski dated June 4, 2020 (``R. Rutkowski
Letter''); Letter from Rutheford B. Campbell, Jr. dated Aug. 3, 2020
(``R. Campbell Letter''); Letter from Committee on Securities Law of
the Business Law Section of the Maryland State Bar Association dated
June 1, 2020 (``Md. St. Bar Assoc. Letter''); and Letter from
Council of Institutional Investors dated May 28, 2020 (``CII
Letter'') (expressing concern that the proposed integration
framework and expansion of the safe harbors would weaken the
integration doctrine and result in the inclusion of large numbers of
non-accredited investors in exempt offerings). See also Letter from
North American Securities Administrators Association, Inc. dated
June 1, 2020 (``NASAA Letter'') (stating its objection to a 30-day
safe harbor in proposed Rule 152(b)(1), although not objecting to
the goal of harmonizing the integration regime and the safe harbors
in proposed Rule 152(b)(2) through (4)).
    \43\ See CFA Letter (stating its concern that the amendments
could result in issuers being able to raise unlimited amounts of
capital from an unlimited number of investors through exempt
offerings, without ever needing to go through the registration
process). See generally CFA Institute Letter; and R. Rutkowski
Letter.
    \44\ See, e.g., CFA Letter (stating that ``the original goal of
preventing issuers from artificially separating related transactions
into multiple offerings to avoid the registration requirement is
gone under this approach, so long as the individual offerings each
satisfy a particular exemption''); and R. Rutkowski Letter
(suggesting that the proposal would allow issuers to avoid
registration requirements by dividing large financings into multiple
smaller exempt offerings).
    \45\ See, e.g., CFA Letter; and Md. St. Bar Assoc. Letter. But
see IPA Letter; and Fried Frank Letter (stating that an offering
made more than 30 days after the termination of another offering
should not be integrated, regardless of whether the purchasers in
the exempt offering may have been solicited using general
solicitation).
    \46\ See Md. St. Bar Assoc. Letter.
---------------------------------------------------------------------------

    Several commenters who supported the concept of revising the
integration framework offered alternative approaches to the
proposal.\47\ One of these commenters stated the current integration
doctrine should be replaced with general anti-evasion principles and
noted its potential adverse effect on early-stage companies.\48\
Another commenter recommended elimination of the current integration
doctrine and expressed concern that it has negative effects,
particularly for small companies that commonly rely on Section 4(a)(2),
Rule 504 or Rule 506(b) for their offerings.\49\
---------------------------------------------------------------------------

    \47\ See CrowdCheck Letter; Letter from John R. Clarke, dated
May 30, 2020 (``J. Clarke Letter'') (stating that the integration
framework should be replaced with a filing requirement describing
all historical and current exempt and registered offerings made by
the issuer); and Letter from Invesco Ltd. dated June 1, 2020
(``Invesco Letter'') (recommending a single safe harbor permitting
offerings ``so long as those offerings are reasonably conducted
commensurate with the requirements under such rules'').
    \48\ See CrowdCheck Letter (stating that, although the proposed
rule ``is a distinct improvement on the current state of affairs,''
they would prefer for the Commission to ``eliminate the concept of
integration altogether and rely on general anti-evasion
principles'').
    \49\ See R. Campbell Letter (stating that the integration
doctrine ``drives up offering costs and provides no protection for
investors'' and ``its pernicious effects fall most heavily on small
issuers''). This commenter raised a concern that, as proposed with
its references to purchasers in ``each exempt offering,'' the
requirements of Rule 152(a)(1) would rarely be met for offerings
under Section 4(a)(2), Rule 504, or Rule 506(b)).
---------------------------------------------------------------------------

    Some commenters specifically supported our proposal to replace the
five-factor test with the Commission's more recent approach to
integration adopted in 2015 and 2016 rulemakings involving Regulation
A, Regulation Crowdfunding and Rules 147 and 147A, namely whether the
issuer can establish that each offering either complies with the
registration requirements of the Securities Act or that an exemption
from registration is available for the particular offering.\50\ Other
commenters specifically recommended retaining the current five-factor
test.\51\ One commenter questioned the need for the proposed new
framework, stating that it was not aware of significant problems in
applying the current five-factor test,\52\ while another commenter
stated its concern that the proposal could permit concurrent and serial
offerings that are clearly part of a single plan of financing to avoid
integration.\53\
---------------------------------------------------------------------------

    \50\ See ABA Letter; J. Clarke Letter; CrowdCheck Letter; Geraci
Letter (suggesting that it is difficult for issuers to determine
whether subsequent offers might be integrated into a single offering
under the five-factor test of integration); and W. Hubbard Letter
(suggesting that the five-factor test may continue to be useful in
limited situations).
    \51\ See CFA Letter; and Md. St. Bar Assoc. Letter.
    \52\ See Md. St. Bar Assoc. Letter.
    \53\ See CFA Letter (stating that the purpose of integration is
to look at the totality of a financing scheme rather than different
components in isolation). See also R. Rutkowski Letter (stating that
the proposed integration framework greatly weakens the integration
doctrine by permitting issuers to conduct multiple exempt offerings
regardless of whether such offerings are part of a single plan of
financing, so long as each offering qualifies for an exemption from
Securities Act registration requirements and is separated by at
least 30 days).

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

ii. Introductory Language of Rule 152
    One commenter suggested that the Commission expand the introductory
language to the proposed rule, concerning a ``plan or scheme to evade
the registration requirements of the Act'' to include not just the
rule's safe harbors, as proposed, but rather the entire rule, including
the rule's general principle of integration.\54\ This commenter also
suggested that the Commission provide examples of facts and
circumstances that might be relevant in applying the general principle
of integration set forth in proposed Rule 152(a).\55\
---------------------------------------------------------------------------

    \54\ See Md. St. Bar Assoc. Letter.
    \55\ See id (questioning the need for the reference to ``facts
and circumstances'').
---------------------------------------------------------------------------

iii. Provisions Applying the General Principle (Rules 152(a)(1) and
152(a)(2))
    Commenters requested clarification and suggested modifications
concerning the guidance on the general principle of integration
provided in proposed Rule 152(a)(1)(i) and proposed Rule
152(a)(1)(ii).\56\ Some of these commenters asked the Commission to
revise new 17 CFR 230.152(a)(1)(i) (``Rule 152(a)(1)(i)'') and 17 CFR
230.152(a)(1)(ii) (``Rule 152(a)(1)(ii)'') to address an application of
the general principle for concurrent exempt offerings where general
solicitation is prohibited for one or more, but not all, such
offerings.\57\ Commenters also stated their concerns that an issuer
could identify investors through a general solicitation and then sell
to such investors in a subsequent private offering, and sought
clarification of the application of proposed Rule 152(a)(1)(i) and (ii)
to exempt offerings prohibiting general solicitation.\58\ Another
commenter recommended that the application of proposed Rule
152(a)(1)(i) and (ii) be tied to the particular purchaser, rather than
``purchasers.'' \59\ One commenter requested that the Commission
clarify the application of proposed Rule 152(a)(1) to whether an
offering permitting general solicitation would be integrated with an
investor's secondary offering in reliance on Section 4(a)(7) of the
Securities Act.\60\ Another commenter suggested that a ``certification
from the investor that the investor did not become aware of a potential
Rule 506(b) investment through a general solicitation'' should satisfy
an issuer's obligation under Rule 152(a)(1) to have, based on the facts
and circumstances, a reasonable belief that the investor in the Rule
506(b) offering was not solicited through the use of general
solicitation.\61\ In contrast, some commenters suggested that the
prohibition on general solicitation in exempt offerings should be
eliminated.\62\
---------------------------------------------------------------------------

    \56\ See, e.g., Md. St. Bar Assoc. Letter; Fried Frank Letter;
IPA Letter; ABA Letter; CFA Letter; Invesco Letter; and CrowdCheck
Letter.
    \57\ See Md. St. Bar Assoc. Letter (requesting clarification as
to whether Rule 152(a)(1), as proposed, would codify Commission
guidance first issued in 2007, involving one offering where general
solicitation is permitted and a private offering where general
solicitation is not permitted); Fried Frank Letter (stating that
``[t]he Commission should revise Rule 152(a)(1) to clarify that, so
long as its conditions are satisfied, an issuer may concurrently
engage in an offering in reliance on Rule 506(b) and another
offering in reliance on Rule 506(c).''); IPA Letter (recommending
that the requirement not be applicable to ``each exempt offering''
but to ``each exempt offering that prohibits the use of general
solicitation''); and ABA Letter (recommending revisions to
paragraphs (i) and (ii) of Rule 152(a)(1), as proposed, ``[s]ince
these Rule 152(a)(l) tests are intended to apply only to exempt
offerings for which general solicitation is not permitted, but may
be used in the context of concurrent or successive offerings with
one exempt offering permitting general solicitation (such as Rule
506(c)) and the other prohibiting general solicitation (such as Rule
506(b))''). See also 2016 Forum Report; 2017 Forum Report; and 2018
Forum Report (all three forums recommending that the Commission
clarify the relationship of exempt offerings in which general
solicitation is not permitted with Rule 506(c) offerings involving
general solicitation).
    \58\ See e.g., CFA Letter; and Md. St. Bar Assoc. Letter.
    \59\ See ABA Letter (``An issuer should be able to rely on Rule
152(a)(l) if the issuer has a reasonable belief, based on the facts
and circumstances, that each purchaser (rather than `purchasers') in
such exempt offering (rather than `each exempt offering') either (i)
was not solicited through the use of general solicitation in
connection with the offerings not permitting general solicitation
that are being analyzed or (ii) established a substantive
relationship with the issuer before the offer was made (rather than
`commenced') to that purchaser.'').
    \60\ See Fried Frank Letter.
    \61\ See IPA Letter.
    \62\ See Invesco Letter (suggesting eliminating the prohibition
on general solicitation ``or combining the safe harbors laid out in
Rules 506(b) and (c) to permit open communications about an offering
when targeted at a limited group of purchasers at a higher
eligibility level than the minimums provided for in the `accredited
investor' definition.''); and IPA Letter (stating that the
prohibition on general solicitation in an exempt offering is
archaic, and there are a variety of ways that investor protections
can be built into securities offerings ``without regulating how the
investor became aware of the offering.'').
---------------------------------------------------------------------------

    Other commenters requested clarifications and modifications with
respect to proposed Rule 152(a)(2), concerning an exempt offering
permitting general solicitation that includes information about the
material terms of a concurrent offering under another exemption also
permitting general solicitation. One commenter recommended revising the
rule to clarify whether the requirement in proposed Rule 152(a)(2) that
the offering materials mentioning the terms of the other concurrent
offering must comply with ``the requirements of each exemption'' refers
solely to the offering materials, or to the offering in general.\63\
This commenter also expressed concern that this aspect of the proposal
may contradict the general principle that each exempt offering should
be analyzed individually for compliance only with its claimed
exemption.\64\ Another commenter stated its specific concerns about
potential difficulties issuers may have in complying with Rule
152(a)(2) in connection with concurrent Regulation A and Regulation
Crowdfunding offerings.\65\
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    \63\ See Md. St. Bar Assoc. Letter.
    \64\ See id.
    \65\ See CrowdCheck Letter (stating that when a Form C discusses
the material terms of a concurrent Regulation A offering that has
been qualified, it is problematic for the issuer to file on EDGAR a
Form C with a live active hyperlink to the Regulation A offering
circular in order to satisfy the issuer's delivery obligation under
Regulation A, and also noting that a Form 1-A filed with the
Commission that discusses the material terms of a Regulation
Crowdfunding offering would not comply with the limitations on
advertising in Rule 204 of Regulation Crowdfunding).
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c. Final Amendments
    After considering the comments, we are adopting a new comprehensive
integration framework, in new Rule 152,\66\ substantially as proposed,
but with modifications in response to comments received. In addition to
introductory anti-evasion language, new Rule 152(a) sets forth a
general principle of integration, and applies the general principle to
two specific fact patterns, if the four safe harbors set forth in new
Rule 152(b) do not apply.
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    \66\ Revised Rule 152 as adopted will replace current Rules 152
and 155 concerning the integration of non-public and public
offerings and references to Rule 152 will replace the integration
provisions of Regulation D, Regulation A, Regulation Crowdfunding,
and Rules 147 and 147A. Consistent with current Rule 155, new Rule
152 specifies that the provisions of the rule are not available to
any issuer for any transaction or series of transactions that,
although in technical compliance with the rule, is part of a plan or
scheme to evade the registration requirements of the Securities Act.
As a result of the amendments, Rule 155 will be removed and
reserved.
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i. Introductory Language
    We are adopting the introductory language of Rule 152 substantially
as proposed to describe what is provided in the rule and caution
issuers that Rule 152 may not be used as part of a plan or scheme to
evade the registration requirements of the Securities Act. As suggested
by a commenter, we have revised the introductory language to encompass
all of the provisions of the rule, not just the provisions of the safe
harbors. Therefore, the provisions of

Rule 152 will not have the effect of avoiding integration for any
transaction or series of transactions that, although in technical
compliance with the rule, is part of a plan or scheme to evade the
registration requirements of the Securities Act. We believe this change
adds important clarity about the availability of Rule 152 as a basis
for concluding that two or more offerings will not be integrated in
certain situations by making it clear that, although it may be possible
to structure two or more offerings such that they appear to technically
comply with the terms of applicable exemptions, if that structuring is
part of a plan or scheme to evade the registration requirements of the
Securities Act, the offerings would still be subject to integration.
ii. Integration Framework and General Principle
    The general principle of integration we are adopting in Rule 152(a)
looks to the particular facts and circumstances of each offering.\67\
Specifically, the general principle provides that, for all offerings
not covered by a safe harbor in Rule 152(b), offers and sales will not
be integrated if, based on the particular facts and circumstances, the
issuer can establish that each offering either complies with the
registration requirements of the Securities Act, or that an exemption
from registration is available for the particular offering.
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    \67\ Consistent with the discussion in the Proposing Release and
to provide further clarification, we note that the focus of this
rulemaking effort is capital-raising offerings. However, the new
rules that we adopt in this release, especially new Rule 152, apply
equally to a series of transactions, whether registered or exempt
from Securities Act registration, that involve one or more business
combination transactions and/or capital-raising transactions that
occur concurrently or close in time. The new rules that we adopt in
this release do not otherwise alter or affect the current regulatory
scheme that governs communications made in connection with business
combination transactions, such as 17 CFR 230.162, 17 CFR 230.165,
and 17 CFR 230.166, which were adopted in recognition of the special
nature of business combination transactions (such as mergers,
recapitalizations, and acquisitions). See Regulation of Takeovers
and Security Holder Communications, Release No. 33-7760 (Oct. 22,
1999) [64 FR 61408 (Nov. 10, 1999)].
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    We continue to believe that providing additional clarity on how
securities offerings interrelate, including the relationship between
exempt and registered offerings, and when two or more securities
offerings will be considered integrated as one offering, will reduce
perceived risk among issuers when considering and planning possible
capital raising alternatives, while preserving investor protections
built into the respective offering exemptions. We are not persuaded by
commenters who raised concerns that our proposed integration framework
may promote greater reliance on exempt offerings and thereby reduce the
need or incentive for issuers to undertake registered public
offerings.\68\ Rather, we are of the view that the greater clarity that
the integration framework will provide on how securities offerings
interrelate: (1) Will facilitate capital-raising in exempt markets when
using the public markets is not practical, and (2) will provide issuers
the flexibility to choose between types of offerings, which may
encourage more issuers to raise more capital in our securities markets,
including in both exempt and registered offerings.\69\ Because the
amended framework will provide certainty to an issuer conducting exempt
and registered offerings close in time, it may ultimately result in
more issuers undertaking the risks, time, and expense of conducting a
registered public offering. It may also facilitate some small issuers
in raising enough external financing to develop their business model
and scale up to a point where they may become viable candidates for a
registered public offering, thereby providing Main Street investors
with more registered investment options, as well as all the benefits
that flow from registration.
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    \68\ See CFA Letter; and R. Rutkowski Letter. See also Md. St.
Bar Assoc. Letter.
    \69\ See, e.g., Netcapital Letter (suggesting that clarification
and modernization of the existing integration standards is an
important objective that will reduce unnecessary complexities and
reduce uncertainties and risks for issuers when planning and
carrying out capital raising activities). Further, based on data
compiled by the Division of Economic and Risk Analysis on Regulation
D issuer and offering characteristics from 2009 through 2019,
extracted from Forms D filed with the Commission, we note that a
registered offering likely would not be appropriate for the typical
Regulation D issuer, based on the following: The median amount sold
(if reported) was $1.50 million; the median offer size (if reported)
was $2.25 million; the median years of a Regulation D issuer since
incorporation was two years; the median issuer size (if reported) of
Non-Fund Issuers (Revenue) was $1 million to $5 million; only 20% of
all Regulation D offerings used an intermediary; and the average
number of investors in an offering (if reported) was 10 investors.
See Report to Congress on Regulation A/Regulation D Performance: As
Directed by the House Committee on Appropriations in H.R. Rept. No.
116-122 (Aug. 25, 2020), available at https://www.sec.gov/files/report-congress-regulation-a-d.pdf (``Report to Congress on
Regulation A/Regulation D Performance'') at Table 2. See also infra
note 596 and Table 7.
---------------------------------------------------------------------------

    The final rules replace the five-factor test with the Commission's
more recent approach to integration adopted in rulemakings involving
Regulation A, Regulation Crowdfunding, and Rules 147 and 147A. We agree
with commenters who indicated that the amendments provide a clearer
framework for determining whether two offerings occurring close in time
may be considered as integrated than the five-factor test.\70\ As noted
above, we believe that our new integration framework will facilitate
both exempt and registered offerings, by providing greater clarity and
flexibility to issuers in choosing capital raising options to grow
their businesses without compromising investor protections.
---------------------------------------------------------------------------

    \70\ See, e.g., J. Clarke Letter; CrowdCheck Letter; Geraci
Letter; and W. Hubbard Letter.
---------------------------------------------------------------------------

iii. Integration With Exempt Offerings Prohibiting General Solicitation
(Rule 152(a)(1))
    We are adopting Rule 152(a)(1) substantially as proposed, with
clarifying changes in response to commenters' concerns. Accordingly,
for an issuer considering the application of the general principle to
an exempt offering prohibiting general solicitation and one or more
other offerings, new Rule 152(a)(1) requires that the 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.
    New Rule 152(a)(1) has been revised from the proposal in several
ways. First, as suggested by several commenters, the language of Rule
152(a)(1) has been revised to clarify that the restrictions on the use
of general solicitation only apply to the exempt offering prohibiting
general solicitation that is being analyzed under the general
principle, and not to ``each exempt offering.'' We have also revised
Rule 152(a)(1) to clarify that in exempt offerings prohibiting general
solicitation, it is the obligation of the issuer, or any person acting
on the issuer's behalf, to refrain from the use of general solicitation
to solicit a purchaser.
    New Rule 152(a)(1) codifies and expands on guidance the Commission
first issued in 2007, and updated through 2016, which sets forth a
framework for analyzing how an issuer can conduct simultaneous
registered and private offerings.\71\ Since the adoption of Rule 506(c)
by the Commission in 2013, commenters have requested that the
Commission's 2007 guidance on concurrent registered and

private offerings be extended to concurrent Rule 506(c) and Rule 506(b)
offerings.\72\ Under the new integration principle in Rule 152(a),
issuers may conduct concurrent Rule 506(c) and Rule 506(b) offerings,
or any other combination of concurrent offerings, involving an offering
prohibiting general solicitation and another offering permitting
general solicitation, without integration concerns, so long as the
provisions of Rule 152(a)(1) and all other conditions of the applicable
exemptions are satisfied.\73\
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    \71\ See supra text accompanying notes 28-32.
    \72\ See Fried Frank Letter; and Md. St. Bar Assoc. Letter. See
also 2016 Forum Report; 2017 Forum Report; and 2018 Forum Report
(all three forums recommended that the Commission clarify the
relationship of exempt offerings in which general solicitation is
not permitted with Rule 506(c) offerings involving general
solicitation).
    \73\ We caution issuers, however, that a general solicitation
permitted in connection with one offering that mentions the material
terms of a concurrent or subsequent exempt offering prohibiting
general solicitation may constitute an offer for the concurrent or
subsequent exempt offering prohibiting general solicitation and
thereby violate the prohibition on general solicitation with respect
to that concurrent or subsequent offering prohibiting general
solicitation. See Interpretive Release on Regulation D, Release No.
33-6455 (Mar. 3, 1983) [48 FR 10045 (Mar. 10, 1983)] at Section
III(c).
---------------------------------------------------------------------------

    In response to commenters who raised concerns that the proposed
language of Rule 152(a)(1) could enable an issuer to identify investors
through a general solicitation and then sell to such investors in a
subsequent exempt offering prohibiting general solicitation,\74\ we
note the introductory language, discussed above, which clarifies that
Rule 152 may not be used as part of a plan or scheme to evade the
registration requirements of the Securities Act, as well as the
requirement in new Rule 152(a)(1) itself, which would not allow an
issuer to avoid integration of such offerings. For example, an issuer
could not engage in general solicitation in an offering made in
reliance on Rule 506(c) and then sell to investors in an offering made
in reliance on Rule 506(b), unless either the issuer did not solicit
the purchaser in the Rule 506(b) offering through the use of the
general solicitation used in the Rule 506(c) offering, or the issuer
established a substantive relationship with such purchaser prior to the
commencement of the Rule 506(b) offering.\75\
---------------------------------------------------------------------------

    \74\ See supra notes 57-58.
    \75\ An issuer may not conduct a Rule 506(c) general
solicitation in order to identify potential investors for the Rule
506(b) offering. In that instance, such Rule 506(b) offering may be
deemed to be commenced at the time of such solicitation under new
Rule 152(c).
---------------------------------------------------------------------------

    New Rule 152(a)(1)(ii) codifies and expands the Commission's 2007
guidance that the existence of a pre-existing substantive relationship
between the issuer, or its agent, and a prospective investor may be one
means by which an investor may become interested in, or become aware
of, a private placement conducted while a registration statement for a
public offering is on file with the Commission that may be consistent
with Section 4(a)(2). In response to a commenter that questioned the
application of this guidance,\76\ we also confirm that the existence of
such a relationship prior to the commencement of an offering is one
means, but not the exclusive means, of demonstrating the absence of a
general solicitation in a Regulation D offering.\77\ Accordingly, an
offer of the issuer's securities to a person with whom the issuer, or a
person acting on its behalf, has a pre-existing substantive
relationship would not constitute a general solicitation, so long as
the relationship was established prior to the commencement of the
offering.
---------------------------------------------------------------------------

    \76\ See Md. St. Bar Assoc. Letter.
    \77\ See Regulation D; Accredited Investor and Filing
Requirements, Release No. 33-6825 (Mar. 15, 1989) [54 FR 11369 (Mar.
20, 1989)], at note 12.
---------------------------------------------------------------------------

    We reiterate the guidance provided in the Proposing Release that we
generally view a ``pre-existing'' relationship as one that the issuer
has formed with an offeree prior to the commencement of the offering
or, alternatively, that was established through another person (for
example, a registered broker-dealer or investment adviser) prior to
that person's participation in the offering.\78\ A ``substantive''
relationship is one in which the issuer (or a person acting on its
behalf, such as a registered broker-dealer or investment adviser) has
sufficient information to evaluate, and does, in fact, evaluate, an
offeree's financial circumstances and sophistication, in determining
his or her status as an accredited or sophisticated investor.\79\
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    \78\ Certain offerings by private funds that rely on the
exclusions from the definition of ``investment company'' set forth
in Investment Company Act Sections 3(c)(1) (15 U.S.C. 80a-3(c)(1)
and 3(c)(7) (15 U.S.C. 80a-3(c)(7) posted on a website or platform
may be able to rely on a limited staff accommodation with respect to
the timing of the formation of a relationship. See Division of
Investment Management no-action letter to Lamp Technologies, Inc.
(May 29, 1997).
    \79\ We do not believe that self-certification alone (by
checking a box) without any other knowledge of a person's financial
circumstances or sophistication would be sufficient to form a
``substantive'' relationship for these purposes. Persons other than
registered broker-dealers and investment advisers may form a pre-
existing, substantive relationship with an offeree as a means of
establishing that a general solicitation is not involved in a
Regulation D offering. Generally, whether a ``pre-existing,
substantive relationship'' exists turns on procedures established by
broker-dealers in connection with their customers. This is because
traditional broker-dealer relationships require that a broker-dealer
deal fairly with, and make suitable recommendations to, customers,
and, thus, implies that a substantive relationship exists between
the broker-dealer and its customers. We have long stated, however,
that the presence or absence of a general solicitation is always
dependent on the facts and circumstances of each particular case.
Thus, there may be facts and circumstances in which a third party,
other than a registered broker-dealer, could establish a ``pre-
existing, substantive relationship'' sufficient to avoid a ``general
solicitation.'' See, e.g., Use of Electronic Media, Release No. 33-
7856 (Apr. 28, 2000) [65 FR 25843 (May 4, 2000)] (``Use of
Electronic Media Release''). We also recognize there may be
particular instances where issuers may develop pre-existing,
substantive relationships with offerees. However, in the absence of
a prior business relationship or a recognized legal duty to
offerees, it is likely more difficult for an issuer to establish a
pre-existing, substantive relationship, especially when
contemplating or engaged in an offering over the internet. Issuers
would have to consider not only whether they have sufficient
information about particular offerees, but also whether they in fact
use that information appropriately to evaluate the financial
circumstances and sophistication of the offerees prior to commencing
the offering.
---------------------------------------------------------------------------

    Investors with whom the issuer has a pre-existing substantive
relationship may include the issuer's existing or prior investors,
investors in prior deals of the issuer's management, or friends or
family of the issuer's control persons. Similarly, such investors may
also include customers of a registered broker-dealer or investment
adviser with whom the broker-dealer or investment adviser established a
substantive relationship prior to the participation in the exempt
offering by the broker-dealer or investment adviser.\80\
---------------------------------------------------------------------------

    \80\ Certain investment advisers that rely on an exemption from
registration under the Investment Advisers Act of 1940, 15 U.S.C.
80b-1 et seq. (``Advisers Act'') may be registered under an
appropriate State authority.
---------------------------------------------------------------------------

    We are not providing guidance, as requested by a commenter, with
respect to the relevant facts and circumstances to be considered in
applying Rule 152(a)(1). We believe it is incumbent on the issuer and
its agents to consider all relevant facts and circumstances when
analyzing whether the offering satisfies the requirements of Rule 152.
iv. Integration With Exempt Offerings Permitting General Solicitation
(Rule 152(a)(2))
    We are adopting new Rule 152(a)(2), substantially as proposed, with
certain clarifying revisions in response to commenters' concerns. In
the context of two or more concurrent offerings each relying on a
Securities Act exemption permitting general solicitation,\81\ new

Rule 152(a)(2) clarifies that an issuer's general solicitation offering
materials for one offering that includes information about the material
terms of a concurrent offering under another exemption may constitute
an ``offer'' of the securities in such other offering, and therefore
the offer must comply with all the requirements for, and restrictions
on, offers under the exemption being relied on for such other offering,
including any necessary legends or communications restrictions.\82\
---------------------------------------------------------------------------

    \81\ For example, Rule 506(c), Regulation A, and Regulation
Crowdfunding. Concurrent offerings permitting general solicitation
may also include intrastate or regional offerings relying on Rules
147 and 147A or 17 CFR 230.504(b)(1)(i) (``Rule 504(b)(1)(i)''), 17
CFR 230.504(b)(1)(ii) (``Rule 504(b)(1)(ii)''), or 17 CFR
230.504(b)(1)(iii) (``Rule 504(b)(1)(iii)''), all of which permit
general solicitation but also require compliance with State
registration requirements or exemptions to State registration under
State securities laws. However, an issuer would not be able to
describe the terms of a Rule 147 offering using any form of general
solicitation viewable by out-of-state residents, as this would
constitute an offer by the issuer to residents residing out of the
State in which the issuer has its principal place of business, which
is prohibited by the Rule 147 safe harbor for a valid Section
3(a)(11) exempt offering. Two or more exempt offerings permitting
general solicitation occurring close in time, but not concurrent,
may be eligible for the safe harbor in new Rule 152(b)(4).
    \82\ For example, the limitations on advertising the terms of an
offering pursuant to Rule 204 of Regulation Crowdfunding would limit
the issuer's ability to reference the terms of that offering in a
general solicitation in connection with a concurrent offering made
pursuant to Regulation A, Rule 506(c), or Rule 147A. See Concept
Release, at note 483. See infra Section II.B.3 for a discussion of
revisions we are making to Rule 204 of Regulation Crowdfunding.
---------------------------------------------------------------------------

    New Rule 152(a)(2) builds on the Commission guidance in its 2015
Regulation A and Regulation Crowdfunding rulemakings and in its 2016
Rule 147 and Rule 147A rulemaking to provide issuers with greater
flexibility and the ability to rely on existing Securities Act
exemptions more effectively without compromising the investor
protections of each exemption.\83\
---------------------------------------------------------------------------

    \83\ See 2015 Regulation A Release, at Section II.B.5;
Crowdfunding Adopting Release, at Section II.A.1.c; and Intrastate
and Regional Offerings Release, at Section II.B.5.
---------------------------------------------------------------------------

    For example, under new Rule 152(a)(2), an issuer may undertake an
offering in reliance on Rule 506(c), so long as the issuer meets all of
the conditions of that exemption, including taking reasonable steps to
verify that all purchasers in the Rule 506(c) offering are accredited
investors, while conducting a concurrent offering in reliance on
Regulation A, so long as the concurrent offering complies with all the
requirements of Regulation A. If this issuer were to discuss in its
Rule 506(c) general solicitation materials the material terms of the
Regulation A offering, new Rule 152(a)(2) would require the Rule 506(c)
general solicitation to comply with all the requirements for offers
under Regulation A, including all necessary legends and comply with any
restrictions on the use of general solicitation imposed on issuers
making offers under Regulation A.\84\ Similarly, an issuer undertaking
a Rule 506(c) offering concurrently with a Regulation Crowdfunding
offering must make sure that any general solicitation materials used in
connection with the Rule 506(c) offering that mention the material
terms of the Regulation Crowdfunding offering comply with the off-
portal offering limitations in Rule 204 of Regulation Crowdfunding.\85\
---------------------------------------------------------------------------

    \84\ Rule 255 of Regulation A requires certain statements in any
communications constituting offers made in reliance on Regulation A.
Any such legends or statements need not be included in the issuer's
Rule 506(c) general solicitation materials if such materials do not
mention the material terms of the other concurrent offering.
    \85\ See infra Section II.B.3 for a discussion of revisions
adopted to Rule 204 of Regulation Crowdfunding.
---------------------------------------------------------------------------

2. Integration Safe Harbors
    The Commission proposed new Rule 152(b) which would provide four
non-exclusive safe harbors from integration. For offers and sales
meeting the conditions of these safe harbors, the issuer would not need
to conduct any further integration analysis. A number of commenters
supported the proposed safe harbors,\86\ indicating that the safe
harbors would provide clarity and bright line rules to simplify
compliance.\87\ Some commenters recommended expanding on the proposed
safe harbors.\88\
---------------------------------------------------------------------------

    \86\ See Fried Frank Letter; Geraci Law Letter; W. Hubbard
Letter; Letter from Raise Green Inc., and New Haven Community Solar,
LLC dated June 1, 2020 (``Raise Green & New Haven Comm. Solar
Letter''); D. Burton Letter; and Shearman & Sterling Letter.
    \87\ See, e.g., ABA Letter (supporting harmonization of the
rules for both exempt and registered offerings and simplifying the
integration analysis); Geraci Law Letter; and Raise Green & New
Haven Comm. Solar Letter.
    \88\ See Fried Frank Letter (recommending an additional safe
harbor providing that any offering commenced in reliance on an
exemption that does not permit general solicitation can be continued
in reliance on an exemption that does permit general solicitation);
and Shearman & Sterling Letter (recommending revisions to the
proposed safe harbors to cover shelf registration statements and the
exercise of outstanding warrants or the conversion of convertible or
exchangeable securities).
---------------------------------------------------------------------------

    Several commenters, however, opposed one or more of the proposed
safe harbors.\89\ Some of these commenters expressed particular concern
that the revisions could lead to more frequent offerings involving non-
accredited investors.\90\ One commenter expressed concern that a 30-day
integration safe harbor could render the integration doctrine a
nullity.\91\
---------------------------------------------------------------------------

    \89\ See, e.g., NASAA Letter; CFA Letter; Better Markets Letter;
Md. St. Bar Assoc. Letter; and CII Letter.
    \90\ See, e.g., CII Letter; and NASAA Letter.
    \91\ See NASAA Letter.
---------------------------------------------------------------------------

    Some commenters expressed concern with the proposed approach to
expanding the integration framework or offered alternatives for how to
expand the integration framework.\92\ One commenter recommended use of
a single integration safe harbor that would permit issuers intending to
conduct distinct offerings under different Securities Act rules to
treat them as separate so long as those offerings are reasonably
conducted commensurate with the requirements of such rules.\93\
---------------------------------------------------------------------------

    \92\ See, e.g., CrowdCheck Letter (expressing concern that the
focus on the safe harbors may lead to issuers relying on the safe
harbors instead of the general principles); Invesco Letter; W.
Hubbard Letter (recommending a safe harbor for all offers or sales
to investors with whom the issuer has a pre-existing substantive
relationship, but opposing a safe harbor for all offerings limited
to qualified institutional buyers and accredited investors that
would exclude non-accredited investors); and J. Clarke Letter
(recommending a safe harbor for issuers that comply with a new
recommended disclosure that integrates Form D, Form C, and an
issuer's offering statements).
    \93\ See Invesco Letter.
---------------------------------------------------------------------------

a. 30-Day Integration Safe Harbor (Rule 152(b)(1))
    Current Securities Act integration safe harbors generally provide
for a six-month safe harbor time period, outside of which other
offerings will not be integrated or considered as part of the same
offering.\94\
---------------------------------------------------------------------------

    \94\ See Rule 502(a), 17 CFR 230.251(c) (``Rule 251(c)''), 17
CFR 230.147(g) (``Rule 147(g)''), and 17 CFR 230.147A(g) (``Rule
147A(g)''). These rules rely on a six-month time period, but include
exceptions for certain offers and sales under specific exemptions or
circumstances. For example, Rule 502(a) excludes offers or sales of
securities under an employee benefit plan as defined in 17 CFR
230.405 (``Rule 405''). In addition, Rules 251(c), 147(g), and
147A(g) all exclude from integration all prior offers and sales of
securities without regard to a time period so long as the prior
offers and sales have terminated. Under Rules 147, 147A, and 251,
subsequent offers and sales will not be integrated with offers and
sales that are registered under the Securities Act, exempt from
registration under Rule 701, Regulation A, Regulation S, or Section
4(a)(6) of the Securities Act, or made pursuant to an employee
benefit plan. Further, generally, transactions otherwise meeting the
requirements of an exemption will not be integrated with
simultaneous offers and sales of securities being made outside the
United States in compliance with Regulation S. See, e.g., 17 CFR
230.500(g) (``Rule 500(g)'') and Note to Rule 502(a).
---------------------------------------------------------------------------

i. Proposed Amendments
    The Commission proposed Rule 152(b)(1) to shorten the six-month
time period to 30 days and harmonize current Securities Act exemptions
by providing the same 30-day safe harbor time period throughout the
Securities Act's integration provisions. The proposed safe harbor would
apply to both offerings for which a registration

statement has been filed under the Securities Act and exempt
offerings.\95\ Specifically, the proposed safe harbor in Rule 152(b)(1)
would provide that any offering made more than 30 calendar days before
the commencement of any other offering, or more than 30 calendar days
after the termination or completion of any other offering, will not be
integrated with the other offering, provided that for an exempt
offering for which general solicitation is not permitted, the proposed
safe harbor would require either: (i) That the purchasers were not
solicited through the use of general solicitation, or (ii) that the
issuer established a substantive relationship with the purchasers prior
to the commencement of the offering.
---------------------------------------------------------------------------

    \95\ Both this proposed safe harbor and the safe harbor in
proposed Rule 152(b)(3)(iii) would apply to a registered offering
made more than 30 calendar days after the termination or completion
of any other offering.
---------------------------------------------------------------------------

    In conjunction with this safe harbor, the Commission also proposed
to amend 17 CFR 230.506(b)(2)(i) (``Rule 506(b)(2)(i)'') to address the
concern that a 30-day safe harbor could result in some issuers seeking
to undertake serial Rule 506(b) offerings each month, selling to up to
35 unique non-accredited investors in each offering, potentially
resulting in unregistered sales of securities to hundreds of non-
accredited investors in a year. As proposed, where an issuer conducts
more than one offering under Rule 506(b), the number of non-accredited
investors purchasing in all such offerings within 90 calendar days of
each other would be limited to 35.\96\
---------------------------------------------------------------------------

    \96\ Proposed Rule 506(b)(2)(i) provides that there are no more
than, or the issuer reasonably believes that there are no more than,
35 purchasers of securities from the issuer in offerings under this
section in any 90 calendar day period. Under 17 CFR 230.501(e), only
non-accredited investors are included in computing the number of
``purchasers.''
---------------------------------------------------------------------------

    In addition, because proposed Rule 152(b)(1) would generally
supersede the specific requirements in Rule 155 relating to the
integration of abandoned offerings with subsequent offerings, the
Commission proposed to remove and reserve Rule 155.\97\
---------------------------------------------------------------------------

    \97\ 17 CFR 230.155(b) (``Rule 155(b)'') and 17 CFR 230.155(c)
(``Rule 155(c)'') provide safe harbors for integration of abandoned
offerings. Specifically, Rule 155(b) provides that an abandoned
private offering of securities will not be considered part of an
offering for which the issuer later files a registration statement
if the offering meets certain enumerated conditions, including that
the issuer does not file the registration statement until at least
30 calendar days after termination of all offering activity in the
private offering, unless the issuer and any person acting on its
behalf offered securities in the private offering only to persons
who were (or who the issuer reasonably believes were) accredited
investors or who satisfy the knowledge and experience standard of
Rule 506(b)(2)(ii). Rule 155(c) provides a similar safe harbor for a
registered offering followed by a private offering of securities
subject to a similar set of enumerated conditions, including that
neither the issuer nor any person acting on the issuer's behalf
commences the private offering earlier than 30 calendar days after
the effective date of withdrawal of the registration statement.
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ii. Comments
    Some commenters supported,\98\ and others opposed,\99\ proposed
Rule 152(b)(1). Some commenters supporting the 30-day safe harbor
expressed their belief that 30 days was sufficient to mitigate concerns
that an exempt offering may condition the market for a subsequent
offering or undermine the protections of a subsequent exempt
offering.\100\ Another commenter stated that a 30-day time period is
consistent with market practice in registered offerings to address gun-
jumping concerns.\101\ One supportive commenter suggested that the
Commission clarify that ``the 30-day period before and the 30-day
period after each offering--have to be free of offers in all cases.''
\102\ Commenters opposed to the proposed 30-day safe harbor expressed
concern that the 30 day time period was too short.\103\ Many of these
commenters recommended a 90-day safe harbor.\104\
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    \98\ See, e.g., J. Clarke Letter; Republic Letter; Letter from
Securities Industry and Financial Markets Association dated June 1,
2020 (``SIFMA Letter''); W. Hubbard Letter; D. Burton Letter;
CrowdCheck Letter; and Shearman & Sterling Letter.
    \99\ See, e.g., Letter from Silicon Prairie Holdings, Inc. dated
May 31, 2020 (``Silicon Prairie Letter''); NASAA Letter; Md. St. Bar
Assoc. Letter; Letter from Americans for Financial Reform Education
Fund dated June 1, 2020 (``AFREF Letter''); CFA Letter; R. Campbell
Letter; and R. Rutkowski Letter.
    \100\ See, e.g., Shearman & Sterling Letter; and SIFMA Letter
(suggesting a 30-day cooling off period is appropriate given changes
to markets, technologies and the securities laws since the six-month
time frame was adopted).
    \101\ See CrowdCheck Letter.
    \102\ See ABA Letter (suggesting clarification that the 30-day
separation period be ``applied separately to each other offering
potentially subject to integration, on an individualized basis, with
a 30-day separation required between each pair of offerings relying
on this provision.'').
    \103\ See, e.g., Silicon Prairie Letter; NASAA Letter; Md. St.
Bar Assoc. Letter; AFREF Letter; CFA Letter; and R. Rutkowski
Letter.
    \104\ See Silicon Prairie Letter (suggesting that 30 days is not
enough time to assess an offering); NASAA Letter (expressing concern
that the 30-day safe harbor would render integration a nullity); Md.
St. Bar Assoc. Letter (suggesting that 90 days would more
effectively impede issuers from improperly avoiding registration by
artificially dividing a single offering into multiple offerings);
CFA Letter (citing to the Regulation D 2007 Proposing Release, at
note 135, and noting that for issuers that provide quarterly
reports, the 90-day requirement would provide transparency and time
for investors and the market to take into account the offering and
its results); AFREF Letter; CFA Letter; and R. Rutkowski Letter.
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    Commenters addressing the proposal to revise Rule 506(b) to limit
the total number of non-accredited investors purchasing in such
offerings to 35 persons within 90 calendar days were divided in their
support for,\105\ or opposition to,\106\ the proposed amendments. One
commenter stated that limiting sales to non-accredited investors to no
more than 35 in any 90-day period will encourage issuers seeking
capital from non-accredited investors to use Regulation Crowdfunding
and Regulation A.\107\ Another commenter suggested shortening the time
period or increasing the number of non-accredited investors in the
proposal.\108\
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    \105\ See, e.g., Md. St. Bar Assoc. Letter (supporting the
proposal but acknowledging a preference for a 90-day, safe harbor);
and CFA Letter (contending that the speed with which information is
disseminated for a small, private company has not increased in the
way it has for public companies and that while the markets have
changed a great deal since the 1980s, today's markets do not look
all that different than they did in 2007, when the Commission
rejected a 30-day cooling off period for Regulation D offerings).
    \106\ See, e.g., Ketsal Letter (recommending eliminating the
limit on sales to non-accredited investors); and Letter from Darshun
N. Kendrick dated May 14, 2020 (suggesting the proposed amendment
would not help with clarifying or streamlining the rules).
    \107\ See Republic Letter.
    \108\ See W. Hubbard Letter.
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    Commenters were also divided in their support for,\109\ or
opposition to,\110\ conditioning the availability of the 30-day safe
harbor on the requirement that, for an exempt offering for which
general solicitation is not permitted, the issuer did not solicit the
purchasers in such offering through the use of general solicitation or
that the issuer established a substantive relationship with the
purchaser prior to commencement of the offering for which general
solicitation is not permitted. One commenter opposed to these
requirements suggested that the effects of any offers made more than 30
days prior to or after the commencement of another offering would be
sufficiently diluted by intervening market developments so as to render
an integration analysis unnecessary.\111\ This commenter further stated
that an issuer should be able to rely on the general principle without
having to wait 30 calendar days from the termination of the prior
offering if the issuer has a reasonable belief, based on the facts and
circumstances, that purchasers in an

exempt offering for which general solicitation is not permitted were
either not solicited through general solicitation or had a pre-existing
relationship with the issuer or person acting on its behalf.\112\
Another commenter expressed concern that an issuer relying on the
exemptions provided by Section 4(a)(2), Rule 504, and Rule 506(b) would
not likely be able to satisfy the conditions to the availability of the
30-day safe harbor as proposed.\113\
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    \109\ See, e.g., CrowdCheck Letter; J. Clarke Letter; and W.
Hubbard Letter (recommending allowing a limited number of investors
to be solicited through general solicitation in a twelve month
period).
    \110\ See, e.g., Fried Frank Letter (recommending not
integrating offerings after 30 days regardless of whether the
purchasers may have been solicited using general solicitation);
Shearman & Sterling Letter; and IPA Letter (suggesting that the
proposed amendment would address the integration concern, but not
the general solicitation concern).
    \111\ See Shearman & Sterling Letter.
    \112\ See id. See also ABA Letter (recommending that both Rule
152(a)(1) and Rule 152(b)(1) ``be tied to the particular
purchaser,'' rather than ``purchasers'').
    \113\ See R. Campbell Letter (stating amending proposed Rule 152
``to provide clear and complete two-way safe harbor integration
protection for all exemptions . . . is especially important for the
exemptions used by small businesses, including the exemptions
provided by Section 4(a)(2), Rule 504 and Rule 506(b)'').
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    Some commenters also recommended that the Commission harmonize the
provisions in the general principle of integration in proposed Rule
152(a)(1) with the similar provision in the safe harbor in proposed
Rule 152(b)(1), or provide an explanation of how they differ.\114\
These commenters stated their belief that, although paragraph (a)(1)
and the proviso in paragraph (b)(1) of proposed Rule 152 have an almost
identical standard, unlike the general principle of integration in
proposed Rule 152(a)(1), the 30-day safe harbor in paragraph (b)(1)
omits the ``reasonable belief'' standard, as well as the provision
allowing a ``person acting on the issuer's behalf,'' to establish a
pre-existing substantive relationship with the purchaser.\115\
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    \114\ See, e.g., Md. St. Bar Assoc. Letter; and Shearman &
Sterling Letter (suggesting that as proposed, the non-solicitation
and pre-existing relationship conditions to the availability of the
30-day safe harbor are stricter than the corresponding requirements
in the general principle of integration).
    \115\ Id.
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    Some commenters recommended alternative approaches to the proposal,
such as: Eliminating the prohibition on general solicitation in Rule
506(b), or combining the exemptions laid out in Rules 506(b) and (c) to
permit open communications to a more limited group of purchasers at a
higher eligibility level; \116\ or permitting serial offerings pursuant
to a new reporting form for exempt offerings.\117\
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    \116\ See Invesco Letter.
    \117\ See J. Clarke Letter.
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iii. Final Amendments
    After considering the comments received, we are adopting the 30-day
non-exclusive safe harbor in Rule 152(b)(1) with modifications
consistent with certain commenters' suggestions. We are also
harmonizing current Securities Act exemptions by replacing their
existing integration provisions with a reference to Rule 152. This safe
harbor will apply to both offerings for which a registration statement
has been filed under the Securities Act and exempt offerings.\118\
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    \118\ Both this safe harbor and the safe harbor in 17 CFR
230.152(b)(3)(iii) (``Rule 152(b)(3)(iii)'') may apply to a
registered offering made more than 30 calendar days after the
termination or completion of any other offering.
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    Several commenters stated that a 90-day safe harbor may be more
effective at preventing issuers from attempting to improperly avoid
Securities Act registration by artificially dividing a single offering
into multiple offerings such that Securities Act exemptions would apply
to the multiple offerings that would not be available for the combined
offering. However, we believe that a 30-day time frame is sufficient to
mitigate concerns that an exempt offering may condition the market for
a subsequent registered offering or undermine the protections of a
subsequent exempt offering. In light of the changes in technology, the
markets, and the securities laws since the adoption of Regulation D in
1982, we believe that a 30-day safe harbor time period will enhance an
issuer's flexibility and expand the capital-raising options available
to issuers under the Securities Act to access capital when needed,
while still providing a sufficient length of time to impede what
integration seeks to prevent: Improperly avoiding registration by
artificially dividing a single offering into multiple offerings.
    We are also not persuaded by commenters that suggested that a 90-
day time frame is preferable because it would allow needed time for
investors and the market to assess an offering, in light of the
accelerating speed and consumption of electronically disseminated
information in today's financial marketplace, and especially the
rapidly evolving informational environment since the adoption of a six-
month safe harbor in Regulation D in 1982.\119\ Because of this
informational access, we also think it likely that the effects of any
offers made more than 30 days prior to or after commencement of another
offering would be sufficiently diluted by intervening market
developments so as to render an integration analysis unnecessary.
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    \119\ See Regulation D Adopting Release, at text accompanying
note 18. See also Proposed Revisions of Certain Exemptions from the