Inflation Adjustments Under Titles I and III of the JOBS Act, 57394-57398 [2022-19867]
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57394
Federal Register / Vol. 87, No. 181 / Tuesday, September 20, 2022 / Rules and Regulations
Commission, unless the Commission
timely notifies the standards
organization that it has determined that
the revision does not improve the safety
of the product, or the Commission sets
a later date in the Federal Register. 15
U.S.C. 2056a(b)(4)(B). The Commission
is taking neither of those actions with
respect to the standard for infant
swings. Therefore, ASTM F2088–22 will
take effect as the new mandatory
standard for infant swings on January 1,
2023, 180 days after July 5, 2022, when
the Commission received notice of the
revision.
L. Congressional Review Act
The Congressional Review Act (CRA;
5 U.S.C. 801–808) states that before a
rule may take effect, the agency issuing
the rule must submit the rule, and
certain related information, to each
House of Congress and the Comptroller
General. 5 U.S.C. 801(a)(1). The CRA
submission must indicate whether the
rule is a ‘‘major rule.’’ The CRA states
that the Office of Information and
Regulatory Affairs determines whether a
rule qualifies as a ‘‘major rule.’’
Pursuant to the CRA, this rule does
not qualify as a ‘‘major rule,’’ as defined
in 5 U.S.C. 804(2). To comply with the
CRA, CPSC will submit the required
information to each House of Congress
and the Comptroller General.
List of Subjects in 16 CFR Part 1223
Consumer protection, Imports,
Incorporation by reference, Infants and
children, Law enforcement, Safety.
For the reasons discussed in the
preamble, the Commission amends 16
CFR chapter II as follows:
PART 1223—SAFETY STANDARD FOR
INFANT SWINGS
1. The authority citation for part
1223.2 continues to read as follows:
■
Authority: Sec. 104, Pub. L. 110–314, 122
Stat. 3016 (15 U.S.C. 2056a); Sec 3, Pub. L.
112–28, 125 Stat. 273.
■
2. Revise § 1223.2 to read as follows:
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§ 1223.2
Requirements for Infant Swings.
Each infant swing must comply with
all applicable provisions of ASTM
F2088–22, Standard Consumer Safety
Specification for Infant and Cradle
Swings, approved on May 1, 2022. The
Director of the Federal Register
approves this incorporation by reference
in accordance with 5 U.S.C. 552(a) and
1 CFR part 51. A read-only copy of the
standard is available for viewing on the
ASTM website at https://www.astm.org/
READINGLIBRARY/. You may obtain a
copy from ASTM International, 100 Barr
Harbor Drive, P.O. Box C700, West
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16:25 Sep 19, 2022
Jkt 256001
Conshohocken, PA 19428–2959;
telephone (610) 832–9585;
www.astm.org. You may inspect a copy
at the Office of the Secretary, U.S.
Consumer Product Safety Commission,
4330 East West Highway, Bethesda, MD
20814, telephone (301) 504–7479, email
cpsc-os@cpsc.gov, or at the National
Archives and Records Administration
(NARA). For information on the
availability of this material at NARA,
email fr.inspection@nara.gov, or go to:
www.archives.gov/federal-register/cfr/
ibr-locations.html.
Alberta E. Mills,
Secretary, Consumer Product Safety
Commission.
[FR Doc. 2022–20246 Filed 9–19–22; 8:45 am]
BILLING CODE 6355–01–P
SECURITIES AND EXCHANGE
COMMISSION
17 CFR Parts 227, 230, 239, and 240
[Release Nos. 33–11098; 34–95715]
Inflation Adjustments Under Titles I
and III of the JOBS Act
Securities and Exchange
Commission.
ACTION: Final rule.
AGENCY:
SUMMARY: To effectuate inflation
adjustments required under Title I and
Title III of the Jumpstart Our Business
Startups Act (‘‘JOBS Act’’), we are
adopting amendments to adjust the
thresholds in the definition of
‘‘emerging growth company’’ as well as
dollar amounts in Regulation
Crowdfunding.
DATES: Effective September 20, 2022.
FOR FURTHER INFORMATION CONTACT:
Charlie Guidry, Special Counsel, Office
of Small Business Policy, at (202) 551–
3460, Division of Corporation Finance,
U.S. Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549.
SUPPLEMENTARY INFORMATION: We are
adopting amendments to 17 CFR
227.100(a)(2) (‘‘Rule 100(a)(2)’’) and 17
CFR 227.201(t) (‘‘Rule 201(t)’’) of 17
CFR 227.100 et seq. (‘‘Regulation
Crowdfunding’’); 17 CFR 230.405 (‘‘Rule
405’’) and 17 CFR 239.900 (‘‘Form C’’)
under the Securities Act of 1933
(‘‘Securities Act’’); and 17 CFR 240.12b–
2 (‘‘Rule 12b–2’’) under the Exchange
Act of 1934 (‘‘Exchange Act’’).
I. Introduction
Title I of the JOBS Act 1 added
Securities Act Section 2(a)(19) and
1 Public
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Exchange Act Section 3(a)(80) to define
the term ‘‘emerging growth company’’ 2
(‘‘EGC’’). Pursuant to the statutory
definition, the Commission is required
every five years to index to inflation the
annual gross revenue amount used to
determine EGC status to reflect the
change in the Consumer Price Index for
All Urban Consumers (‘‘CPI–U’’)
published by the Bureau of Labor
Statistics (‘‘BLS’’).3 In 2017, the
Commission increased the annual gross
revenue amount from $1,000,000,000 to
$1,070,000,000.4 We are adopting
amendments to our rules to reflect the
next statutorily required inflation
adjustment to the annual gross revenue
amount.
Title III of the JOBS Act added
Securities Act Section 4(a)(6),5≤ which
provides an exemption from the
registration requirements of Securities
Act Section 5 6 for certain crowdfunding
transactions, and the Commission
promulgated Regulation Crowdfunding 7
2 Section 101(a) of the JOBS Act amended Section
2(a) of the Securities Act [15 U.S.C. 77b(a)] and
Section 3(a) of the Exchange Act [15 U.S.C. 78c(a)]
to define an ‘‘emerging growth company’’ as an
issuer with less than $1 billion in total annual gross
revenues during its most recently completed fiscal
year. If an issuer qualifies as an EGC on the first
day of its fiscal year, it maintains that status until
the earliest of (1) the last day of the fiscal year of
the issuer during which it has total annual gross
revenues of $1 billion or more; (2) the last day of
its fiscal year following the fifth anniversary of the
first sale of its common equity securities pursuant
to an effective registration statement; (3) the date on
which the issuer has, during the previous three-year
period, issued more than $1 billion in nonconvertible debt; or (4) the date on which the issuer
is deemed to be a ‘‘large accelerated filer’’ (as
defined in Exchange Act Rule 12b–2). See Section
2(a)(19) of the Securities Act [15 U.S.C. 77b(a)(19)]
and Section 3(a)(80) of the Exchange Act [15 U.S.C.
78c(a)(80)]. A ‘‘large accelerated filer’’ is an issuer
that, as of the end of its fiscal year, has an aggregate
worldwide market value of the voting and nonvoting common equity held by its non-affiliates of
$700 million or more, as measured on the last
business day of the issuer’s most recently
completed second fiscal quarter; has been subject to
the requirements of Section 13(a) or 15(d) of the
Exchange Act for a period of at least twelve
calendar months; has filed at least one annual
report pursuant to Section 13(a) or 15(d) of the
Exchange Act; and is not eligible to use the
requirements for smaller reporting companies under
the revenue test in paragraph (2) or (3)(iii)(B) of the
‘‘smaller reporting company’’ definition. See
Exchange Act Rule 12b–2.
3 The CPI–U is the statistical metric developed by
the BLS to monitor the change in the price of a set
list of products. The CPI–U represents changes in
prices of all goods and services purchased for
consumption by urban households. See ‘‘Consumer
Price Index’’ available at https://www.bls.gov/cpi.
4 See Inflation Adjustments and Other Technical
Amendments Under Titles I and III of the Jobs Act,
Release Nos. 33–10332; 34–80355 (Mar. 31, 2017)
[82 FR 17545 (Apr. 12, 2017)] (‘‘2017 Release’’).
5 15 U.S.C. 77d(a)(6).
6 15 U.S.C. 77e.
7 17 CFR 227.100 et seq.; see also Crowdfunding,
Release No. 33–9974 (Oct. 30, 2015) [80 FR 71388]
(‘‘Crowdfunding Release’’).
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Federal Register / Vol. 87, No. 181 / Tuesday, September 20, 2022 / Rules and Regulations
to implement that exemption. Sections
4(a)(6) and 4A 8 of the Securities Act set
forth dollar amounts used in connection
with the crowdfunding exemption, and
Section 4A(h)(1) 9 states that such dollar
amounts shall be adjusted by the
Commission not less frequently than
once every five years to reflect the
change in the CPI–U published by the
BLS. Pursuant to this directive, the
Commission adjusted the amounts for
inflation in the 2017 Release. We are
amending Regulation Crowdfunding to
again adjust those dollar amounts for
inflation pursuant to the statutory
requirement.
II. Inflation Adjustments to the
Definition of ‘‘Emerging Growth
Company’’
JOBS Act Section 101 amended
Section 2(a)(19) of the Securities Act
and Section 3(a)(80) of the Exchange Act
to define ‘‘emerging growth company’’
to mean an issuer that had total annual
gross revenues of less than $1 billion, as
such amount is indexed for inflation
every five years by the Commission to
reflect the change in the CPI–U during
its most recently completed fiscal year.
By statute, the adjusted gross revenue
threshold must be set to the nearest
$1,000,000. Pursuant to this directive,
the Commission, in the 2017 Release,
adjusted the threshold from
$1,000,000,000 to $1,070,000,000.
Today, we are adopting an amendment
to Rule 405 and to Rule 12b–2 to again
index the annual gross revenue amounts
included in the definition of ‘‘emerging
growth company’’ for inflation to reflect
the change in the CPI–U as required by
statute.
To determine the new EGC gross
revenue threshold to be included in the
amendments, we use the same baseline
thresholds and CPI–U and the same
methodology that the Commission used
in the 2017 Release. First, we determine
the appropriate CPI–U for December of
the calendar year preceding the year of
adjustment. Because we are making the
inflation adjustment for the definition of
EGC in 2022, we use the CPI–U for
December 2021, which was 278.802
(‘‘2021 CPI–U’’). Consistent with the
8 15
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9 15
U.S.C. 77d–1.
U.S.C. 77d–1(h)(1).
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2017 Release, we then use the CPI–U for
December of 2011, the calendar year
before the EGC definition was
established by the JOBS Act, which was
225.672 (‘‘2011 CPI–U’’).
Second, we calculate the cost-ofliving adjustment or inflation factor. To
do this, we divide the 2021 CPI–U by
the 2011 CPI–U. The resulting inflation
factor is 1.23543.10
Third, we calculate the raw inflation
adjustment, which is the inflation
adjustment before rounding. To do this,
we multiply the initial EGC gross
revenue threshold, $1,000,000,000, by
the inflation factor 1.23543, the product
of which is $1,235,430,000.
Fourth, we round the raw inflation
amounts according to the convention set
forth in the statutory definition.11
Because we round only the increased
amount, we calculate the increased
amount by subtracting the initial EGC
gross revenue threshold from the raw
maximum inflation adjustment.
Accordingly, the increase in the EGC
gross revenue threshold from the initial
threshold is $235,430,000 (i.e.,
$1,235,430,000 less $1,000,000,000),
which is rounded to $235,000,000 under
the statutory rounding convention.
Finally, we add the rounded increase,
$235,000,000, to the initial EGC revenue
threshold, $1,000,000,000, which yields
an inflation-adjusted EGC revenue
threshold of $1,235,000,000. The
amendments to the ‘‘emerging growth
company’’ definitions in Securities Act
Rule 405 and Exchange Act Rule 12b–
2 we are adopting reflect this adjusted
threshold.
III. Inflation Adjustments to Regulation
Crowdfunding Thresholds
Title III of the JOBS Act amended the
Securities Act to add Section 4(a)(6),
which provides an exemption from the
registration requirements of Section 5 of
the Securities Act for certain
crowdfunding transactions. In 2015, the
Commission adopted Regulation
Crowdfunding to implement that
exemption.12 Sections 4(a)(6) and 4A of
10 As in the 2017 Release, we round the inflation
factor to the nearest hundred thousandth.
11 See Section 2(a)(19) of the Securities Act and
Section 3(a)(80) of the Exchange Act, which require
the amount to be set to the nearest $1,000,000.
12 See Crowdfunding Release.
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57395
the Securities Act set forth dollar
amounts used in connection with the
crowdfunding exemption,13 and Section
4A(h)(1) 14 states that those dollar
amounts shall be adjusted by the
Commission not less frequently than
once every five years to reflect any
changes in the CPI–U. Pursuant to this
directive, the Commission, in the 2017
Release, adjusted those dollar amounts
to reflect the inflation adjustment for the
prior five-year period from December
2011 until December 2016, and we are
again amending Rules 100(a)(2) and
201(t) and Form C to adjust for inflation
the dollar amounts set forth in these
rules and in the form as required by the
statute.
To determine the adjusted dollar
amounts for Rule 100(a)(2) and Rule
201(t), we use the same process as
described above in connection with the
EGC adjustment to determine the raw
inflation amounts.15 Then we round the
raw inflation amounts to the nearest
$100 for amounts under $100,000 and to
the nearest $1,000 for amounts that
equal or exceed $100,000. The rounded
inflation amounts are then added to the
initial inflation amounts to yield the
inflation-adjusted amounts. Tables 1
and 2 show the current amounts, initial
amounts, rounded inflation amounts,
and inflation-adjusted amounts for
Rules 100(a)(2) and 201(t).16
13 Section 4(a)(6)(A) sets forth the maximum
amount an issuer may sell in reliance on the
crowdfunding exemption in a 12-month period, and
Section 4(a)(6)(B) sets limits on the dollar amount
that may be sold to any investor by an issuer in
reliance on the crowdfunding exemption. These
amounts, as adjusted in the 2017 Release, are
reflected in 17 CFR 227.100. Section 4A(b)(1)(D)
sets forth thresholds for determining the level of
financial statements required, and those thresholds,
as adjusted in the 2017 Release, are reflected in
Rule 201(t).
14 15 U.S.C. 77d–1(h)(1).
15 The 2021 CPI–U is divided by the 2011 CPI–
U to derive the inflation factor of 1.23543. Each
dollar amount is then multiplied by the inflation
factor to determine the raw inflation adjusted
amount. Then, to derive the Rounded Inflation
Amount in the charts, we subtract that product by
the original dollar amount and apply the rounding
convention. The Inflation-Adjusted Amount is the
sum of the Initial Amount and Rounded Inflation
Amount.
16 We have reflected the adjusted amounts for the
financial statement thresholds where those are
referenced in Question 29 of the ‘‘Optional
Question & Answer Format’’ portion of Form C.
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Federal Register / Vol. 87, No. 181 / Tuesday, September 20, 2022 / Rules and Regulations
TABLE 1—INFLATION-ADJUSTED AMOUNTS IN RULE 100(a)(2) OF REGULATION CROWDFUNDING
[Investment limits]
Current
amount
Regulation crowdfunding rule
Threshold for assessing investor’s annual income or net worth to determine
investment limits (17 CFR 227.100(a)(2)(i) (‘‘Rule 100(a)(2)(i)’’) and 17
CFR 227.100(a)(2)(ii) (‘‘Rule 100(a)(2)(ii)’’) .................................................
Lower threshold of Regulation Crowdfunding securities permitted to be sold
to an investor if annual income or net worth is less than $124,000 (Rule
100(a)(2)(i)) ..................................................................................................
Maximum amount that can be sold to an investor under Regulation
Crowdfunding in a 12-month period (Rule 100(a)(2)(ii)) ..............................
Initial amount
Rounded
inflation
amount
Inflationadjusted
amount
$107,000
$100,000
$24,000
$124,000
2,200
2,000
500
2,500
107,000
100,000
24,000
124,000
TABLE 2—INFLATION-ADJUSTED AMOUNTS IN RULE 201(t) OF REGULATION CROWDFUNDING
[Financial statement requirements]
Current offering threshold
amount
Regulation crowdfunding rule
17 CFR 227.201(t)(1) ......................................................................................
17 CFR 227.201(t)(2) ......................................................................................
17 CFR 227.201(t)(3) ......................................................................................
When the Commission adjusted the
Regulation Crowdfunding dollar
amounts in April 2017 for inflation
pursuant to the statutory directive, those
adjustments included setting the
offering limit in 17 CFR 227.100(a)(1)
(‘‘Rule 100(a)(1)’’) at $1,070,000.
Adjusting the offering limit amount for
inflation using the same method we use
for the adjustments in Rules 100(a)(2)
and 201(t) would result in an offering
limit of $1,235,000 ($1,000,000 baseline
plus $235,000 inflation adjustment).
However, effective March 2021, the
Commission increased the Rule
100(a)(1) threshold by $3,930,000 (from
$1,070,000 to $5,000,000).17
Accordingly, we consider the current
Rule 100(a)(1) offering limit to more
than account for inflation and are
making zero further inflation
adjustments to this threshold at this
time.18
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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
17 See Facilitating Capital Formation and
Expanding Investment Opportunities by Improving
Access to Capital in Private Markets, Release Nos.
33–10884; 34–90300; IC–34082 (Nov. 2, 2020) [86
FR 3496 (Jan. 14, 2021)] (‘‘2020 Release’’).
18 For the next statutorily-required adjustment,
we expect that the Commission will use $5 million
as the baseline from which the adjustment will be
calculated.
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$107,000
535,000
1,070,000
impracticable, unnecessary, or contrary
to the public interest.’’ 19
The implementation of statutory
inflation adjustments pursuant to Title I
and Title III of the JOBS Act do not
impose any new substantive regulatory
requirements on any person. The
amendments to implement the statutory
inflation adjustments will effectuate the
adjusted dollar amount thresholds
mandated by the JOBS Act and involve
minimal discretion. For these reasons,
for good cause, we find that it is
unnecessary to publish notice of these
amendments in the Federal Register
and solicit public comment thereon.20
For similar reasons, although the APA
generally requires publication of a rule
at least 30 days before its effective date,
we find there is good cause for the
amendments to take effect on September
20, 2022.21
If any of the provisions of these
amendments, or the application thereof
to any person or circumstance, is held
to be invalid, such invalidity shall not
affect other provisions or application of
such provisions to other persons or
19 5
U.S.C. 553(b)(3)(B).
finding also satisfies the requirements of
5 U.S.C. 808(2), allowing the amendments 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
amendments 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).
21 See 5 U.S.C. 553(d)(3).
20 This
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Initial offering
threshold
amount
$100,000
500,000
1,000,000
Rounded
inflation
amount
$24,000
118,000
235,000
Inflationadjusted
amount
$124,000
618,000
1,235,000
circumstances that can be given effect
without the invalid provision or
application.
Pursuant to the Congressional Review
Act, the Office of Information and
Regulatory Affairs has designated these
amendments not a ‘‘major rule,’’ as
defined by 5 U.S.C. 804(2).
V. Economic Analysis
We are mindful of the costs imposed
by, and the benefits to be obtained from,
our rules. Section 2(b) of the Securities
Act and Section 3(f) of the Exchange Act
require the Commission, whenever it
engages in rulemaking and 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 would promote efficiency,
competition, and capital formation.22 In
addition, Section 23(a)(2) of the
Exchange Act requires the Commission,
when making rules under the Exchange
Act, to consider the impact such rules
would have on competition.23 Section
23(a)(2) of the Exchange Act also
prohibits the Commission from adopting
any rule that would impose a burden on
competition not necessary or
appropriate in furtherance of the
purposes of the Exchange Act.24 Below
we address the costs and benefits, as
well as the potential effects on
efficiency, competition, and capital
formation, of the various amendments
being adopted in this release. Because
22 See
23 See
15 U.S.C. 77b(b) and 15 U.S.C. 78c(f).
15 U.S.C. 78w(a)(2).
24 Id.
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the amendments merely implement the
statutory inflation adjustments
mandated by the JOBS Act, we do not
believe there are reasonable alternatives
to the amendments discussed in this
analysis.
To comply with the inflation
adjustments required under the JOBS
Act, we are adopting amendments that
include an inflation-adjusted threshold
in the definition of the term ‘‘emerging
growth company.’’ These amendments
adjust the total annual gross revenue
threshold for EGCs in accordance with
inflation as required by the JOBS Act.
The amendments will increase the
number of eligible filers that may
qualify for scaled disclosure, thereby
reducing disclosure costs in the
aggregate, to the extent that eligible
filers take advantage of the EGC
accommodations.
We note that this inflation adjustment
affects both domestic issuers and foreign
private issuers. We estimate that during
calendar year 2021 approximately 7,199
issuers filed annual reports 25
(excluding asset-backed securities
issuers and registered investment
companies, which are ineligible for the
EGC status). We estimate that
approximately 1,704 (23.7%) of those
filers were EGCs and 5,495 (76.3%)
were non-EGCs.26 In addition, we
estimate that among those filers,
approximately 6,232 filed on domestic
forms (of which approximately 1,391
(22.3%) were EGCs) and 967 were
foreign private issuers that filed on
Forms 20–F and 40–F (of which
approximately 313 (32.4%) were EGCs).
The inflation adjustment to the total
annual gross revenue threshold for EGCs
is designed to maintain the scope of
registrants that may qualify as an EGC,
preserving the economic effects
associated with the option to claim EGC
status. It does so by not allowing the
level of revenue, in real terms, that
determines the eligibility for EGC status
to be diminished by inflation. The
inflation adjustment amendment may
marginally expand the number of
issuers that may claim EGC status, thus
extending the economic effects,
including impacts on efficiency,
competition, and capital formation, of
the option to claim this status to issuers
that fall between the current
$1,070,000,000 gross revenue threshold
and the $1,235,000,000 gross revenue
25 This estimate is based on the number of filers,
by unique Central Index Key, with at least one
periodic report on Form 10–K, Form 20–F, Form
40–F, or an amendment thereto, filed between
January 1 and December 31, 2021.
26 EGC status data was obtained from Ives Group’s
Audit Analytics (‘‘Audit Analytics’’) and staff
review of EDGAR filings.
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threshold that will define EGC
eligibility under the amendments. Using
the number of filers and the distribution
of filer revenues in calendar year 2021,
we estimate that the inflation
adjustment of the EGC revenue
threshold will increase the overall
number of EGCs by 51, from
approximately 1,704 (23.7% of the total
number of filers (7,199)) to
approximately 1,755 (24.4% of the total
number of filers (7,199)); among them,
the number of domestic issuers that
qualify as EGCs would increase by 45,
from approximately 1,391 (22.3% of the
total number of domestic-form filers
(6,232)) to approximately 1,436 (23.0%
of the total number of domestic-form
filers (6,232)), while the number of
foreign private issuers that qualify as
EGCs will increase by 6, from
approximately 313 (32.4% of the total
number of Form 20–F and 40–F filers
(967)) to approximately 319 (33.0% of
the total number of Form 20–F and 40–
F filers (967)).27
For the purposes of analyzing the
economic effects of the amendments to
Regulation Crowdfunding, we use as our
baseline the regulatory framework
established by Regulation
Crowdfunding as adopted in 2015 (and
amended in 2017 and 2020).28 The
amendments to Regulation
Crowdfunding adjust the thresholds in
Rules 100(a)(2) and 201(t) in accordance
with inflation as required by Section
4A(h) of the Securities Act and are not
expected to increase disclosure or
compliance costs incurred by an issuer.
The adjustment will cause some issuers
to become subject to less extensive
financial statement requirements and
may lower disclosure or compliance
27 The estimates of filers newly eligible as EGCs
under the amendments are based on the number of
calendar year non-EGC filers, excluding assetbacked securities issuers and registered investment
companies (which are ineligible as EGCs) and
excluding large accelerated filers (which also are
ineligible as EGCs), with nonmissing revenue data
in Audit Analytics (most recent revenues as of the
end of calendar year 2021) that exceed the existing
revenue threshold but do not exceed the inflationadjusted revenue threshold, where revenue data is
available. Revenue data is unavailable for
approximately 1.5% of non-EGCs, which may result
in a slight underestimate of the number of newly
eligible EGCs. As a caveat, it is possible that some
companies included in the above estimates would
be ineligible as EGCs for reasons not captured in the
estimate, for example, because they were previously
EGCs and have ‘‘aged out’’ of the status or exceeded
the non-convertible debt threshold, which may
result in a slight overestimate of the number of
newly eligible EGCs. Finally, the estimates are
based on the universe of registrants from calendar
year 2021. Future changes to the number and
characteristics of new entrants and deregistering
companies would also affect these projections.
28 See Crowdfunding Release; see also 2017
Release and 2020 Release.
PO 00000
Frm 00023
Fmt 4700
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57397
costs for these issuers.29 The adjustment
will also increase the amounts of
securities that may be sold to a given
investor, which may expand some
issuers’ ability to raise capital and some
investors’ ability to gain exposure to
Regulation Crowdfunding investment
opportunities.
The inflation adjustment to the
thresholds in Rules 100(a)(2) and 201(t)
is intended to allow these thresholds to
keep pace with inflation, preserving the
economic effects of Regulation
Crowdfunding in real terms.30 For
example, the inflation adjustments to
the financial statement thresholds in
Rule 201(t) will ensure that issuers can
continue to utilize higher offering
amounts without incurring the
increased cost of complying with the
higher tier of financial statement
requirements that would apply absent
the amendments.
Substantively, the inflation
adjustments to Rule 100(a)(2) and Rule
201(t) marginally affect the amount of
capital that issuers may raise in reliance
on Regulation Crowdfunding without
incurring the costs of compliance with
a higher tier of financial statement
requirements, the number of investors
who may participate in crowdfunding
offerings, and the amounts that
investors may invest in crowdfunding
offerings.
Because we believe the substantive
impact of these amendments to our
rules and forms is likely to be marginal,
we do not believe that they will
substantially impact efficiency,
competition, and capital formation.
VI. Paperwork Reduction Act
The amendments effecting the
statutory inflation adjustments do not
make any substantive modifications to
any existing collection of information
requirements or impose any new
substantive recordkeeping or
information collection requirements
within the meaning of the Paperwork
Reduction Act of 1995 (‘‘PRA’’).31
Accordingly, we are not revising any
burden and cost estimates in connection
with these amendments.
Statutory Authority
The amendments contained in this
release are being adopted under the
authority set forth in Sections 2, 4(a)(6),
29 See
Crowdfunding Release at 71497.
at 71482.
31 44 U.S.C. 3501 et seq. The amendments to
reflect the statutory inflation adjustments to certain
dollar amount thresholds in Titles I and III of the
JOBS Act will have only marginal effects on the
application of these thresholds for eligibility and
reporting purposes and therefore are not expected
to affect the overall burden estimates for affected
forms. See Section V above.
30 Id.
E:\FR\FM\20SER1.SGM
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57398
Federal Register / Vol. 87, No. 181 / Tuesday, September 20, 2022 / Rules and Regulations
4A, and 19(a) of the Securities Act;
Sections 3 and 23(a) of the Exchange
Act; and Sections 102, 103, and 107 of
the JOBS Act.
U.S.C. 1350; and Pub. L. 111–203, 939A, 124
Stat. 1376, (2010); and Pub. L. 112–106, sec.
503 and 602, 126 Stat. 326 (2012), unless
otherwise noted.
4. The authority citation for part 230
continues to read as follows:
■
■
List of Subjects
17 CFR Part 227
Crowdfunding, Reporting and
recordkeeping requirements, Securities.
17 CFR Part 230
Advertising, Administrative practice
and procedure, Confidential business
information, Investment companies,
Reporting and recordkeeping
requirements, Securities.
17 CFR Part 239
Administrative practice and
procedure, Reporting and recordkeeping
requirements, Securities.
17 CFR Part 240
Administrative practice and
procedure, Reporting and recordkeeping
requirements, Securities.
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.
*
*
*
*
*
5. In § 230.405, amend the definition
‘‘Emerging growth company’’ by:
■ a. In paragraph (1), removing
reference to ‘‘$1,070,000,000’’ and
adding in its place ‘‘$1,235,000,000’’;
and
■ b. In paragraph (2)(i), removing
reference to ‘‘$1,070,000,000’’ and
adding in its place ‘‘$1,235,000,000.’’
■
PART 239—FORMS PRESCRIBED
UNDER THE SECURITIES ACT OF 1933
6. The authority citation for part 239
continues to read as follows:
For the reasons set out in the
preamble, the Commission is amending
title 17, chapter II of the Code of Federal
Regulations 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).
Authority: 15 U.S.C. 77c, 77f, 77g, 77h, 77j,
77s, 77z–2, 77z–3, 77sss, 78c, 78l, 78m, 78n,
78o(d), 78o–7 note, 78u–5, 78w(a), 78ll,
78mm, 80a–2(a), 80a–3, 80a–8, 80a–9, 80a–
10, 80a–13, 80a–24, 80a–26, 80a–29, 80a–30,
and 80a–37; and sec. 107, Pub. L. 112–106,
126 Stat. 312, unless otherwise noted.
7. Amend Form C (referenced in
Section 239.900) by revising the dollar
amounts in Question 29 of the
‘‘OPTIONAL QUESTION & ANSWER
FORMAT FOR AN OFFERING
STATEMENT’’ as follows:
■
■
Note: The text of Form C does not, and this
amendment will not, appear in the Code of
Federal Regulations.
■
■
3. Amend § 227.201 by:
a. In paragraph (t)(1), removing
reference to ‘‘$107,000’’ and adding in
its place ‘‘$124,000’’;
■ b. In paragraph (t)(2), removing
reference to ‘‘$107,000’’ and adding in
its place ‘‘$124,000’’; and removing
reference to ‘‘$535,000’’ and adding in
its place ‘‘$618,000’’; and
■ c. In paragraph (t)(3), removing the
two references to ‘‘$535,000’’ and
adding in their place ‘‘$618,000’’; and
removing reference to ‘‘$1,070,000’’ and
adding in its place ‘‘$1,235,000.’’
PART 240—GENERAL RULES AND
REGULATIONS, SECURITIES
EXCHANGE ACT OF 1934
2. Amend § 227.100 by:
a. In paragraph (a)(2)(i), removing
reference to ‘‘$2,200’’ and adding in its
place ‘‘$2,500’’; and removing
‘‘$107,000’’ and adding in its place
‘‘$124,000’’; and
■ b. In paragraph (a)(2)(ii), removing the
two references to ‘‘$107,000’’ and
adding in their place ‘‘$124,000.’’
■
■
VerDate Sep<11>2014
16:25 Sep 19, 2022
Jkt 256001
9. In § 240.12b–2, amend the
definition ‘‘Emerging growth company’’
by:
■ a. In paragraph (1), removing
reference to ‘‘$1,070,000,000’’ and
adding in its place ‘‘$1,235,000,000’’;
and
■ b. In paragraph (2)(i), removing
reference to ‘‘$1,070,000,000’’ and
adding in its place ‘‘$1,235,000,000.’’
By the Commission.
Dated: September 9, 2022.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2022–19867 Filed 9–19–22; 8:45 am]
BILLING CODE 8011–01–P
DEPARTMENT OF HOMELAND
SECURITY
Coast Guard
■
Text of the Final Rule and Form
Amendments
lotter on DSK11XQN23PROD with RULES1
PART 230—GENERAL RULES AND
REGULATIONS, SECURITIES ACT OF
1933
a. Removing all references to
‘‘$107,000’’ and adding in their place
‘‘$124,000’’; and
■ b. Removing all references to
‘‘$535,000’’ and adding in their place
‘‘$618,000’’; and
■ c. Removing reference to ‘‘$1,070,000’’
and adding in its place ‘‘$1,235,000.’’
8. The general authority citation for
part 240 continues to read as follows:
■
Authority: 15 U.S.C. 77c, 77d, 77g, 77j,
77s, 77z–2, 77z–3, 77eee, 77ggg, 77nnn,
77sss, 77ttt, 78c, 78c–3, 78c–5, 78d, 78e, 78f,
78g, 78i, 78j, 78j–1, 78k, 78k–1, 78l, 78m,
78n, 78n–1, 78o, 78o–4, 78o–10, 78p, 78q,
78q–1, 78s, 78u–5, 78w, 78x, 78dd, 78ll,
78mm, 80a–20, 80a–23, 80a–29, 80a–37, 80b–
3, 80b–4, 80b–11, 7201 et seq.; and 8302; 7
U.S.C. 2(c)(2)(E); 12 U.S.C. 5221(e)(3); 18
PO 00000
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Fmt 4700
Sfmt 4700
33 CFR Part 165
[Docket Number USCG–2022–0638]
RIN 1625–AA00
Safety Zone; Cumberland River,
Nashville, TN
Coast Guard, Department of
Homeland Security (DHS).
ACTION: Temporary final rule.
AGENCY:
SUMMARY: The Coast Guard is
establishing a temporary safety zone
from mile marker (MM) 191.1 to 191.5
of the Cumberland River. This action is
necessary to provide for the safety of life
on these navigable waters near Korean
Veterans Bridge, Nashville, TN, during
Pro Wakeboard Tour on September 23,
2022. This rule prohibits persons and
vessels from being in the safety zone
unless authorized by the Captain of the
Port Sector Ohio Valley or a designated
representative.
DATES: This rule is effective on
September 23, 2022, from 9 a.m. until 9
p.m.
ADDRESSES: To view documents
mentioned in this preamble as being
available in the docket, go to https://
www.regulations.gov, type USCG–2022–
0638 in the search box and click
‘‘Search.’’ Next, in the Document Type
column, select ‘‘Supporting & Related
Material.’’
If
you have questions about this rule, call
or email Petty Officer Third Class
Benjamin Gardner and Marine Safety
Detachment Nashville, U.S. Coast
FOR FURTHER INFORMATION CONTACT:
E:\FR\FM\20SER1.SGM
20SER1
]]>Agencies
[Federal Register Volume 87, Number 181 (Tuesday, September 20, 2022)]
[Rules and Regulations]
[Pages 57394-57398]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-19867]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 227, 230, 239, and 240
[Release Nos. 33-11098; 34-95715]
Inflation Adjustments Under Titles I and III of the JOBS Act
AGENCY: Securities and Exchange Commission.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: To effectuate inflation adjustments required under Title I and
Title III of the Jumpstart Our Business Startups Act (``JOBS Act''), we
are adopting amendments to adjust the thresholds in the definition of
``emerging growth company'' as well as dollar amounts in Regulation
Crowdfunding.
DATES: Effective September 20, 2022.
FOR FURTHER INFORMATION CONTACT: Charlie Guidry, Special Counsel,
Office of Small Business Policy, at (202) 551-3460, Division of
Corporation Finance, U.S. Securities and Exchange Commission, 100 F
Street NE, Washington, DC 20549.
SUPPLEMENTARY INFORMATION: We are adopting amendments to 17 CFR
227.100(a)(2) (``Rule 100(a)(2)'') and 17 CFR 227.201(t) (``Rule
201(t)'') of 17 CFR 227.100 et seq. (``Regulation Crowdfunding''); 17
CFR 230.405 (``Rule 405'') and 17 CFR 239.900 (``Form C'') under the
Securities Act of 1933 (``Securities Act''); and 17 CFR 240.12b-2
(``Rule 12b-2'') under the Exchange Act of 1934 (``Exchange Act'').
I. Introduction
Title I of the JOBS Act \1\ added Securities Act Section 2(a)(19)
and Exchange Act Section 3(a)(80) to define the term ``emerging growth
company'' \2\ (``EGC''). Pursuant to the statutory definition, the
Commission is required every five years to index to inflation the
annual gross revenue amount used to determine EGC status to reflect the
change in the Consumer Price Index for All Urban Consumers (``CPI-U'')
published by the Bureau of Labor Statistics (``BLS'').\3\ In 2017, the
Commission increased the annual gross revenue amount from
$1,000,000,000 to $1,070,000,000.\4\ We are adopting amendments to our
rules to reflect the next statutorily required inflation adjustment to
the annual gross revenue amount.
---------------------------------------------------------------------------
\1\ Public Law 112-106, 126 Stat. 306 (2012).
\2\ Section 101(a) of the JOBS Act amended Section 2(a) of the
Securities Act [15 U.S.C. 77b(a)] and Section 3(a) of the Exchange
Act [15 U.S.C. 78c(a)] to define an ``emerging growth company'' as
an issuer with less than $1 billion in total annual gross revenues
during its most recently completed fiscal year. If an issuer
qualifies as an EGC on the first day of its fiscal year, it
maintains that status until the earliest of (1) the last day of the
fiscal year of the issuer during which it has total annual gross
revenues of $1 billion or more; (2) the last day of its fiscal year
following the fifth anniversary of the first sale of its common
equity securities pursuant to an effective registration statement;
(3) the date on which the issuer has, during the previous three-year
period, issued more than $1 billion in non-convertible debt; or (4)
the date on which the issuer is deemed to be a ``large accelerated
filer'' (as defined in Exchange Act Rule 12b-2). See Section
2(a)(19) of the Securities Act [15 U.S.C. 77b(a)(19)] and Section
3(a)(80) of the Exchange Act [15 U.S.C. 78c(a)(80)]. A ``large
accelerated filer'' is an issuer that, as of the end of its fiscal
year, has an aggregate worldwide market value of the voting and non-
voting common equity held by its non-affiliates of $700 million or
more, as measured on the last business day of the issuer's most
recently completed second fiscal quarter; has been subject to the
requirements of Section 13(a) or 15(d) of the Exchange Act for a
period of at least twelve calendar months; has filed at least one
annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act; and is not eligible to use the requirements for smaller
reporting companies under the revenue test in paragraph (2) or
(3)(iii)(B) of the ``smaller reporting company'' definition. See
Exchange Act Rule 12b-2.
\3\ The CPI-U is the statistical metric developed by the BLS to
monitor the change in the price of a set list of products. The CPI-U
represents changes in prices of all goods and services purchased for
consumption by urban households. See ``Consumer Price Index''
available at https://www.bls.gov/cpi.
\4\ See Inflation Adjustments and Other Technical Amendments
Under Titles I and III of the Jobs Act, Release Nos. 33-10332; 34-
80355 (Mar. 31, 2017) [82 FR 17545 (Apr. 12, 2017)] (``2017
Release'').
\5\ 15 U.S.C. 77d(a)(6).
\6\ 15 U.S.C. 77e.
\7\ 17 CFR 227.100 et seq.; see also Crowdfunding, Release No.
33-9974 (Oct. 30, 2015) [80 FR 71388] (``Crowdfunding Release'').
---------------------------------------------------------------------------
Title III of the JOBS Act added Securities Act Section 4(a)(6),\5\>
which provides an exemption from the registration requirements of
Securities Act Section 5 \6\ for certain crowdfunding transactions, and
the Commission promulgated Regulation Crowdfunding \7\
[[Page 57395]]
to implement that exemption. Sections 4(a)(6) and 4A \8\ of the
Securities Act set forth dollar amounts used in connection with the
crowdfunding exemption, and Section 4A(h)(1) \9\ states that such
dollar amounts shall be adjusted by the Commission not less frequently
than once every five years to reflect the change in the CPI-U published
by the BLS. Pursuant to this directive, the Commission adjusted the
amounts for inflation in the 2017 Release. We are amending Regulation
Crowdfunding to again adjust those dollar amounts for inflation
pursuant to the statutory requirement.
---------------------------------------------------------------------------
\8\ 15 U.S.C. 77d-1.
\9\ 15 U.S.C. 77d-1(h)(1).
---------------------------------------------------------------------------
II. Inflation Adjustments to the Definition of ``Emerging Growth
Company''
JOBS Act Section 101 amended Section 2(a)(19) of the Securities Act
and Section 3(a)(80) of the Exchange Act to define ``emerging growth
company'' to mean an issuer that had total annual gross revenues of
less than $1 billion, as such amount is indexed for inflation every
five years by the Commission to reflect the change in the CPI-U during
its most recently completed fiscal year. By statute, the adjusted gross
revenue threshold must be set to the nearest $1,000,000. Pursuant to
this directive, the Commission, in the 2017 Release, adjusted the
threshold from $1,000,000,000 to $1,070,000,000. Today, we are adopting
an amendment to Rule 405 and to Rule 12b-2 to again index the annual
gross revenue amounts included in the definition of ``emerging growth
company'' for inflation to reflect the change in the CPI-U as required
by statute.
To determine the new EGC gross revenue threshold to be included in
the amendments, we use the same baseline thresholds and CPI-U and the
same methodology that the Commission used in the 2017 Release. First,
we determine the appropriate CPI-U for December of the calendar year
preceding the year of adjustment. Because we are making the inflation
adjustment for the definition of EGC in 2022, we use the CPI-U for
December 2021, which was 278.802 (``2021 CPI-U''). Consistent with the
2017 Release, we then use the CPI-U for December of 2011, the calendar
year before the EGC definition was established by the JOBS Act, which
was 225.672 (``2011 CPI-U'').
Second, we calculate the cost-of-living adjustment or inflation
factor. To do this, we divide the 2021 CPI-U by the 2011 CPI-U. The
resulting inflation factor is 1.23543.\10\
---------------------------------------------------------------------------
\10\ As in the 2017 Release, we round the inflation factor to
the nearest hundred thousandth.
---------------------------------------------------------------------------
Third, we calculate the raw inflation adjustment, which is the
inflation adjustment before rounding. To do this, we multiply the
initial EGC gross revenue threshold, $1,000,000,000, by the inflation
factor 1.23543, the product of which is $1,235,430,000.
Fourth, we round the raw inflation amounts according to the
convention set forth in the statutory definition.\11\ Because we round
only the increased amount, we calculate the increased amount by
subtracting the initial EGC gross revenue threshold from the raw
maximum inflation adjustment. Accordingly, the increase in the EGC
gross revenue threshold from the initial threshold is $235,430,000
(i.e., $1,235,430,000 less $1,000,000,000), which is rounded to
$235,000,000 under the statutory rounding convention.
---------------------------------------------------------------------------
\11\ See Section 2(a)(19) of the Securities Act and Section
3(a)(80) of the Exchange Act, which require the amount to be set to
the nearest $1,000,000.
---------------------------------------------------------------------------
Finally, we add the rounded increase, $235,000,000, to the initial
EGC revenue threshold, $1,000,000,000, which yields an inflation-
adjusted EGC revenue threshold of $1,235,000,000. The amendments to the
``emerging growth company'' definitions in Securities Act Rule 405 and
Exchange Act Rule 12b-2 we are adopting reflect this adjusted
threshold.
III. Inflation Adjustments to Regulation Crowdfunding Thresholds
Title III of the JOBS Act amended the Securities Act to add Section
4(a)(6), which provides an exemption from the registration requirements
of Section 5 of the Securities Act for certain crowdfunding
transactions. In 2015, the Commission adopted Regulation Crowdfunding
to implement that exemption.\12\ Sections 4(a)(6) and 4A of the
Securities Act set forth dollar amounts used in connection with the
crowdfunding exemption,\13\ and Section 4A(h)(1) \14\ states that those
dollar amounts shall be adjusted by the Commission not less frequently
than once every five years to reflect any changes in the CPI-U.
Pursuant to this directive, the Commission, in the 2017 Release,
adjusted those dollar amounts to reflect the inflation adjustment for
the prior five-year period from December 2011 until December 2016, and
we are again amending Rules 100(a)(2) and 201(t) and Form C to adjust
for inflation the dollar amounts set forth in these rules and in the
form as required by the statute.
---------------------------------------------------------------------------
\12\ See Crowdfunding Release.
\13\ Section 4(a)(6)(A) sets forth the maximum amount an issuer
may sell in reliance on the crowdfunding exemption in a 12-month
period, and Section 4(a)(6)(B) sets limits on the dollar amount that
may be sold to any investor by an issuer in reliance on the
crowdfunding exemption. These amounts, as adjusted in the 2017
Release, are reflected in 17 CFR 227.100. Section 4A(b)(1)(D) sets
forth thresholds for determining the level of financial statements
required, and those thresholds, as adjusted in the 2017 Release, are
reflected in Rule 201(t).
\14\ 15 U.S.C. 77d-1(h)(1).
---------------------------------------------------------------------------
To determine the adjusted dollar amounts for Rule 100(a)(2) and
Rule 201(t), we use the same process as described above in connection
with the EGC adjustment to determine the raw inflation amounts.\15\
Then we round the raw inflation amounts to the nearest $100 for amounts
under $100,000 and to the nearest $1,000 for amounts that equal or
exceed $100,000. The rounded inflation amounts are then added to the
initial inflation amounts to yield the inflation-adjusted amounts.
Tables 1 and 2 show the current amounts, initial amounts, rounded
inflation amounts, and inflation-adjusted amounts for Rules 100(a)(2)
and 201(t).\16\
---------------------------------------------------------------------------
\15\ The 2021 CPI-U is divided by the 2011 CPI-U to derive the
inflation factor of 1.23543. Each dollar amount is then multiplied
by the inflation factor to determine the raw inflation adjusted
amount. Then, to derive the Rounded Inflation Amount in the charts,
we subtract that product by the original dollar amount and apply the
rounding convention. The Inflation-Adjusted Amount is the sum of the
Initial Amount and Rounded Inflation Amount.
\16\ We have reflected the adjusted amounts for the financial
statement thresholds where those are referenced in Question 29 of
the ``Optional Question & Answer Format'' portion of Form C.
[[Page 57396]]
Table 1--Inflation-Adjusted Amounts in Rule 100(a)(2) of Regulation Crowdfunding
[Investment limits]
----------------------------------------------------------------------------------------------------------------
Rounded Inflation-
Regulation crowdfunding rule Current amount Initial amount inflation adjusted
amount amount
----------------------------------------------------------------------------------------------------------------
Threshold for assessing investor's annual income $107,000 $100,000 $24,000 $124,000
or net worth to determine investment limits (17
CFR 227.100(a)(2)(i) (``Rule 100(a)(2)(i)'')
and 17 CFR 227.100(a)(2)(ii) (``Rule
100(a)(2)(ii)'')...............................
Lower threshold of Regulation Crowdfunding 2,200 2,000 500 2,500
securities permitted to be sold to an investor
if annual income or net worth is less than
$124,000 (Rule 100(a)(2)(i))...................
Maximum amount that can be sold to an investor 107,000 100,000 24,000 124,000
under Regulation Crowdfunding in a 12-month
period (Rule 100(a)(2)(ii))....................
----------------------------------------------------------------------------------------------------------------
Table 2--Inflation-Adjusted Amounts in Rule 201(t) of Regulation Crowdfunding
[Financial statement requirements]
----------------------------------------------------------------------------------------------------------------
Current Initial
offering offering Rounded Inflation-
Regulation crowdfunding rule threshold threshold inflation adjusted
amount amount amount amount
----------------------------------------------------------------------------------------------------------------
17 CFR 227.201(t)(1)............................ $107,000 $100,000 $24,000 $124,000
17 CFR 227.201(t)(2)............................ 535,000 500,000 118,000 618,000
17 CFR 227.201(t)(3)............................ 1,070,000 1,000,000 235,000 1,235,000
----------------------------------------------------------------------------------------------------------------
When the Commission adjusted the Regulation Crowdfunding dollar
amounts in April 2017 for inflation pursuant to the statutory
directive, those adjustments included setting the offering limit in 17
CFR 227.100(a)(1) (``Rule 100(a)(1)'') at $1,070,000. Adjusting the
offering limit amount for inflation using the same method we use for
the adjustments in Rules 100(a)(2) and 201(t) would result in an
offering limit of $1,235,000 ($1,000,000 baseline plus $235,000
inflation adjustment). However, effective March 2021, the Commission
increased the Rule 100(a)(1) threshold by $3,930,000 (from $1,070,000
to $5,000,000).\17\ Accordingly, we consider the current Rule 100(a)(1)
offering limit to more than account for inflation and are making zero
further inflation adjustments to this threshold at this time.\18\
---------------------------------------------------------------------------
\17\ See Facilitating Capital Formation and Expanding Investment
Opportunities by Improving Access to Capital in Private Markets,
Release Nos. 33-10884; 34-90300; IC-34082 (Nov. 2, 2020) [86 FR 3496
(Jan. 14, 2021)] (``2020 Release'').
\18\ For the next statutorily-required adjustment, we expect
that the Commission will use $5 million as the baseline from which
the adjustment will be calculated.
---------------------------------------------------------------------------
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.'' \19\
---------------------------------------------------------------------------
\19\ 5 U.S.C. 553(b)(3)(B).
---------------------------------------------------------------------------
The implementation of statutory inflation adjustments pursuant to
Title I and Title III of the JOBS Act do not impose any new substantive
regulatory requirements on any person. The amendments to implement the
statutory inflation adjustments will effectuate the adjusted dollar
amount thresholds mandated by the JOBS Act and involve minimal
discretion. For these reasons, for good cause, we find that it is
unnecessary to publish notice of these amendments in the Federal
Register and solicit public comment thereon.\20\
---------------------------------------------------------------------------
\20\ This finding also satisfies the requirements of 5 U.S.C.
808(2), allowing the amendments 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 amendments
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).
---------------------------------------------------------------------------
For similar reasons, although the APA generally requires
publication of a rule at least 30 days before its effective date, we
find there is good cause for the amendments to take effect on September
20, 2022.\21\
---------------------------------------------------------------------------
\21\ See 5 U.S.C. 553(d)(3).
---------------------------------------------------------------------------
If any of the provisions of these amendments, or the application
thereof to any person or circumstance, is held to be invalid, such
invalidity shall not affect other provisions or application of such
provisions to other persons or circumstances that can be given effect
without the invalid provision or application.
Pursuant to the Congressional Review Act, the Office of Information
and Regulatory Affairs has designated these amendments not a ``major
rule,'' as defined by 5 U.S.C. 804(2).
V. Economic Analysis
We are mindful of the costs imposed by, and the benefits to be
obtained from, our rules. Section 2(b) of the Securities Act and
Section 3(f) of the Exchange Act require the Commission, whenever it
engages in rulemaking and 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 would promote efficiency, competition, and capital
formation.\22\ In addition, Section 23(a)(2) of the Exchange Act
requires the Commission, when making rules under the Exchange Act, to
consider the impact such rules would have on competition.\23\ Section
23(a)(2) of the Exchange Act also prohibits the Commission from
adopting any rule that would impose a burden on competition not
necessary or appropriate in furtherance of the purposes of the Exchange
Act.\24\ Below we address the costs and benefits, as well as the
potential effects on efficiency, competition, and capital formation, of
the various amendments being adopted in this release. Because
[[Page 57397]]
the amendments merely implement the statutory inflation adjustments
mandated by the JOBS Act, we do not believe there are reasonable
alternatives to the amendments discussed in this analysis.
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\22\ See 15 U.S.C. 77b(b) and 15 U.S.C. 78c(f).
\23\ See 15 U.S.C. 78w(a)(2).
\24\ Id.
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To comply with the inflation adjustments required under the JOBS
Act, we are adopting amendments that include an inflation-adjusted
threshold in the definition of the term ``emerging growth company.''
These amendments adjust the total annual gross revenue threshold for
EGCs in accordance with inflation as required by the JOBS Act. The
amendments will increase the number of eligible filers that may qualify
for scaled disclosure, thereby reducing disclosure costs in the
aggregate, to the extent that eligible filers take advantage of the EGC
accommodations.
We note that this inflation adjustment affects both domestic
issuers and foreign private issuers. We estimate that during calendar
year 2021 approximately 7,199 issuers filed annual reports \25\
(excluding asset-backed securities issuers and registered investment
companies, which are ineligible for the EGC status). We estimate that
approximately 1,704 (23.7%) of those filers were EGCs and 5,495 (76.3%)
were non-EGCs.\26\ In addition, we estimate that among those filers,
approximately 6,232 filed on domestic forms (of which approximately
1,391 (22.3%) were EGCs) and 967 were foreign private issuers that
filed on Forms 20-F and 40-F (of which approximately 313 (32.4%) were
EGCs).
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\25\ This estimate is based on the number of filers, by unique
Central Index Key, with at least one periodic report on Form 10-K,
Form 20-F, Form 40-F, or an amendment thereto, filed between January
1 and December 31, 2021.
\26\ EGC status data was obtained from Ives Group's Audit
Analytics (``Audit Analytics'') and staff review of EDGAR filings.
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The inflation adjustment to the total annual gross revenue
threshold for EGCs is designed to maintain the scope of registrants
that may qualify as an EGC, preserving the economic effects associated
with the option to claim EGC status. It does so by not allowing the
level of revenue, in real terms, that determines the eligibility for
EGC status to be diminished by inflation. The inflation adjustment
amendment may marginally expand the number of issuers that may claim
EGC status, thus extending the economic effects, including impacts on
efficiency, competition, and capital formation, of the option to claim
this status to issuers that fall between the current $1,070,000,000
gross revenue threshold and the $1,235,000,000 gross revenue threshold
that will define EGC eligibility under the amendments. Using the number
of filers and the distribution of filer revenues in calendar year 2021,
we estimate that the inflation adjustment of the EGC revenue threshold
will increase the overall number of EGCs by 51, from approximately
1,704 (23.7% of the total number of filers (7,199)) to approximately
1,755 (24.4% of the total number of filers (7,199)); among them, the
number of domestic issuers that qualify as EGCs would increase by 45,
from approximately 1,391 (22.3% of the total number of domestic-form
filers (6,232)) to approximately 1,436 (23.0% of the total number of
domestic-form filers (6,232)), while the number of foreign private
issuers that qualify as EGCs will increase by 6, from approximately 313
(32.4% of the total number of Form 20-F and 40-F filers (967)) to
approximately 319 (33.0% of the total number of Form 20-F and 40-F
filers (967)).\27\
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\27\ The estimates of filers newly eligible as EGCs under the
amendments are based on the number of calendar year non-EGC filers,
excluding asset-backed securities issuers and registered investment
companies (which are ineligible as EGCs) and excluding large
accelerated filers (which also are ineligible as EGCs), with
nonmissing revenue data in Audit Analytics (most recent revenues as
of the end of calendar year 2021) that exceed the existing revenue
threshold but do not exceed the inflation-adjusted revenue
threshold, where revenue data is available. Revenue data is
unavailable for approximately 1.5% of non-EGCs, which may result in
a slight underestimate of the number of newly eligible EGCs. As a
caveat, it is possible that some companies included in the above
estimates would be ineligible as EGCs for reasons not captured in
the estimate, for example, because they were previously EGCs and
have ``aged out'' of the status or exceeded the non-convertible debt
threshold, which may result in a slight overestimate of the number
of newly eligible EGCs. Finally, the estimates are based on the
universe of registrants from calendar year 2021. Future changes to
the number and characteristics of new entrants and deregistering
companies would also affect these projections.
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For the purposes of analyzing the economic effects of the
amendments to Regulation Crowdfunding, we use as our baseline the
regulatory framework established by Regulation Crowdfunding as adopted
in 2015 (and amended in 2017 and 2020).\28\ The amendments to
Regulation Crowdfunding adjust the thresholds in Rules 100(a)(2) and
201(t) in accordance with inflation as required by Section 4A(h) of the
Securities Act and are not expected to increase disclosure or
compliance costs incurred by an issuer. The adjustment will cause some
issuers to become subject to less extensive financial statement
requirements and may lower disclosure or compliance costs for these
issuers.\29\ The adjustment will also increase the amounts of
securities that may be sold to a given investor, which may expand some
issuers' ability to raise capital and some investors' ability to gain
exposure to Regulation Crowdfunding investment opportunities.
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\28\ See Crowdfunding Release; see also 2017 Release and 2020
Release.
\29\ See Crowdfunding Release at 71497.
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The inflation adjustment to the thresholds in Rules 100(a)(2) and
201(t) is intended to allow these thresholds to keep pace with
inflation, preserving the economic effects of Regulation Crowdfunding
in real terms.\30\ For example, the inflation adjustments to the
financial statement thresholds in Rule 201(t) will ensure that issuers
can continue to utilize higher offering amounts without incurring the
increased cost of complying with the higher tier of financial statement
requirements that would apply absent the amendments.
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\30\ Id. at 71482.
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Substantively, the inflation adjustments to Rule 100(a)(2) and Rule
201(t) marginally affect the amount of capital that issuers may raise
in reliance on Regulation Crowdfunding without incurring the costs of
compliance with a higher tier of financial statement requirements, the
number of investors who may participate in crowdfunding offerings, and
the amounts that investors may invest in crowdfunding offerings.
Because we believe the substantive impact of these amendments to
our rules and forms is likely to be marginal, we do not believe that
they will substantially impact efficiency, competition, and capital
formation.
VI. Paperwork Reduction Act
The amendments effecting the statutory inflation adjustments do not
make any substantive modifications to any existing collection of
information requirements or impose any new substantive recordkeeping or
information collection requirements within the meaning of the Paperwork
Reduction Act of 1995 (``PRA'').\31\ Accordingly, we are not revising
any burden and cost estimates in connection with these amendments.
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\31\ 44 U.S.C. 3501 et seq. The amendments to reflect the
statutory inflation adjustments to certain dollar amount thresholds
in Titles I and III of the JOBS Act will have only marginal effects
on the application of these thresholds for eligibility and reporting
purposes and therefore are not expected to affect the overall burden
estimates for affected forms. See Section V above.
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Statutory Authority
The amendments contained in this release are being adopted under
the authority set forth in Sections 2, 4(a)(6),
[[Page 57398]]
4A, and 19(a) of the Securities Act; Sections 3 and 23(a) of the
Exchange Act; and Sections 102, 103, and 107 of the JOBS Act.
List of Subjects
17 CFR Part 227
Crowdfunding, Reporting and recordkeeping requirements, Securities.
17 CFR Part 230
Advertising, Administrative practice and procedure, Confidential
business information, Investment companies, Reporting and recordkeeping
requirements, Securities.
17 CFR Part 239
Administrative practice and procedure, Reporting and recordkeeping
requirements, Securities.
17 CFR Part 240
Administrative practice and procedure, Reporting and recordkeeping
requirements, Securities.
Text of the Final Rule and Form Amendments
For the reasons set out in the preamble, the Commission is amending
title 17, chapter II of the Code of Federal Regulations 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. 227.100 by:
0
a. In paragraph (a)(2)(i), removing reference to ``$2,200'' and adding
in its place ``$2,500''; and removing ``$107,000'' and adding in its
place ``$124,000''; and
0
b. In paragraph (a)(2)(ii), removing the two references to ``$107,000''
and adding in their place ``$124,000.''
0
3. Amend Sec. 227.201 by:
0
a. In paragraph (t)(1), removing reference to ``$107,000'' and adding
in its place ``$124,000'';
0
b. In paragraph (t)(2), removing reference to ``$107,000'' and adding
in its place ``$124,000''; and removing reference to ``$535,000'' and
adding in its place ``$618,000''; and
0
c. In paragraph (t)(3), removing the two references to ``$535,000'' and
adding in their place ``$618,000''; and removing reference to
``$1,070,000'' and adding in its place ``$1,235,000.''
PART 230--GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933
0
4. The 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
5. In Sec. 230.405, amend the definition ``Emerging growth company''
by:
0
a. In paragraph (1), removing reference to ``$1,070,000,000'' and
adding in its place ``$1,235,000,000''; and
0
b. In paragraph (2)(i), removing reference to ``$1,070,000,000'' and
adding in its place ``$1,235,000,000.''
PART 239--FORMS PRESCRIBED UNDER THE SECURITIES ACT OF 1933
0
6. The authority citation for part 239 continues to read as follows:
Authority: 15 U.S.C. 77c, 77f, 77g, 77h, 77j, 77s, 77z-2, 77z-3,
77sss, 78c, 78l, 78m, 78n, 78o(d), 78o-7 note, 78u-5, 78w(a), 78ll,
78mm, 80a-2(a), 80a-3, 80a-8, 80a-9, 80a-10, 80a-13, 80a-24, 80a-26,
80a-29, 80a-30, and 80a-37; and sec. 107, Pub. L. 112-106, 126 Stat.
312, unless otherwise noted.
0
7. Amend Form C (referenced in Section 239.900) by revising the dollar
amounts in Question 29 of the ``OPTIONAL QUESTION & ANSWER FORMAT FOR
AN OFFERING STATEMENT'' as follows:
Note: The text of Form C does not, and this amendment will not,
appear in the Code of Federal Regulations.
0
a. Removing all references to ``$107,000'' and adding in their place
``$124,000''; and
0
b. Removing all references to ``$535,000'' and adding in their place
``$618,000''; and
0
c. Removing reference to ``$1,070,000'' and adding in its place
``$1,235,000.''
PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF
1934
0
8. The general authority citation for part 240 continues to read as
follows:
Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3,
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78c-3, 78c-5, 78d, 78e, 78f,
78g, 78i, 78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78n-1, 78o, 78o-4,
78o-10, 78p, 78q, 78q-1, 78s, 78u-5, 78w, 78x, 78dd, 78ll, 78mm,
80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4, 80b-11, 7201 et seq.;
and 8302; 7 U.S.C. 2(c)(2)(E); 12 U.S.C. 5221(e)(3); 18 U.S.C. 1350;
and Pub. L. 111-203, 939A, 124 Stat. 1376, (2010); and Pub. L. 112-
106, sec. 503 and 602, 126 Stat. 326 (2012), unless otherwise noted.
0
9. In Sec. 240.12b-2, amend the definition ``Emerging growth company''
by:
0
a. In paragraph (1), removing reference to ``$1,070,000,000'' and
adding in its place ``$1,235,000,000''; and
0
b. In paragraph (2)(i), removing reference to ``$1,070,000,000'' and
adding in its place ``$1,235,000,000.''
By the Commission.
Dated: September 9, 2022.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2022-19867 Filed 9-19-22; 8:45 am]
BILLING CODE 8011-01-P
