On October 16, 2018 the Securities and Exchange Commission announced that it is implementing temporary rules for issuers who are making offerings pursuant to Regulation Crowdfunding and Regulation A in order to assist issuers who were directly or indirectly impacted by Hurricane Michael. These temporary rules will postpone the filing deadlines for certain reports and forms which must be filed under Regulation Crowdfunding and Regulation A to a later date, provided that Hurricane Michael affected the issuer filing the reports and forms. The rules are set to be effective through November 23, 2018.
Regulation Crowdfunding and Regulation A allow issuers to offer and sell securities that have not been registered under the Securities Act, provided that the issuers follow specified conditions. One of those conditions is that the issuer in question must comply with continual reporting requirements. According to the SEC, the reporting requirements improve investor protection and reduce the likelihood that there will be information disparities between issuers and investors. Ongoing reporting also requires issuers to update their information, which allows investors to base their investment decisions on the most current information available.
When Hurricane Michael made landfall, numerous businesses in the area, including those of issuers making offerings pursuant to Regulation Crowdfunding or Regulation A, experienced disruptions. The SEC expects that the shortage in communications, electricity, facilities, and professional advisors in areas affected by Hurricane Michael could delay companies’ ability to meet their reporting requirements. However, the SEC also acknowledges that those who invest in securities offered pursuant to Regulation Crowdfunding and Regulation A would like for information about the companies that offer those securities to be readily available. In particular, investors will likely have an interest in knowing of any material adverse effects that Hurricane Michael had on the issuer or its business. The SEC found that the most appropriate solution to this dilemma would be to issue temporary relief pursuant to Section 28 of the Securities Act, which permits the SEC to, by rule or regulation, to make exemptions for any person, security, or transaction, provided that the exemption in question is in the public interest and is in harmony with the protection of investors.