Relief for Form ID Filers and Regulation Crowdfunding and Regulation A Issuers Related to Coronavirus Disease 2019 (COVID-19), 17747-17751 [2020-06721]

Download as PDF Federal Register / Vol. 85, No. 62 / Tuesday, March 31, 2020 / Rules and Regulations each side of the 338° bearing from the airport, extending from the 6.4-mile radius to 8.4 miles north of the Bend Municipal Airport. no extraordinary circumstances exist that warrant preparation of an environmental assessment. List of Subjects in 14 CFR Part 71 Airspace, Incorporation by reference, Navigation (air). Adoption of the Amendment In consideration of the foregoing, the Federal Aviation Administration amends 14 CFR part 71 as follows: PART 71—DESIGNATION OF CLASS A, B, C, D, AND E AIRSPACE AREAS; AIR TRAFFIC SERVICE ROUTES; AND REPORTING POINTS Authority: 49 U.S.C. 106(f), 106(g), 40103, 40113, 40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959–1963 Comp., p. 389. [Amended] * * * Paragraph 6004 Class E Airspace Areas Designated as an Extension to a Class D or Class E Surface Area. * * * * ANM OR E4 Bend, OR (NEW) Bend Municipal Airport, OR (Lat. 44°05′40″ N, long. 121°12′01″ W) That airspace extending upward from the surface within 1 mile each side of the 167° bearing from the airport, extending from the 3.9-mile radius to 6.8 miles south of the Bend Municipal Airport. Paragraph 6005 Class E Airspace Areas Extending Upward From 700 Feet or More Above the Surface of the Earth. jbell on DSKJLSW7X2PROD with RULES * * * * * ANM OR E5 Bend, OR (AMENDED) Bend Municipal Airport, OR (Lat. 44°05′40″ N, long. 121°12′01″ W) That airspace extending upward from 700 feet above the surface within a 6.4-mile radius of the airport, and within 1.1 miles each side of the 167° bearing from the airport, extending from 6.4-mile radius to 8.8 miles south of the airport, and within 3.8 miles VerDate Sep<11>2014 17 CFR Parts 227, 230, and 232 Relief for Form ID Filers and Regulation Crowdfunding and Regulation A Issuers Related to Coronavirus Disease 2019 (COVID–19) 16:11 Mar 30, 2020 Jkt 250001 We are adopting temporary final rules for Form ID filers and for issuers subject to reporting obligations pursuant to Regulation Crowdfunding and Regulation A in order to address the needs of companies directly or indirectly affected by coronavirus disease 2019 (COVID–19). The temporary final rules provide temporary relief from the Form ID notarization process for certain filers and extend the filing deadlines for specified reports and forms due pursuant to Regulation Crowdfunding and Regulation A for certain issuers. DATES: The amendment to 17 CFR 232.10 is effective from March 30, 2020 through September 30, 2020. The amendments to 17 CFR 227.202 and 17 CFR 230.257 are effective from March 30, 2020 through July 15, 2020. FOR FURTHER INFORMATION CONTACT: Rosemary Filou, Chief Counsel and Acting Deputy Director of the EDGAR Business Office, at (202) 551–8900; or Charlie Guidry, Special Counsel, Office of Small Business Policy, Division of Corporation Finance, at (202) 551–3460; U.S. Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–3628. SUPPLEMENTARY INFORMATION: We are adopting amendments to 17 CFR 232.10 (‘‘Rule 10’’) of Regulation S–T,1 17 CFR 227.202 (‘‘Rule 202’’) of Regulation Crowdfunding 2 under the Securities Act of 1933 (the ‘‘Securities Act’’),3 and SUMMARY: ANM OR E2 Bend, OR (NEW) Bend Municipal Airport, OR (Lat. 44°05′40″ N, long. 121°12′01″ W) That airspace extending upward from the surface within a 3.9-mile radius of the Bend Municipal Airport, excluding that airspace within 1 mile of a point in space at lat. 44°02′51″ N, Long. 121°16′30″ W. * SECURITIES AND EXCHANGE COMMISSION Securities and Exchange Commission. ACTION: Temporary final rule. Paragraph 6002 Class E Airspace Areas Designated as Surface Areas. * BILLING CODE 4910–13–P AGENCY: 2. The incorporation by reference in 14 CFR 71.1 of FAA Order 7400.11D, Airspace Designations and Reporting Points, dated August 8, 2019, and effective September 15, 2019, is amended as follows: ■ * [FR Doc. 2020–06664 Filed 3–30–20; 8:45 am] [Release No. 33–10768; 34–88492; 39–2531; IC–33832] 1. The authority citation for 14 CFR part 71 continues to read as follows: ■ § 71.1 Issued in Seattle, Washington, on March 25, 2020. Shawn M. Kozica, Group Manager, Western Service Center, Operations Support Group. 17 CFR 230.257 (‘‘Rule 257’’) of Regulation A4 as temporary final rules. I. Introduction The current outbreak of coronavirus disease 2019 (COVID–19) may present challenges to entities and their representatives in timely meeting certain of their obligations under the federal securities laws. In light of this, we are adopting these temporary final rules to address the needs of parties seeking to file a Form ID to gain access to the Commission’s Electronic Data Gathering, Analysis and Retrieval (EDGAR) system and companies directly or indirectly affected by COVID–19 that are subject to reporting obligations pursuant to Regulation Crowdfunding or Regulation A. Section 36 of the Exchange Act of 1934 5 (the ‘‘Exchange Act’’) and Section 28 of the Securities Act 6 provide the Commission with general exemptive authority to conditionally or unconditionally exempt any person, security, or transaction, or any class or classes of persons, securities, or transactions, from any provision or provisions of the Exchange Act and the Securities Act, respectively, or of any rule or regulation thereunder, to the extent that such exemption is necessary or appropriate in the public interest, and is consistent with the protection of investors. Section 6(c) of the Investment Company Act of 1940 7 (the ‘‘Investment Company Act’’) provides that the Commission may conditionally or unconditionally exempt any person, security, or transaction, or any class or classes of persons, securities, or transactions, from any provision or provisions of the Investment Company Act, or any rule or regulation thereunder, if and to the extent that such exemption is necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the Investment Company Act. Section 304(d) of the Trust Indenture Act of 1939 8 (the ‘‘Trust Indenture Act’’) authorizes the Commission to adopt rules to exempt securities or transactions from the provisions of the Trust Indenture Act to the extent that ‘‘such exemption is necessary or appropriate in the public interest and consistent with the protection of 4 17 CFR 230.251 through 230.263. U.S.C. 78a et seq. 6 15 U.S.C. 77z–3. 7 15 U.S.C. 80a et seq. 8 15 U.S.C. 77aaa et seq. 5 15 1 17 CFR part 232. CFR part 227. 3 15 U.S.C. 77a et seq. 2 17 PO 00000 Frm 00027 Fmt 4700 Sfmt 4700 17747 E:\FR\FM\31MRR1.SGM 31MRR1 17748 Federal Register / Vol. 85, No. 62 / Tuesday, March 31, 2020 / Rules and Regulations investors and the purposes fairly intended by’’ the Trust Indenture Act. jbell on DSKJLSW7X2PROD with RULES II. Temporary Relief From Form ID Notarization Requirement In order to use the Commission’s EDGAR system to make filings, an applicant must complete online the Form ID 9 application, and, in accord with Rule 10 of Regulation S–T, ‘‘file, by uploading as a Portable Document Format (PDF) attachment to the Form ID filing, a notarized document, manually signed by the applicant over the applicant’s typed signature, that includes the information required to be included in the Form ID filing and confirms the authenticity of the Form ID filing.’’ 10 A number of filers have indicated that they are having difficulty securing the required notarization to gain access to EDGAR because their employees are teleworking or are otherwise no longer in reasonable proximity of an authorized notary public due to circumstances relating to COVID–19. They have expressed a need for temporary relief from this notarization requirement so that they can make their required filings in a timely manner. We believe it is in the public interest and consistent with investor protection to provide temporary relief from the Form ID notarization process where circumstances related to COVID–19 render it impracticable or impossible to obtain a notarization in a timely fashion. Consequently we are adopting as a temporary final rule a new paragraph (c) to Rule 10 of Regulation S–T that will allow filers to gain access to the EDGAR system on a temporary basis without initially providing the required notarization to the manually signed document. From March 26, 2020 through July 1, 2020, temporary paragraph (c) allows the staff to create EDGAR accounts and issue EDGAR access codes based on a manually signed document without the requisite notarization, provided that the filer indicates on the face of the signed document that it could not obtain the required notarization due to circumstances relating to COVID–19. Filers seeking access to EDGAR in reliance on the temporary final rule may be asked to provide documents, on a 9 17 CFR 239.63; 17 CFR 249.446; 17 CFR 269.7; and 17 CFR 274.402. 10 17 CFR 232.10(b). The requirement to upload a notarized signed Form ID is also specified in the EDGAR Filer Manual, incorporated into Regulation S–T at 17 CFR 232.301 (‘‘Rule 301’’). All references to notarized signatures in Volume I of the EDGAR Filer Manual and the EDGAR Filer Management site (Form ID) should be interpreted consistently with temporary paragraph (c) during the period in which the temporary final rule is in effect. VerDate Sep<11>2014 16:11 Mar 30, 2020 Jkt 250001 supplemental basis, to support their application to assist the staff in validating the request. Once the codes are issued, the filer may commence filing. The filer is required to submit as correspondence via EDGAR a PDF copy of the notarized manually signed document within 90 days of the issuance of the codes under this temporary provision. If it does not do so within the stated timeframe, the Commission staff may inactivate the filer’s EDGAR access codes. In order to provide an additional tool to counteract potential abuse, we also are authorizing the staff to inactivate codes issued pursuant to this temporary rule when the staff has reason to believe that a filer who gained access under the temporary final rule has made illegitimate filings that are inconsistent with the protection of investors. In exercising such authority, the staff may request additional information or documentation from the filer. III. Temporary Relief From Filing Requirements for Issuers Subject to the Reporting Obligations of Regulation Crowdfunding or Regulation A Disruptions as a result of COVID–19 could hamper the efforts of companies and other persons with filing obligations to meet their filing deadlines under Regulation Crowdfunding or Regulation A. At the same time, investors have an interest in the timely availability of required information about these companies. While the Commission believes that the temporary relief from filing requirements provided by the amendments to Rule 202 of Regulation Crowdfunding 11 and Rule 257 of Regulation A12 is both necessary in the public interest and consistent with the protection of investors, we remind companies that are the subject of the relief provided in these temporary final rules to continue to evaluate their obligations to make materially accurate and complete disclosures in accordance with the anti-fraud provisions of the federal securities laws. For example, an issuer relying on the temporary final rules that is conducting a continuous Regulation A offering is responsible for ensuring that the offering materials contain the information required to be included therein. If the issuer is satisfied that the offering materials still contain the material information required to be included therein, it 11 See Rule 202(c) of Regulation Crowdfunding. 17 CFR 227.202(c). 12 See Rule 257(f) of Regulation A. 17 CFR 230.257(f). PO 00000 Frm 00028 Fmt 4700 Sfmt 4700 should nevertheless disclose that it is relying on this relief. Pursuant to Section 28 of the Securities Act, we are adopting temporary final rules providing that an issuer subject to the reporting requirements of either Regulation Crowdfunding or Regulation A is exempt from any requirement to file specified reports or forms with the Commission, and would be considered current in its reporting obligations under Regulation Crowdfunding or Regulation A, where the conditions below are satisfied: • The issuer is not able to meet a filing deadline due to circumstances related to COVID–19; • The issuer promptly discloses on its public website or, for Regulation Crowdfunding issuers, through an intermediary’s platform, or provides direct notification to its investors, that it is relying on the temporary final rules; • The issuer files with the Commission, no later than 45 days after the original filing deadline of the report or form, the report or form required to be filed pursuant to either Regulation Crowdfunding or Regulation A during the period from and including March 26, 2020 to May 31, 2020; and • In any such report or form, the issuer discloses that it is relying on the temporary final rules and states the reasons why, in good faith, it could not file such report or form on a timely basis. For Regulation Crowdfunding, the relief applies to annual reports on Form C–AR, progress updates on Form C–U, and termination of reporting on Form C–TR.13 For Regulation A, the relief applies to post-qualification amendments required at least every 12 months after the qualification date to include updated financial statements, annual reports on Form 1–K, semiannual reports on Form 1–SA, special financial reports on Forms 1–K or 1–SA, current reports on Form 1–U, and exit reports on Form 1–Z.14 The Commission intends to monitor the current situation and may, if necessary, extend the time period during which this relief applies, with any additional conditions the Commission deems appropriate and/or issue other relief. 13 This relief does not apply to Form C or Form C/A. 14 This relief does not apply to a Form 1–A that has not been qualified. E:\FR\FM\31MRR1.SGM 31MRR1 Federal Register / Vol. 85, No. 62 / Tuesday, March 31, 2020 / Rules and Regulations IV. Economic Analysis jbell on DSKJLSW7X2PROD with RULES A. Temporary Relief From Form ID Notarization Requirement The Commission is temporarily providing Form ID filers affected by COVID–19 with a 90-day deferral of the requirement to upload a PDF attachment to the electronic Form ID filing with a copy of a notarized document, manually signed by the applicant over the applicant’s typed signature, that includes the information required to be included in the Form ID filing. Under current filing requirements, the notarized signature is intended to confirm the authenticity of the identity of the Form ID filer. During calendar year 2019, we estimate that 34,512 Form ID filings were accepted by EDGAR. The deferral of the requirement to provide a notarized copy is expected to benefit affected Form ID filers that newly require EDGAR access for electronic filings, particularly natural persons and small business filers, and that cannot secure the required notarization due to circumstances relating to COVID–19 (e.g., because their employees are teleworking or are otherwise no longer in reasonable proximity of an authorized notary public). In the absence of the amendments, such filers might incur high additional costs to obtain the required notarization from a notary public in order to receive EDGAR access expediently or may not be able to receive EDGAR access on a timely basis to satisfy filing requirements. By providing affected filers with a way to access EDGAR expediently, the amendments would increase timeliness in the availability of such filers’ electronic filings and disclosures, which may also benefit investors in affected filers that rely on the information in the electronic filings.15 To the extent that the amendments marginally increase the risk of an applicant that is not the claimed filer gaining access to the EDGAR system and using that access in an improper way (such as making misleading filings), investors may experience costs as a result of relying on such filings. We expect several factors and provisions of the temporary final rules to mitigate these costs. First, the amendment 15 Under these temporary final rules and other filer relief provided by the Commission (see Order Under Section 36 of the Securities Exchange Act of 1934 Modifying Exemptions from the Reporting and Proxy Delivery Requirements for Public Companies, Release No. 34–88465 (March 25, 2020)), some filers affected by COVID–19 are provided an extension of the deadline to make certain required periodic filings. However, such relief does not extend, for example, to filings of beneficial ownership disclosures or filings of Form D. VerDate Sep<11>2014 16:11 Mar 30, 2020 Jkt 250001 requires filers to submit a notarized copy within 90 days rather than waiving the requirement altogether. This provision is expected to benefit investors by reducing the likelihood that an applicant that is not the claimed EDGAR filer that avails itself of relief from the notarization-based authentication requirement retains indefinite access to the EDGAR system. Second, we are authorizing the staff to inactivate codes issued pursuant to this temporary rule where the staff has reason to believe that such action is necessary for the protection of investors, which may further reduce the risk of a new applicant gaining access to the EDGAR system and using that access in an improper way. In exercising such authority, the staff may request additional information or documentation from the filer in order to determine whether continued use of the codes is consistent with the protection of investors. Third, irrespective of the manner in which EDGAR access is obtained, anti-fraud liability under federal securities laws would continue to apply and may serve to mitigate potential risk to investors. Overall, we expect this temporary amendment to have modest economic effects, including modest effects on efficiency, competition, and capital formation. We expect the proposed amendments to marginally increase efficiency for new filers seeking EDGAR access and facing disruptions in access to the services of a notary public. To the extent that small filers may face relatively greater hurdles, these amendments may have a marginally positive effect on competition and facilitate such filers’ access to capital that may require an electronic filing. We have considered reasonable alternatives to this amendment. As an alternative, we could have temporarily waived rather than deferred the notarization requirement for Form ID. The benefits of such an alternative compared to the final rule would be additional cost savings for affected filers. The cost of such an alternative compared to the final rule would be a potentially greater risk to investors in the case of a bad actor obtaining access to EDGAR and using that access in an improper way. As another alternative, we considered a different time-frame for the temporary deferral of the notarization requirement for Form ID filers than 90 days. Compared to the final rule, a shorter (longer) deferral would result in less (more) flexibility for filers affected by COVID–19 seeking to access the EDGAR system and unable to meet the notarization requirement without incurring significant costs PO 00000 Frm 00029 Fmt 4700 Sfmt 4700 17749 while at the same time lower (greater) marginal risk of continued EDGAR access by an applicant other than the claimed filer. B. Temporary Relief From Filing Requirements for Issuers Subject to the Reporting Obligations of Regulation Crowdfunding and Regulation A Regulation Crowdfunding and Regulation A permit offers and sales of securities without registration under the Securities Act, subject to certain limitations and conditions, including compliance with ongoing reporting requirements. Based on staff analysis, between June 19, 2015 16 and December 31, 2019, we estimate that 382 Regulation A offering statements were qualified by the Commission, excluding withdrawn offerings. We estimate that 2,003 Regulation Crowdfunding offerings were filed on Form C between May 16, 2016 and December 31, 2019, excluding withdrawn offerings.17 We lack the data to estimate the number of investors in Regulation A or Regulation Crowdfunding offerings that could be affected if issuers rely on the relief provided by the temporary final rules, because information on the number of investors is generally not required to be disclosed in periodic or current reports required under Regulation A or in periodic reports or progress updates required under Regulation Crowdfunding.18 We are mindful of the costs and benefits of the temporary final rules.19 We believe the temporary final rules will benefit issuers that have an obligation to file specified reports with the Commission pursuant to either Regulation Crowdfunding or Regulation A and have been adversely affected by COVID–19 by permitting them to take additional time to meet their reporting obligations. We expect the relief provided by the temporary final rules will benefit issuers that, absent the 16 June 19, 2015 was the effective date of certain amendments to Regulation A. See Amendments for Small and Additional Issues Exemptions Under the Securities Act (Regulation A), Rel. Nos. 33–9741; 34–74578; 39–2501 (Mar. 25, 2015) [80 FR 21806 (Apr. 20, 2015)]. 17 These figures overstate the number of issuers with obligations to file annual reports under Regulation Crowdfunding, because they do not exclude issuers that have failed to raise the target amount or have exited the reporting regime. 18 Regulation A issuers that file Form 1–Z to suspend reporting are required to disclose the number of shareholders of record. 19 Section 2(b) of the Securities Act [15 U.S.C. 77b(b)] requires the Commission, when engaging in rulemaking where it is required to consider or determine whether an action is necessary or appropriate in the public interest, to consider, in addition to the protection of investors, whether the action will promote efficiency, competition, and capital formation. E:\FR\FM\31MRR1.SGM 31MRR1 jbell on DSKJLSW7X2PROD with RULES 17750 Federal Register / Vol. 85, No. 62 / Tuesday, March 31, 2020 / Rules and Regulations relief, would not be able to avail themselves of the exemption from registration under Regulation Crowdfunding or Regulation A because the timely filing of required reports is a condition to the exemptions. In the absence of this relief, issuers could incur prohibitively high costs in an attempt to meet filing deadlines given the disruptions as a result of COVID–19. The requirements for an issuer to promptly disclose that it is relying on Rule 202(c) of Regulation Crowdfunding or Rule 257(f) of Regulation A and to disclose in the subsequently filed report that it relied on such rule and state the reasons why, in good faith, it could not file a report or form on a timely basis may impose minimal additional costs on issuers availing themselves of this relief. However, we believe that these minimal costs are justified in light of the significant negative implications of not being able to rely on the exemption, the prohibitively high costs an issuer may incur in attempting to file in a timely manner, and the value to investors of the information about the issuer’s reporting status and reasons for not filing a timely report. We also acknowledge that there may be costs imposed on investors, intermediaries, and other market participants due to delayed access to information about offerings conducted in reliance on Regulation A and Regulation Crowdfunding. Generally, reporting requirements strengthen investor protection and decrease the extent of information asymmetries between issuers and investors. Ongoing reporting provides investors with periodically updated information, allowing them to assess investment opportunities based on the information provided and their level of risk tolerance, resulting in better informed investment decisions and improved allocative efficiency. Given that the temporary final rules allow for delayed reporting for a limited time period and only under specified conditions, we do not believe such costs will be significant. The temporary final rules will not substantially affect competition or capital formation. We acknowledge the possibility that the temporary final rules may have a minor impact on efficiency. On the one hand, as noted above, the delay in reporting could marginally affect allocative efficiency to the extent that it allows information asymmetries between investors and issuers to persist for the length of time of the delay. On the other hand, we expect efficiency gains to the extent that the temporary final rules allow issuers to continue to rely on either of the exemptions from VerDate Sep<11>2014 16:11 Mar 30, 2020 Jkt 250001 registration that would not be available if one of the required reports that is a condition to the exemptions was not filed in a timely manner, or to the extent the issuers are able to avoid paying a premium to service providers in an attempt to file in a timely manner by delaying reporting during the specified relief period. As an alternative to the relief specified in the temporary final rules, we could have considered a longer or shorter relief period. While a shorter period would have reduced the costs to investors of asymmetric information, it would also reduce the benefits of the temporary final rules to issuers. Similarly, a longer period would increase the costs to investors. We believe that the delay provided by the temporary final rules is appropriate given the potential impact COVID–19 could have on the efforts of companies to meet filing deadlines pursuant to Regulation Crowdfunding and Regulation A. As another alternative, we could have provided the specified relief but not required issuers to provide disclosure about reliance on the relief, or only required issuers to do so in cases of ongoing offerings. While these alternatives could have lowered issuer costs compared to the temporary final rules, the cost savings would likely be modest given the limited nature of the notice and the flexibility afforded to issuers with regard to how to provide disclosure. Further, under these alternatives, investors, including investors in securities issued in a past offering (particularly, in cases of traded Regulation A securities), would not have the benefit of timely information about an issuer’s reliance on the temporary final rules. IV. Procedural and Other Matters The Administrative Procedure Act (‘‘APA’’) generally requires an agency to publish notice of a rulemaking in the Federal Register and provide an opportunity for public comment. This requirement does not apply, however, if the agency ‘‘for good cause finds . . . that notice and public procedure are impracticable, unnecessary, or contrary to the public interest.’’ 20 The APA also generally requires that an agency publish an adopted rule in the Federal Register at least 30 days before it becomes effective. This requirement does not apply, however, if the agency finds good cause for making the rule effective sooner.21 Given the temporary nature of the relief contemplated by the temporary 20 5 21 5 PO 00000 U.S.C. 553(b)(3)(B). U.S.C. 553(d)(3). Frm 00030 Fmt 4700 Sfmt 4700 final rules and the significant and immediate impact of COVID–19 on affected issuers, as discussed above, the Commission finds that good cause exists to dispense with notice and comment as impracticable and unnecessary, and to act immediately to amend Rule 10 of Regulation S–T, Rule 202 of Regulation Crowdfunding, and Rule 257 of Regulation A.22 Further, the temporary final rules will not materially affect the burden or cost estimates associated with existing collections of information for Form ID or under Regulation Crowdfunding and Regulation A for purposes of the Paperwork Reduction Act of 1995.23 Pursuant to the Congressional Review Act,24 the Office of Information and Regulatory Affairs has designated these amendments as not ‘‘a major rule,’’ as defined by 5 U.S.C. 804(2). V. Statutory Basis We are adopting amendments to Rule 202 of Regulation Crowdfunding and Rule 257 of Regulation A under the authority set forth in the Securities Act (15 U.S.C. 77a et seq.), particularly, Section 28 thereof. We are adopting the amendment to Regulation S–T under the authority in Sections 6, 7, 8, 10, 19(a), and 28 of the Securities Act; Sections 3, 12, 13, 14, 15, 15B, 23, 35A, and 36 of the Exchange Act; Sections 304(d) and 319 of the Trust Indenture Act; and Sections 6(c), 8, 30, 31, and 38 of the Investment Company Act. List of Subjects 17 CFR Part 227 Crowdfunding, Funding portals, Intermediaries, Reporting and recordkeeping requirements, Securities. 17 CFR Part 230 Reporting and recordkeeping requirements, Securities. 17 CFR Part 232 Incorporation by reference, Reporting and recordkeeping requirements, Securities. 22 This finding also satisfies the requirements of 5 U.S.C. 808(2), allowing the temporary final rules to become effective notwithstanding the requirement of 5 U.S.C. 801 (if a federal agency finds that notice and public comment are impractical, unnecessary or contrary to the public interest, a rule shall take effect at such time as the federal agency promulgating the rule determines). The temporary final rules also do not require analysis under the Regulatory Flexibility Act. See 5 U.S.C. 604(a) (requiring a final regulatory flexibility analysis only for rules required by the APA or other law to undergo notice and comment). 23 44 U.S.C. 3501 et seq. 24 5 U.S.C. 801 et seq. E:\FR\FM\31MRR1.SGM 31MRR1 Federal Register / Vol. 85, No. 62 / Tuesday, March 31, 2020 / Rules and Regulations In accordance with the foregoing, title 17, chapter II of the Code of Federal Regulations is amended as follows: PART 227—REGULATION CROWDFUNDING, GENERAL RULES AND REGULATIONS 1. The authority citation for part 227 continues to read as follows: ■ Authority: 15 U.S.C. 77d, 77d–1, 77s, 77z– 3, 78c, 78o, 78q, 78w, 78mm, and Pub. L. 112–106, secs. 301–305, 126 Stat. 306 (2012). 2. Amend § 227.202 by adding paragraph (c) to read as follows: ■ § 227.202 Ongoing reporting requirements. * * * * * (c) Temporary relief from certain reporting requirements is provided as follows: (1) An issuer that is not able to meet a filing deadline for any report or form required to be filed by this section or § 227.203(a)(3) or (b) during the period from and including March 26, 2020, to May 31, 2020, due to circumstances relating to coronavirus disease 2019 (COVID–19) shall be deemed to have satisfied the filing deadline for such report or form if: (i) The issuer promptly discloses on its public website or through an intermediary’s platform, or provides direct notification to its investors, that it is relying on this paragraph (c); and (ii) The issuer files such report or form with the Commission no later than 45 days after the original filing deadline of the report or form. (2) In any report or form filed pursuant to paragraph (c)(1)(ii) of this section, the issuer must disclose that it is relying on this paragraph (c) and state the reasons why, in good faith, it could not file such report or form on a timely basis. PART 230—GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933 3. The general authority citation for part 230 continues to read as follows: ■ Authority: 15 U.S.C. 77b, 77b note, 77c, 77d, 77f, 77g, 77h, 77j, 77r, 77s, 77z–3, 77sss, 78c, 78d, 78j, 78l, 78m, 78n, 78o, 78o–7 note, 78t, 78w, 78ll(d), 78mm, 80a–8, 80a–24, 80a– 28, 80a–29, 80a–30, and 80a–37, and Pub. L. 112–106, sec. 201(a), sec. 401, 126 Stat. 313 (2012), unless otherwise noted. * * * * * 4. Amend § 230.257 by adding paragraph (f) to read as follows: jbell on DSKJLSW7X2PROD with RULES ■ § 230.257 Periodic and current reporting; exit report. * * * * * (f) Temporary relief from ongoing reporting requirements. (1) An issuer VerDate Sep<11>2014 16:11 Mar 30, 2020 Jkt 250001 that is not able to meet a filing deadline for any report or form required to be filed by § 230.252(f)(2)(i) or paragraphs (a) through (c) of this section during the period from and including March 26, 2020, to May 31, 2020, due to circumstances relating to coronavirus disease 2019 (COVID–19) shall be deemed to have satisfied the filing deadline for such report or form if: (i) The issuer promptly discloses on its public website or provides direct notification to its investors that it is relying on this paragraph (f); and (ii) The issuer files such report or form with the Commission no later than 45 days after the original filing deadline of the report or form. (2) In any report or form filed pursuant to paragraph (f)(1)(ii) of this section, the issuer must disclose that it is relying on this paragraph (f) and state the reasons why, in good faith, it could not file such report or form on a timely basis. PART 232—REGULATION S–T— GENERAL RULES AND REGULATIONS FOR ELECTRONIC FILINGS 5. The general authority citation for part 232 continues to read as follows: ■ Authority: 15 U.S.C. 77c, 77f, 77g, 77h, 77j, 77s(a), 77z–3, 77sss(a), 78c(b), 78l, 78m, 78n, 78o(d), 78w(a), 78ll, 80a–6(c), 80a–8, 80a–29, 80a–30, 80a–37, 7201 et seq.; and 18 U.S.C. 1350, unless otherwise noted. * * * * * 6. Amend § 232.10 by adding paragraph (c) to read as follows: ■ § 232.10 Application of part 232. * * * * * (c) Temporary relief from Form ID notarization requirement is provided as follows: (1) An applicant subject to the notarization requirement under paragraph (b) of this section who is unable to obtain the notarization due to circumstances relating to coronavirus disease 2019 (COVID–19) may upload the manually signed PDF copy of the attachment to the Form ID filing without the notarization provided that the applicant indicates on the face of the signed document that the applicant could not provide the required notarization due to circumstances relating to coronavirus disease 2019 (COVID–19). (2) Commission staff will issue codes necessary to file on the EDGAR system in the cases described in paragraph (c)(1) from March 26, 2020, to July 1, 2020, to allow filers to proceed with required electronic filings. The required notarized document must be submitted as correspondence via EDGAR within 90 PO 00000 Frm 00031 Fmt 4700 Sfmt 4700 17751 days of EDGAR codes issuance; if it is not, the Commission staff is authorized to inactivate the filer’s EDGAR codes. (3) The Commission or its staff may inactivate or terminate codes issued under this paragraph (c) if the staff has reason to believe that such action is necessary for the protection of investors. * * * * * By the Commission. Dated: March 26, 2020. Vanessa A. Countryman, Secretary. [FR Doc. 2020–06721 Filed 3–30–20; 8:45 am] BILLING CODE 8011–01–P DEPARTMENT OF HOMELAND SECURITY Coast Guard 33 CFR Part 165 [Docket Number USCG–2020–0195] RIN 1625–AAOO Safety Zone; Mamala Bay, Honolulu, HI—Voluntary First Amendment Zone Coast Guard, DHS. Temporary final rule. AGENCY: ACTION: The Coast Guard is establishing a temporary safety zone for navigable waters within Mamala Bay, Honolulu Hawaii. The safety zone is needed to protect personnel and vessels who may want to exercise their First Amendment in the vicinity of Honolulu Harbor and Honolulu Channel. Entrance into the safety zone does not require notification to the COTP or the COTP’s designated representative; however persons or vessels operating within the safety zone shall travel at the minimum speed necessary to maintain a safe course. Addtionally, each person in the safety zone must comply with all lawful orders or directions given to them by the COTP or the COTP’s designated representative. Vessels wishing to enter the safety zone will not be allowed to cross an active security zone and should make alternative arrangements if necessary. DATES: This rule is effective without actual notice from March 31, 2020 through 11:59 p.m. April 17, 2020. For the purposes of enforcement, actual notice will be used from March 20, 2020 through March 31, 2020. ADDRESSES: To view documents mentioned in this preamble as being available in the docket, go to https:// www.regulations.gov, type USCG–2020– 0195 in the ‘‘SEARCH’’ box and click ‘‘SEARCH.’’ Click on Open Docket SUMMARY: E:\FR\FM\31MRR1.SGM 31MRR1

Agencies

[Federal Register Volume 85, Number 62 (Tuesday, March 31, 2020)]
[Rules and Regulations]
[Pages 17747-17751]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-06721]


=======================================================================
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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 227, 230, and 232

[Release No. 33-10768; 34-88492; 39-2531; IC-33832]


Relief for Form ID Filers and Regulation Crowdfunding and 
Regulation A Issuers Related to Coronavirus Disease 2019 (COVID-19)

AGENCY: Securities and Exchange Commission.

ACTION: Temporary final rule.

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SUMMARY: We are adopting temporary final rules for Form ID filers and 
for issuers subject to reporting obligations pursuant to Regulation 
Crowdfunding and Regulation A in order to address the needs of 
companies directly or indirectly affected by coronavirus disease 2019 
(COVID-19). The temporary final rules provide temporary relief from the 
Form ID notarization process for certain filers and extend the filing 
deadlines for specified reports and forms due pursuant to Regulation 
Crowdfunding and Regulation A for certain issuers.

DATES: The amendment to 17 CFR 232.10 is effective from March 30, 2020 
through September 30, 2020. The amendments to 17 CFR 227.202 and 17 CFR 
230.257 are effective from March 30, 2020 through July 15, 2020.

FOR FURTHER INFORMATION CONTACT: Rosemary Filou, Chief Counsel and 
Acting Deputy Director of the EDGAR Business Office, at (202) 551-8900; 
or Charlie Guidry, Special Counsel, Office of Small Business Policy, 
Division of Corporation Finance, at (202) 551-3460; U.S. Securities and 
Exchange Commission, 100 F Street NE, Washington, DC 20549-3628.

SUPPLEMENTARY INFORMATION: We are adopting amendments to 17 CFR 232.10 
(``Rule 10'') of Regulation S-T,\1\ 17 CFR 227.202 (``Rule 202'') of 
Regulation Crowdfunding \2\ under the Securities Act of 1933 (the 
``Securities Act''),\3\ and 17 CFR 230.257 (``Rule 257'') of Regulation 
A\4\ as temporary final rules.
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    \1\ 17 CFR part 232.
    \2\ 17 CFR part 227.
    \3\ 15 U.S.C. 77a et seq.
    \4\ 17 CFR 230.251 through 230.263.
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I. Introduction

    The current outbreak of coronavirus disease 2019 (COVID-19) may 
present challenges to entities and their representatives in timely 
meeting certain of their obligations under the federal securities laws. 
In light of this, we are adopting these temporary final rules to 
address the needs of parties seeking to file a Form ID to gain access 
to the Commission's Electronic Data Gathering, Analysis and Retrieval 
(EDGAR) system and companies directly or indirectly affected by COVID-
19 that are subject to reporting obligations pursuant to Regulation 
Crowdfunding or Regulation A.
    Section 36 of the Exchange Act of 1934 \5\ (the ``Exchange Act'') 
and Section 28 of the Securities Act \6\ provide the Commission with 
general exemptive authority to conditionally or unconditionally exempt 
any person, security, or transaction, or any class or classes of 
persons, securities, or transactions, from any provision or provisions 
of the Exchange Act and the Securities Act, respectively, or of any 
rule or regulation thereunder, to the extent that such exemption is 
necessary or appropriate in the public interest, and is consistent with 
the protection of investors.
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    \5\ 15 U.S.C. 78a et seq.
    \6\ 15 U.S.C. 77z-3.
---------------------------------------------------------------------------

    Section 6(c) of the Investment Company Act of 1940 \7\ (the 
``Investment Company Act'') provides that the Commission may 
conditionally or unconditionally exempt any person, security, or 
transaction, or any class or classes of persons, securities, or 
transactions, from any provision or provisions of the Investment 
Company Act, or any rule or regulation thereunder, if and to the extent 
that such exemption is necessary or appropriate in the public interest 
and consistent with the protection of investors and the purposes fairly 
intended by the policy and provisions of the Investment Company Act. 
Section 304(d) of the Trust Indenture Act of 1939 \8\ (the ``Trust 
Indenture Act'') authorizes the Commission to adopt rules to exempt 
securities or transactions from the provisions of the Trust Indenture 
Act to the extent that ``such exemption is necessary or appropriate in 
the public interest and consistent with the protection of

[[Page 17748]]

investors and the purposes fairly intended by'' the Trust Indenture 
Act.
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    \7\ 15 U.S.C. 80a et seq.
    \8\ 15 U.S.C. 77aaa et seq.
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II. Temporary Relief From Form ID Notarization Requirement

    In order to use the Commission's EDGAR system to make filings, an 
applicant must complete online the Form ID \9\ application, and, in 
accord with Rule 10 of Regulation S-T, ``file, by uploading as a 
Portable Document Format (PDF) attachment to the Form ID filing, a 
notarized document, manually signed by the applicant over the 
applicant's typed signature, that includes the information required to 
be included in the Form ID filing and confirms the authenticity of the 
Form ID filing.'' \10\
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    \9\ 17 CFR 239.63; 17 CFR 249.446; 17 CFR 269.7; and 17 CFR 
274.402.
    \10\ 17 CFR 232.10(b). The requirement to upload a notarized 
signed Form ID is also specified in the EDGAR Filer Manual, 
incorporated into Regulation S-T at 17 CFR 232.301 (``Rule 301''). 
All references to notarized signatures in Volume I of the EDGAR 
Filer Manual and the EDGAR Filer Management site (Form ID) should be 
interpreted consistently with temporary paragraph (c) during the 
period in which the temporary final rule is in effect.
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    A number of filers have indicated that they are having difficulty 
securing the required notarization to gain access to EDGAR because 
their employees are teleworking or are otherwise no longer in 
reasonable proximity of an authorized notary public due to 
circumstances relating to COVID-19. They have expressed a need for 
temporary relief from this notarization requirement so that they can 
make their required filings in a timely manner.
    We believe it is in the public interest and consistent with 
investor protection to provide temporary relief from the Form ID 
notarization process where circumstances related to COVID-19 render it 
impracticable or impossible to obtain a notarization in a timely 
fashion. Consequently we are adopting as a temporary final rule a new 
paragraph (c) to Rule 10 of Regulation S-T that will allow filers to 
gain access to the EDGAR system on a temporary basis without initially 
providing the required notarization to the manually signed document.
    From March 26, 2020 through July 1, 2020, temporary paragraph (c) 
allows the staff to create EDGAR accounts and issue EDGAR access codes 
based on a manually signed document without the requisite notarization, 
provided that the filer indicates on the face of the signed document 
that it could not obtain the required notarization due to circumstances 
relating to COVID-19. Filers seeking access to EDGAR in reliance on the 
temporary final rule may be asked to provide documents, on a 
supplemental basis, to support their application to assist the staff in 
validating the request. Once the codes are issued, the filer may 
commence filing. The filer is required to submit as correspondence via 
EDGAR a PDF copy of the notarized manually signed document within 90 
days of the issuance of the codes under this temporary provision. If it 
does not do so within the stated timeframe, the Commission staff may 
inactivate the filer's EDGAR access codes. In order to provide an 
additional tool to counteract potential abuse, we also are authorizing 
the staff to inactivate codes issued pursuant to this temporary rule 
when the staff has reason to believe that a filer who gained access 
under the temporary final rule has made illegitimate filings that are 
inconsistent with the protection of investors. In exercising such 
authority, the staff may request additional information or 
documentation from the filer.

III. Temporary Relief From Filing Requirements for Issuers Subject to 
the Reporting Obligations of Regulation Crowdfunding or Regulation A

    Disruptions as a result of COVID-19 could hamper the efforts of 
companies and other persons with filing obligations to meet their 
filing deadlines under Regulation Crowdfunding or Regulation A. At the 
same time, investors have an interest in the timely availability of 
required information about these companies. While the Commission 
believes that the temporary relief from filing requirements provided by 
the amendments to Rule 202 of Regulation Crowdfunding \11\ and Rule 257 
of Regulation A\12\ is both necessary in the public interest and 
consistent with the protection of investors, we remind companies that 
are the subject of the relief provided in these temporary final rules 
to continue to evaluate their obligations to make materially accurate 
and complete disclosures in accordance with the anti-fraud provisions 
of the federal securities laws. For example, an issuer relying on the 
temporary final rules that is conducting a continuous Regulation A 
offering is responsible for ensuring that the offering materials 
contain the information required to be included therein. If the issuer 
is satisfied that the offering materials still contain the material 
information required to be included therein, it should nevertheless 
disclose that it is relying on this relief.
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    \11\ See Rule 202(c) of Regulation Crowdfunding. 17 CFR 
227.202(c).
    \12\ See Rule 257(f) of Regulation A. 17 CFR 230.257(f).
---------------------------------------------------------------------------

    Pursuant to Section 28 of the Securities Act, we are adopting 
temporary final rules providing that an issuer subject to the reporting 
requirements of either Regulation Crowdfunding or Regulation A is 
exempt from any requirement to file specified reports or forms with the 
Commission, and would be considered current in its reporting 
obligations under Regulation Crowdfunding or Regulation A, where the 
conditions below are satisfied:
     The issuer is not able to meet a filing deadline due to 
circumstances related to COVID-19;
     The issuer promptly discloses on its public website or, 
for Regulation Crowdfunding issuers, through an intermediary's 
platform, or provides direct notification to its investors, that it is 
relying on the temporary final rules;
     The issuer files with the Commission, no later than 45 
days after the original filing deadline of the report or form, the 
report or form required to be filed pursuant to either Regulation 
Crowdfunding or Regulation A during the period from and including March 
26, 2020 to May 31, 2020; and
     In any such report or form, the issuer discloses that it 
is relying on the temporary final rules and states the reasons why, in 
good faith, it could not file such report or form on a timely basis.
    For Regulation Crowdfunding, the relief applies to annual reports 
on Form C-AR, progress updates on Form C-U, and termination of 
reporting on Form C-TR.\13\ For Regulation A, the relief applies to 
post-qualification amendments required at least every 12 months after 
the qualification date to include updated financial statements, annual 
reports on Form 1-K, semi-annual reports on Form 1-SA, special 
financial reports on Forms 1-K or 1-SA, current reports on Form 1-U, 
and exit reports on Form 1-Z.\14\
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    \13\ This relief does not apply to Form C or Form C/A.
    \14\ This relief does not apply to a Form 1-A that has not been 
qualified.
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    The Commission intends to monitor the current situation and may, if 
necessary, extend the time period during which this relief applies, 
with any additional conditions the Commission deems appropriate and/or 
issue other relief.

[[Page 17749]]

IV. Economic Analysis

A. Temporary Relief From Form ID Notarization Requirement

    The Commission is temporarily providing Form ID filers affected by 
COVID-19 with a 90-day deferral of the requirement to upload a PDF 
attachment to the electronic Form ID filing with a copy of a notarized 
document, manually signed by the applicant over the applicant's typed 
signature, that includes the information required to be included in the 
Form ID filing. Under current filing requirements, the notarized 
signature is intended to confirm the authenticity of the identity of 
the Form ID filer. During calendar year 2019, we estimate that 34,512 
Form ID filings were accepted by EDGAR.
    The deferral of the requirement to provide a notarized copy is 
expected to benefit affected Form ID filers that newly require EDGAR 
access for electronic filings, particularly natural persons and small 
business filers, and that cannot secure the required notarization due 
to circumstances relating to COVID-19 (e.g., because their employees 
are teleworking or are otherwise no longer in reasonable proximity of 
an authorized notary public). In the absence of the amendments, such 
filers might incur high additional costs to obtain the required 
notarization from a notary public in order to receive EDGAR access 
expediently or may not be able to receive EDGAR access on a timely 
basis to satisfy filing requirements. By providing affected filers with 
a way to access EDGAR expediently, the amendments would increase 
timeliness in the availability of such filers' electronic filings and 
disclosures, which may also benefit investors in affected filers that 
rely on the information in the electronic filings.\15\
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    \15\ Under these temporary final rules and other filer relief 
provided by the Commission (see Order Under Section 36 of the 
Securities Exchange Act of 1934 Modifying Exemptions from the 
Reporting and Proxy Delivery Requirements for Public Companies, 
Release No. 34-88465 (March 25, 2020)), some filers affected by 
COVID-19 are provided an extension of the deadline to make certain 
required periodic filings. However, such relief does not extend, for 
example, to filings of beneficial ownership disclosures or filings 
of Form D.
---------------------------------------------------------------------------

    To the extent that the amendments marginally increase the risk of 
an applicant that is not the claimed filer gaining access to the EDGAR 
system and using that access in an improper way (such as making 
misleading filings), investors may experience costs as a result of 
relying on such filings. We expect several factors and provisions of 
the temporary final rules to mitigate these costs. First, the amendment 
requires filers to submit a notarized copy within 90 days rather than 
waiving the requirement altogether. This provision is expected to 
benefit investors by reducing the likelihood that an applicant that is 
not the claimed EDGAR filer that avails itself of relief from the 
notarization-based authentication requirement retains indefinite access 
to the EDGAR system. Second, we are authorizing the staff to inactivate 
codes issued pursuant to this temporary rule where the staff has reason 
to believe that such action is necessary for the protection of 
investors, which may further reduce the risk of a new applicant gaining 
access to the EDGAR system and using that access in an improper way. In 
exercising such authority, the staff may request additional information 
or documentation from the filer in order to determine whether continued 
use of the codes is consistent with the protection of investors. Third, 
irrespective of the manner in which EDGAR access is obtained, anti-
fraud liability under federal securities laws would continue to apply 
and may serve to mitigate potential risk to investors.
    Overall, we expect this temporary amendment to have modest economic 
effects, including modest effects on efficiency, competition, and 
capital formation. We expect the proposed amendments to marginally 
increase efficiency for new filers seeking EDGAR access and facing 
disruptions in access to the services of a notary public. To the extent 
that small filers may face relatively greater hurdles, these amendments 
may have a marginally positive effect on competition and facilitate 
such filers' access to capital that may require an electronic filing.
    We have considered reasonable alternatives to this amendment. As an 
alternative, we could have temporarily waived rather than deferred the 
notarization requirement for Form ID. The benefits of such an 
alternative compared to the final rule would be additional cost savings 
for affected filers. The cost of such an alternative compared to the 
final rule would be a potentially greater risk to investors in the case 
of a bad actor obtaining access to EDGAR and using that access in an 
improper way. As another alternative, we considered a different time-
frame for the temporary deferral of the notarization requirement for 
Form ID filers than 90 days. Compared to the final rule, a shorter 
(longer) deferral would result in less (more) flexibility for filers 
affected by COVID-19 seeking to access the EDGAR system and unable to 
meet the notarization requirement without incurring significant costs 
while at the same time lower (greater) marginal risk of continued EDGAR 
access by an applicant other than the claimed filer.

B. Temporary Relief From Filing Requirements for Issuers Subject to the 
Reporting Obligations of Regulation Crowdfunding and Regulation A

    Regulation Crowdfunding and Regulation A permit offers and sales of 
securities without registration under the Securities Act, subject to 
certain limitations and conditions, including compliance with ongoing 
reporting requirements. Based on staff analysis, between June 19, 2015 
\16\ and December 31, 2019, we estimate that 382 Regulation A offering 
statements were qualified by the Commission, excluding withdrawn 
offerings. We estimate that 2,003 Regulation Crowdfunding offerings 
were filed on Form C between May 16, 2016 and December 31, 2019, 
excluding withdrawn offerings.\17\
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    \16\ June 19, 2015 was the effective date of certain amendments 
to Regulation A. See Amendments for Small and Additional Issues 
Exemptions Under the Securities Act (Regulation A), Rel. Nos. 33-
9741; 34-74578; 39-2501 (Mar. 25, 2015) [80 FR 21806 (Apr. 20, 
2015)].
    \17\ These figures overstate the number of issuers with 
obligations to file annual reports under Regulation Crowdfunding, 
because they do not exclude issuers that have failed to raise the 
target amount or have exited the reporting regime.
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    We lack the data to estimate the number of investors in Regulation 
A or Regulation Crowdfunding offerings that could be affected if 
issuers rely on the relief provided by the temporary final rules, 
because information on the number of investors is generally not 
required to be disclosed in periodic or current reports required under 
Regulation A or in periodic reports or progress updates required under 
Regulation Crowdfunding.\18\
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    \18\ Regulation A issuers that file Form 1-Z to suspend 
reporting are required to disclose the number of shareholders of 
record.
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    We are mindful of the costs and benefits of the temporary final 
rules.\19\ We believe the temporary final rules will benefit issuers 
that have an obligation to file specified reports with the Commission 
pursuant to either Regulation Crowdfunding or Regulation A and have 
been adversely affected by COVID-19 by permitting them to take 
additional time to meet their reporting obligations. We expect the 
relief provided by the temporary final rules will benefit issuers that, 
absent the

[[Page 17750]]

relief, would not be able to avail themselves of the exemption from 
registration under Regulation Crowdfunding or Regulation A because the 
timely filing of required reports is a condition to the exemptions. In 
the absence of this relief, issuers could incur prohibitively high 
costs in an attempt to meet filing deadlines given the disruptions as a 
result of COVID-19.
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    \19\ Section 2(b) of the Securities Act [15 U.S.C. 77b(b)] 
requires the Commission, when engaging in rulemaking where it is 
required to consider or determine whether an action is necessary or 
appropriate in the public interest, to consider, in addition to the 
protection of investors, whether the action will promote efficiency, 
competition, and capital formation.
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    The requirements for an issuer to promptly disclose that it is 
relying on Rule 202(c) of Regulation Crowdfunding or Rule 257(f) of 
Regulation A and to disclose in the subsequently filed report that it 
relied on such rule and state the reasons why, in good faith, it could 
not file a report or form on a timely basis may impose minimal 
additional costs on issuers availing themselves of this relief. 
However, we believe that these minimal costs are justified in light of 
the significant negative implications of not being able to rely on the 
exemption, the prohibitively high costs an issuer may incur in 
attempting to file in a timely manner, and the value to investors of 
the information about the issuer's reporting status and reasons for not 
filing a timely report.
    We also acknowledge that there may be costs imposed on investors, 
intermediaries, and other market participants due to delayed access to 
information about offerings conducted in reliance on Regulation A and 
Regulation Crowdfunding. Generally, reporting requirements strengthen 
investor protection and decrease the extent of information asymmetries 
between issuers and investors. Ongoing reporting provides investors 
with periodically updated information, allowing them to assess 
investment opportunities based on the information provided and their 
level of risk tolerance, resulting in better informed investment 
decisions and improved allocative efficiency. Given that the temporary 
final rules allow for delayed reporting for a limited time period and 
only under specified conditions, we do not believe such costs will be 
significant.
    The temporary final rules will not substantially affect competition 
or capital formation. We acknowledge the possibility that the temporary 
final rules may have a minor impact on efficiency. On the one hand, as 
noted above, the delay in reporting could marginally affect allocative 
efficiency to the extent that it allows information asymmetries between 
investors and issuers to persist for the length of time of the delay. 
On the other hand, we expect efficiency gains to the extent that the 
temporary final rules allow issuers to continue to rely on either of 
the exemptions from registration that would not be available if one of 
the required reports that is a condition to the exemptions was not 
filed in a timely manner, or to the extent the issuers are able to 
avoid paying a premium to service providers in an attempt to file in a 
timely manner by delaying reporting during the specified relief period.
    As an alternative to the relief specified in the temporary final 
rules, we could have considered a longer or shorter relief period. 
While a shorter period would have reduced the costs to investors of 
asymmetric information, it would also reduce the benefits of the 
temporary final rules to issuers. Similarly, a longer period would 
increase the costs to investors. We believe that the delay provided by 
the temporary final rules is appropriate given the potential impact 
COVID-19 could have on the efforts of companies to meet filing 
deadlines pursuant to Regulation Crowdfunding and Regulation A. As 
another alternative, we could have provided the specified relief but 
not required issuers to provide disclosure about reliance on the 
relief, or only required issuers to do so in cases of ongoing 
offerings. While these alternatives could have lowered issuer costs 
compared to the temporary final rules, the cost savings would likely be 
modest given the limited nature of the notice and the flexibility 
afforded to issuers with regard to how to provide disclosure. Further, 
under these alternatives, investors, including investors in securities 
issued in a past offering (particularly, in cases of traded Regulation 
A securities), would not have the benefit of timely information about 
an issuer's reliance on the temporary final rules.

IV. Procedural and Other Matters

    The Administrative Procedure Act (``APA'') generally requires an 
agency to publish notice of a rulemaking in the Federal Register and 
provide an opportunity for public comment. This requirement does not 
apply, however, if the agency ``for good cause finds . . . that notice 
and public procedure are impracticable, unnecessary, or contrary to the 
public interest.'' \20\ The APA also generally requires that an agency 
publish an adopted rule in the Federal Register at least 30 days before 
it becomes effective. This requirement does not apply, however, if the 
agency finds good cause for making the rule effective sooner.\21\
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    \20\ 5 U.S.C. 553(b)(3)(B).
    \21\ 5 U.S.C. 553(d)(3).
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    Given the temporary nature of the relief contemplated by the 
temporary final rules and the significant and immediate impact of 
COVID-19 on affected issuers, as discussed above, the Commission finds 
that good cause exists to dispense with notice and comment as 
impracticable and unnecessary, and to act immediately to amend Rule 10 
of Regulation S-T, Rule 202 of Regulation Crowdfunding, and Rule 257 of 
Regulation A.\22\ Further, the temporary final rules will not 
materially affect the burden or cost estimates associated with existing 
collections of information for Form ID or under Regulation Crowdfunding 
and Regulation A for purposes of the Paperwork Reduction Act of 
1995.\23\
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    \22\ This finding also satisfies the requirements of 5 U.S.C. 
808(2), allowing the temporary final rules to become effective 
notwithstanding the requirement of 5 U.S.C. 801 (if a federal agency 
finds that notice and public comment are impractical, unnecessary or 
contrary to the public interest, a rule shall take effect at such 
time as the federal agency promulgating the rule determines). The 
temporary final rules also do not require analysis under the 
Regulatory Flexibility Act. See 5 U.S.C. 604(a) (requiring a final 
regulatory flexibility analysis only for rules required by the APA 
or other law to undergo notice and comment).
    \23\ 44 U.S.C. 3501 et seq.
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    Pursuant to the Congressional Review Act,\24\ the Office of 
Information and Regulatory Affairs has designated these amendments as 
not ``a major rule,'' as defined by 5 U.S.C. 804(2).
---------------------------------------------------------------------------

    \24\ 5 U.S.C. 801 et seq.
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V. Statutory Basis

    We are adopting amendments to Rule 202 of Regulation Crowdfunding 
and Rule 257 of Regulation A under the authority set forth in the 
Securities Act (15 U.S.C. 77a et seq.), particularly, Section 28 
thereof. We are adopting the amendment to Regulation S-T under the 
authority in Sections 6, 7, 8, 10, 19(a), and 28 of the Securities Act; 
Sections 3, 12, 13, 14, 15, 15B, 23, 35A, and 36 of the Exchange Act; 
Sections 304(d) and 319 of the Trust Indenture Act; and Sections 6(c), 
8, 30, 31, and 38 of the Investment Company Act.

List of Subjects

17 CFR Part 227

    Crowdfunding, Funding portals, Intermediaries, Reporting and 
recordkeeping requirements, Securities.

17 CFR Part 230

    Reporting and recordkeeping requirements, Securities.

17 CFR Part 232

    Incorporation by reference, Reporting and recordkeeping 
requirements, Securities.


[[Page 17751]]


    In accordance with the foregoing, title 17, chapter II of the Code 
of Federal Regulations is amended as follows:

PART 227--REGULATION CROWDFUNDING, GENERAL RULES AND REGULATIONS

0
1. The authority citation for part 227 continues to read as follows:

    Authority:  15 U.S.C. 77d, 77d-1, 77s, 77z-3, 78c, 78o, 78q, 
78w, 78mm, and Pub. L. 112-106, secs. 301-305, 126 Stat. 306 (2012).

0
2. Amend Sec.  227.202 by adding paragraph (c) to read as follows:


Sec.  227.202   Ongoing reporting requirements.

* * * * *
    (c) Temporary relief from certain reporting requirements is 
provided as follows:
    (1) An issuer that is not able to meet a filing deadline for any 
report or form required to be filed by this section or Sec.  
227.203(a)(3) or (b) during the period from and including March 26, 
2020, to May 31, 2020, due to circumstances relating to coronavirus 
disease 2019 (COVID-19) shall be deemed to have satisfied the filing 
deadline for such report or form if:
    (i) The issuer promptly discloses on its public website or through 
an intermediary's platform, or provides direct notification to its 
investors, that it is relying on this paragraph (c); and
    (ii) The issuer files such report or form with the Commission no 
later than 45 days after the original filing deadline of the report or 
form.
    (2) In any report or form filed pursuant to paragraph (c)(1)(ii) of 
this section, the issuer must disclose that it is relying on this 
paragraph (c) and state the reasons why, in good faith, it could not 
file such report or form on a timely basis.

PART 230--GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933

0
3. The general authority citation for part 230 continues to read as 
follows:

    Authority:  15 U.S.C. 77b, 77b note, 77c, 77d, 77f, 77g, 77h, 
77j, 77r, 77s, 77z-3, 77sss, 78c, 78d, 78j, 78l, 78m, 78n, 78o, 78o-
7 note, 78t, 78w, 78ll(d), 78mm, 80a-8, 80a-24, 80a-28, 80a-29, 80a-
30, and 80a-37, and Pub. L. 112-106, sec. 201(a), sec. 401, 126 
Stat. 313 (2012), unless otherwise noted.
* * * * *

0
4. Amend Sec.  230.257 by adding paragraph (f) to read as follows:


Sec.  230.257   Periodic and current reporting; exit report.

* * * * *
    (f) Temporary relief from ongoing reporting requirements. (1) An 
issuer that is not able to meet a filing deadline for any report or 
form required to be filed by Sec.  230.252(f)(2)(i) or paragraphs (a) 
through (c) of this section during the period from and including March 
26, 2020, to May 31, 2020, due to circumstances relating to coronavirus 
disease 2019 (COVID-19) shall be deemed to have satisfied the filing 
deadline for such report or form if:
    (i) The issuer promptly discloses on its public website or provides 
direct notification to its investors that it is relying on this 
paragraph (f); and
    (ii) The issuer files such report or form with the Commission no 
later than 45 days after the original filing deadline of the report or 
form.
    (2) In any report or form filed pursuant to paragraph (f)(1)(ii) of 
this section, the issuer must disclose that it is relying on this 
paragraph (f) and state the reasons why, in good faith, it could not 
file such report or form on a timely basis.

PART 232--REGULATION S-T--GENERAL RULES AND REGULATIONS FOR 
ELECTRONIC FILINGS

0
5. The general authority citation for part 232 continues to read as 
follows:

    Authority:  15 U.S.C. 77c, 77f, 77g, 77h, 77j, 77s(a), 77z-3, 
77sss(a), 78c(b), 78l, 78m, 78n, 78o(d), 78w(a), 78ll, 80a-6(c), 
80a-8, 80a-29, 80a-30, 80a-37, 7201 et seq.; and 18 U.S.C. 1350, 
unless otherwise noted.
* * * * *

0
6. Amend Sec.  232.10 by adding paragraph (c) to read as follows:


Sec.  232.10   Application of part 232.

* * * * *
    (c) Temporary relief from Form ID notarization requirement is 
provided as follows:
    (1) An applicant subject to the notarization requirement under 
paragraph (b) of this section who is unable to obtain the notarization 
due to circumstances relating to coronavirus disease 2019 (COVID-19) 
may upload the manually signed PDF copy of the attachment to the Form 
ID filing without the notarization provided that the applicant 
indicates on the face of the signed document that the applicant could 
not provide the required notarization due to circumstances relating to 
coronavirus disease 2019 (COVID-19).
    (2) Commission staff will issue codes necessary to file on the 
EDGAR system in the cases described in paragraph (c)(1) from March 26, 
2020, to July 1, 2020, to allow filers to proceed with required 
electronic filings. The required notarized document must be submitted 
as correspondence via EDGAR within 90 days of EDGAR codes issuance; if 
it is not, the Commission staff is authorized to inactivate the filer's 
EDGAR codes.
    (3) The Commission or its staff may inactivate or terminate codes 
issued under this paragraph (c) if the staff has reason to believe that 
such action is necessary for the protection of investors.
* * * * *

    By the Commission.

    Dated: March 26, 2020.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2020-06721 Filed 3-30-20; 8:45 am]
 BILLING CODE 8011-01-P