[Federal Register Volume 82, Number 189 (Monday, October 2, 2017)]
[Rules and Regulations]
[Pages 45722-45725]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-21094]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 227 and 230

[Release No. 33-10416]


Regulation Crowdfunding and Regulation A Relief and Assistance 
for Victims of Hurricane Harvey, Hurricane Irma, and Hurricane Maria

AGENCY: Securities and Exchange Commission.

ACTION: Interim final temporary rule.

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SUMMARY: We are adopting interim final temporary rules for issuers 
subject to

[[Page 45723]]

reporting obligations pursuant to Regulation Crowdfunding and 
Regulation A in order to address the needs of companies directly or 
indirectly affected by Hurricane Harvey, Hurricane Irma, or Hurricane 
Maria. The temporary rules extend the filing deadlines for specified 
reports and forms due pursuant to Regulation Crowdfunding and 
Regulation A for certain issuers.

DATES: These rules are effective from September 28, 2017, through 
November 22, 2017.

FOR FURTHER INFORMATION CONTACT: Zachary O. Fallon, Special Counsel, or 
Amy Reischauer, 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 Rule 202 \1\ 
of Regulation Crowdfunding \2\ under the Securities Act of 1933 (the 
``Securities Act'') \3\ and Rule 257 \4\ of Regulation A \5\ under the 
Securities Act as interim final temporary rules.
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    \1\ 17 CFR 227.202.
    \2\ 17 CFR 227 et seq.
    \3\ 15 U.S.C. 77a et seq.
    \4\ 17 CFR 230.257.
    \5\ 17 CFR 230.251 through 230.263.
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I. Introduction

    In late August 2017, Hurricane Harvey caused catastrophic damage 
along the Texas and Louisiana coast, in early September 2017, Hurricane 
Irma caused catastrophic damage to the U.S. Virgin Islands, Puerto Rico 
and the Florida coast, and, in mid-September 2017, Hurricane Maria 
caused additional catastrophic damage to the U.S. Virgin Islands and 
Puerto Rico. The storms and subsequent flooding have displaced 
individuals and businesses and disrupted communications and 
transportation across the affected regions. We are adopting these 
interim final temporary rules to address the needs of companies 
directly or indirectly affected by Hurricane Harvey, Hurricane Irma, or 
Hurricane Maria or their respective aftermaths that are subject to 
reporting obligations pursuant to Regulation Crowdfunding or Regulation 
A.
    Section 28 of the Securities Act provides that the Commission may, 
by rule or regulation, ``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 this 
title or of any rule or regulation issued under this title, to the 
extent that such exemption is necessary or appropriate in the public 
interest, and is consistent with the protection of investors.'' \6\
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    \6\ 15 U.S.C. 77z-3.
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II. Temporary Relief From Filing Requirements for Issurers Subject to 
the Reporting Obligations of Regulation Crowfunding or Regulation A

    The lack of communications, transportation, electricity, 
facilities, and available staff and professional advisors as a result 
of Hurricane Harvey, Hurricane Irma, and Hurricane Maria could hamper 
the efforts of companies with reporting obligations to meet their 
filing deadlines pursuant to 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 \7\ and Rule 257 
of Regulation A \8\ 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 interim final temporary 
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.
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    \7\ See Rule 202(c) of Regulation Crowdfunding. 17 CFR 
227.202(c).
    \8\ See Rule 257(f) of Regulation A. 17 CFR 230.257(f).
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    Accordingly, pursuant to Section 28 of the Securities Act, we are 
adopting interim final temporary 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 where the conditions below are satisfied:
    (a) The issuer is not able to meet a filing deadline due to 
Hurricane Harvey, Hurricane Irma, or Hurricane Maria or their 
respective aftermaths;
    (b)(i) For issuers affected by Hurricane Harvey, the issuer files 
with the Commission, on or before October 27, 2017, the report or form 
required to be filed pursuant to either Regulation Crowdfunding or 
Regulation A during the period from and including August 25, 2017 to 
and including October 26, 2017;
    (ii) For issuers affected by Hurricane Irma, the issuer files with 
the Commission, on or before November 8, 2017, the report or form 
required to be filed pursuant to either Regulation Crowdfunding or 
Regulation A during the period from and including September 6, 2017 to 
and including November 7, 2017; or
    (ii) For issuers affected by Hurricane Maria, the issuer files with 
the Commission, on or before November 22, 2017, the report or form 
required to be filed pursuant to either Regulation Crowdfunding or 
Regulation A during the period from and including September 20, 2017 to 
and including November 21, 2017; and
    (c) In any such report or form, the issuer discloses that it is 
relying on the interim final temporary 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 includes annual reports on 
Form C-AR, progress updates on Form C-U, and termination of reporting 
on Form C-TR. For Regulation A, the relief includes 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.

III. Economic Analysis

    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, approximately 150 
filers publicly filed Regulation A offering statements between June 19, 
2015 (the effective date of the most recent Regulation A amendments 
\9\) and August 31, 2017 that have been qualified as of September 15, 
2017. Approximately 418 issuers initiated Regulation Crowdfunding 
offerings with Form C filings between May 16, 2016 and August 31, 2017, 
excluding issuers that have withdrawn offerings.\10\ Approximately 28 
registered intermediaries, including registered funding portals and 
registered broker-dealers, have participated in Regulation Crowdfunding 
offerings with Form C filings between May 16, 2016 and August 31, 2017, 
which includes offerings that may have been

[[Page 45724]]

subsequently terminated or failed to reach the target amount.
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    \9\ SEC Rel. No. 33-9741 (Mar. 25, 2015) [80 FR 21806 (Apr. 20, 
2015)].
    \10\ 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 interim final temporary 
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.\11\
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    \11\ 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 interim final 
temporary rules.\12\ We believe the interim final temporary 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 Hurricane Harvey, Hurricane Irma, 
or Hurricane Maria or their respective aftermaths by permitting them to 
take additional time to meet their reporting obligations. We expect the 
relief provided by the interim final temporary rules will benefit 
issuers that, absent the 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 lack of communications, transportation, 
electricity, facilities, and available staff and professional advisors.
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    \12\ 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 requirement for an issuer to disclose that it is relying on 
Rule 202(c) of Regulation Crowdfunding or Rule 257(f) of Regulation A 
and to 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 and the 
prohibitively high costs an issuer may incur in attempting to file in a 
timely manner.
    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 interim 
final temporary 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 interim final temporary rules will not substantially affect 
competition or capital formation. We acknowledge the possibility that 
the interim final temporary 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 interim final temporary 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 interim final 
temporary 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 interim final temporary rules to issuers. Similarly, a longer 
period would increase the costs to investors. We believe that the 
approximately nine-week delay in the interim final temporary rules is 
appropriate given the potential impact Hurricane Harvey, Hurricane 
Irma, or Hurricane Maria or their respective aftermaths could have on 
the efforts of companies to meet filing deadlines pursuant to 
Regulation Crowdfunding and Regulation A.

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.'' \13\ 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.\14\
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    \13\ 5 U.S.C. 553(b)(3)(B).
    \14\ 5 U.S.C. 553(d)(3).
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    Given the temporary nature of the relief contemplated by the 
interim final temporary rules and the significant and immediate impacts 
of Hurricane Harvey, Hurricane Irma, and Hurricane Maria and their 
aftermaths on issuers in affected areas, 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 202 of Regulation Crowdfunding and Rule 257 of Regulation 
A.\15\ Further, the interim final temporary rules will not affect the 
burden or cost estimates associated with existing collections of 
information under Regulation Crowdfunding and Regulation A for purposes 
of the Paperwork Reduction Act of 1995.\16\
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    \15\ This finding also satisfies the requirements of 5 U.S.C. 
808(2), allowing the interim final temporary 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 interim final temporary 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).
    \16\ 44 U.S.C. 3501 et seq.
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V. Statutory Basis and Text of Amendments

    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.

List of Subjects

17 CFR Part 227

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

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17 CFR Part 230

    Reporting and recordkeeping requirements, Securities.

    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 is revised 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. (1) An 
issuer that is not able to meet a filing deadline for any report or 
form required to be filed by this section (Rule 202), Rule 203(a)(3) 
(Sec.  227.203(a)(3)), or Rule 203(b) (Sec.  227.203(b)), as 
applicable:
    (i) During the period from and including August 25, 2017 to and 
including October 26, 2017 due to Hurricane Harvey and its aftermath 
shall be deemed to have satisfied the filing deadline for such report 
or form if the issuer files such report or form with the Commission on 
or before October 27, 2017;
    (ii) During the period from and including September 6, 2017 to and 
including November 7, 2017 due to Hurricane Irma and its aftermath 
shall be deemed to have satisfied the filing deadline for such report 
or form if the issuer files such report or form with the Commission on 
or before November 8, 2017; or
    (ii) During the period from and including September 20, 2017 to and 
including November 21, 2017 due to Hurricane Maria and its aftermath 
shall be deemed to have satisfied the filing deadline for such report 
or form if the issuer files such report or form with the Commission on 
or before November 22, 2017.
    (2) In any report or form filed pursuant to paragraph (c)(1) of 
this section, the issuer must disclose that it is relying on this 
paragraph (c) (Rule 202(c) of Regulation Crowdfunding) 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 authority citation for part 230 continues to read in part 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 Rule 252(f)(2)(i) (Sec.  230.252(f)(2)(i)) 
or this section (Rule 257), as applicable:
    (i) During the period from and including August 25, 2017 to and 
including October 26, 2017 due to Hurricane Harvey and its aftermath 
shall be deemed to have satisfied the filing deadline for such report 
or form if the issuer files such report or form with the Commission on 
or before October 27, 2017;
    (ii) During the period from and including September 6, 2017 to and 
including November 7, 2017 due to Hurricane Irma and its aftermath 
shall be deemed to have satisfied the filing deadline for such report 
or form if the issuer files such report or form with the Commission on 
or before November 8, 2017; or
    (ii) During the period from and including September 20, 2017 to and 
including November 21, 2017 due to Hurricane Maria and its aftermath 
shall be deemed to have satisfied the filing deadline for such report 
or form if the issuer files such report or form with the Commission on 
or before November 22, 2017.
    (2) In any report or form filed pursuant to paragraph (f)(1) of 
this section, the issuer must disclose that it is relying on this 
paragraph (f) (Rule 257(f) of Regulation A) and state the reasons why, 
in good faith, it could not file such report or form on a timely basis.

    By the Commission.

     Dated: September 27, 2017.
Brent J. Fields,
Secretary.
[FR Doc. 2017-21094 Filed 9-28-17; 4:15 pm]
BILLING CODE 8011-01-P