Other Aspects of Amended Form N-PX—Applies Only to Registered Funds. Registrants that offer multiple series (sometimes known as “series trusts” in which each series is its own fund having its own investment program and shareholders) will continue to be required to provide Form N-PX disclosure separately by series. The Commission observes that this is a current requirement, but some registrants simply have noted which series voted on which matters rather than organizing the entire report on a series-by-series basis. Additionally, the information otherwise reported on Form N-PX will be required to be reported in the order presented on the issuer’s form of proxy.
The amended Form N-PX will require reporting persons to indicate whether a vote was for or against management’s recommendation. In contrast to the proposed amendments, however, the final amendments will not require reporting persons to disclose whether a voting matter is a proposal or a counterproposal (as it may be challenging to distinguish between the two).
To improve access to the information, reporting will be subject to structured data (electronic “tagging”) requirements. Fund reporting also will be required to be available on a firm’s website instead of filed solely with the Commission as it is today.
Finally, the amendments adopt some changes to the cover page and add a new summary page to Form N-PX. Among other changes, the cover page will require reporting persons to check a box to categorize the report as one of the following types: “Fund Voting Report,” “Fund Notice Report,” “Institutional Manager Voting Report,” “Institutional Manager Notice Report,” or “Institutional Manager Combination Report.” Among other things, reporting persons will be required to disclose on the new summary page the names and the number of included managers with say-on-pay votes in list format.
2. Confidentiality
Form N-PX (like Form 13F) is publicly filed via the EDGAR database on the Commission website. The Commission is providing an opportunity to prevent confidential information protected from disclosure on Form 13F from being disclosed on Form N-PX. These instructions to Form N-PX will provide that a person requesting confidential treatment of information filed on Form N-PX should follow the same procedures set forth in Form 13F for filing confidential treatment requests. The Commission is also prescribing the required content of a confidential treatment request and the required filing of information that is no longer entitled to confidential treatment. The Commission explicitly states that a confidential treatment will not be justified “solely in order to prevent proxy voting information from being made public.”
3. Effective Date
Reporting persons will continue to be required to report annually on Form N-PX no later than August 31 for the twelve-month period of July 1 to June 30. The Commission delayed the effective date of the amendments until July 1, 2024, to allow time to prepare. Therefore, funds and managers will be required to file their first amended Form N-PX by August 31, 2024, covering the period from July 1, 2023, to June 30, 2024.
Additionally, as a transition measure, managers that are new filers of Form 13F will be required to file Form N-PX for the twelve-month period ending June 30 only for the calendar year following the manager’s initial filing on Form 13F. Managers also will not be required to file Form N-PX regarding any shareholder vote that occurs after September 30 of the calendar year in which the manager’s final filing on Form 13F is due. Instead, managers will file a short-period Form N-PX for the period from July 1 to September 30, which will be due no later than March 1 of the immediately following calendar year.
D. Listing Standard for Recovery of Erroneously Awarded Compensation
On October 26, 2022, the Commission adopted new Rule 10D-1, directing national securities exchanges to establish listing standards that prohibit the listing of any security of a company that does not adopt and implement a written policy requiring the recovery, or “clawback,” of certain incentive-based executive compensation. Recovery under a clawback policy must be the amount of incentive compensation that is shown to have been paid in error, based on an accounting restatement that is necessary to correct a material error of a financial reporting requirement.
In a significant expansion of the rule as originally proposed, Rule 10D-1 will require the recovery policy to apply to any accounting restatement to correct not only an error in previously issued financial statements that is material to the previously issued financial statements (also called a “Big R” restatement) but also an error that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period (also called a “little r” restatement).
If a current or former executive officer received erroneously awarded incentive-based compensation within the three fiscal years preceding the date of determination that a restatement is required, the company must recover the excess incentive-based compensation on a “no-fault” basis. The rule also specifies disclosure requirements under newly created Item 402(w) relating to clawback policies and clawbacks.
1. Mandated Listing Standards
Incentive-Based Compensation. Rule 10D-1 defines incentive-based compensation as any compensation that is granted, earned, or vested based wholly or in part upon the attainment of any financial reporting measure. For this purpose, the term “financial reporting measures” means measures that are determined and presented in accordance with the accounting principles used in preparing the company’s financial statements and any measures derived wholly or in part from such financial information (such as non-GAAP financial measures). Additionally, Rule 10D-1 specifically adds stock price and total shareholder return as financial reporting measures for purposes of this rule. The definition is drafted to cover any new forms of compensation and new performance measures that may arise in the future to determine or award incentive-based compensation.
Amounts Recoverable. The amount that listed companies would have to recover is the amount of incentive-based compensation received by the executive officer or former executive officer that exceeds the amount of incentive-based compensation that otherwise would have been received had it been determined based on the accounting restatement. Amounts recovered are computed without regard to taxes that may have been paid or incurred by the executive officer.
To calculate the amount of the excess after an accounting restatement, the company would first need to recalculate both the applicable financial reporting measure and the amount of incentive-based compensation that was based on this measure. Next the company would have to determine whether the executive officer received a greater amount of incentive-based compensation based on the original calculation of the financial reporting measure than such officer would have received based on the recalculated financial reporting measure, after taking into account any discretion applied by the compensation committee to reduce the amount received. If the compensation was only partially based on the financial reporting measure performance goal, the company would need to determine the portion of the original compensation that was based on or derived from the restated financial measure. The company would then have to recalculate the affected portion to determine the excess amount to be recovered.
Because incentive-based compensation that is based on stock price or total shareholder return is not subject to mathematical recalculation directly from the information in an accounting restatement, Rule 10D-1 permits companies to determine the recoverable amount based on a reasonable estimate of the effect of the accounting restatement on stock price or total shareholder return, as applicable, in such circumstances. When this occurs, the listed company must retain documentation of that estimate determination and provide it to the exchange.
Recovery Mechanics. With respect to recoverable incentive-based compensation, the recovery mechanics will depend on the form in which the executive officer holds such compensation at the time of recovery. The adopting release notes that the definition of erroneously awarded compensation is intended to be applied in a principles-based manner thereby allowing companies to adopt a more rigorous recovery policy, provided the minimum requirements set forth in the rules are satisfied. The adopting release provided examples of how to calculate the recovery of certain types of incentive compensation:
For cash awards, the erroneously awarded compensation is the difference between the amount of the cash award (whether payable as a lump sum or over time) that was received and the amount that should have been received applying the restated financial reporting measure.
- For non-qualified deferred compensation, the executive officer’s account balance or distributions would be reduced by the erroneously awarded compensation contributed to the nonqualified deferred compensation plan and the interest or other earnings accrued thereon under the nonqualified deferred compensation plan.
- For cash awards paid from bonus pools, the erroneously awarded compensation is the pro rata portion of any deficiency that results from the aggregate bonus pool that is reduced based on applying the restated financial reporting measure.
- For equity awards, if the shares, options, or SARs are still held at the time of recovery, the erroneously awarded compensation is the number of such securities received in excess of the number that should have been received applying the restated financial reporting measure (or the value of that excess number). If the options or SARs have been exercised, but the underlying shares have not been sold, the erroneously awarded compensation is the number of shares underlying the excess options or SARs (or the value thereof ).
The Commission declined to provide additional guidance on recovery for other forms of incentive-based compensation, suggesting that those determinations will be made based on the individual facts and circumstances of the terms of the incentive compensation arrangements between the company and its executive officer.
If the same compensation is recouped pursuant to section 304 of the Sarbanes-Oxley Act or other recovery provisions, such payment would reduce the amounts recoverable under the listing standards.
Employees Covered. Rule 10D-1 as adopted applies to any individual who, after beginning service as an executive officer, served as an executive officer of the listed company at any time during the performance period for that incentive-based compensation, whether or not such individual is an executive officer at the time the company is seeking recovery. The clawback is not limited to NEOs (i.e., those executive officers whose compensation is described in the company’s proxy statement). Furthermore, the clawback is not limited to executive officers who engaged in misconduct or were directly involved with the accounting error.
Restatements. Rule 10D-1 requires a clawback of incentive-based compensation when a listed company is required to prepare an accounting restatement due to the material noncompliance of the company with any financial reporting requirement under the securities laws, including any required accounting restatement to correct an error (1) in previously issued financial statements that is material to the previously issued financial statements or (2) that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period.
The rules as adopted consider both “Big R” and “little r” restatements to be within the scope of the recovery policy contemplated by Congress because “both result in revisions of previously issued financial statements for a correction of an error in those financial statements.”
The rules as adopted do not define “accounting restatement” or “material noncompliance.” Existing accounting standards and guidance already provide meanings for both terms. The following types of financial statement changes are not considered corrections of errors and, therefore, would not trigger a clawback under Rule 10D-1:
- Retrospective application of a change in accounting principle;
- Retrospective revision to reportable segment information due to a change in the structure of an company’s internal organization;
- Retrospective reclassification due to a discontinued operation;
- Retrospective application of a change in reporting entity, such as from a reorganization of entities under common control;
- Retrospective adjustment to provisional amounts in connection with a prior business combination (IFRS filers only); and
- Retrospective revision for stock splits, reverse stock splits, stock dividends, or other changes to capital structure.
Look-Back Period. Rule 10D-1 requires listed companies to recover incentive-based compensation received during the three completed fiscal years immediately preceding the date that the company is required to prepare an accounting restatement, which is considered to occur for purposes of Rule 10D-1 on the earlier to occur of:
- The date the listed company’s board of directors, board committee, or authorized officer or officers concludes, or reasonably should have concluded, that the company is required to prepare an accounting restatement due to the material noncompliance of the company with any financial reporting requirement under the securities laws.
- The date a court, regulator, or other legally authorized body directs the company to prepare an accounting restatement.
The adopting release provides the following example on the timing of the look-back period: if a company that reports on a calendar year basis concludes in November 2024 that a restatement of previously issued financial statements is required and files the restated financial statements in January 2025, the three-year look-back period would apply to compensation received in 2021, 2022, and 2023.
In arriving at a conclusion that an accounting restatement is required, the adopting release points out that while not dispositive, companies should carefully consider any notice from the company’s independent auditors that previously issued financial statements contain a material error. The triggering event is the determination that an accounting restatement needs to be prepared, which may precede the determination of the actual amount of the error.
Incentive-based compensation would be deemed received in the fiscal period in which the financial reporting measure is attained, even if the payment or grant occurs in a subsequent fiscal period. When the officer’s right to the incentive-based compensation is subject to multiple conditions, the award is deemed received for purposes of the clawback when the relevant financial reporting measure performance goal is attained, regardless of whether the executive officer has only a contingent right to payment.
The date of the receipt of the compensation varies depending on the terms of the award and the type of the award. The adopting release provides the following examples:
- If the grant of the award is based, either wholly or in part, on satisfaction of a financial reporting measure performance goal, the award would be deemed received in the fiscal period when that measure is satisfied;
- If an equity award vets only upon satisfaction of a financial reporting measure performance condition, the award would be deemed received in the fiscal period when it vests;
- A non-equity incentive plan award would be deemed received in the fiscal year that the executive officer earns the award based on the satisfaction of the relevant financial reporting measure performance goal rather than on a subsequent date on which the award was paid; and
- A cash award earned upon satisfaction of a financial reporting measure performance goal would be deemed received in the fiscal period when the measure is satisfied.
Ministerial acts, such as calculating the amount earned or certification of the attainment of the financial measure by the board or a board committee, do not affect the determination of the date received. Incentive-based compensation would be subject to recovery under Rule 10D-1 only if the executive officer receives such compensation while the company has a class of securities listed on an exchange.
Covered Companies. With very few exceptions, the clawback listing standards apply to all listed companies. This means that FPIs, SRCs, emerging growth companies, business development companies, and companies that list only debt or preferred securities would be subject to the clawback listing standards to the extent that they have securities listed on a national securities exchange. Rule 10D-1 does not grant securities exchanges the discretion to exempt any categories of companies from the listing standards.
Mandatory Clawback. Rule 10D-1 mandates recovery of erroneously awarded compensation in compliance with a company’s recovery policy except to the extent that pursuit of recovery would be impracticable. Despite the urging of commenters, the Commission did not provide a board of directors with very much latitude to exercise discretion. Rule 10D-1 allows for only three narrow exceptions where recovery is considered impractical: (1) the direct cost of recovery would exceed the amount of recovery, (2) the recovery would violate home country law and additional conditions are met, and (3) potential disqualification of tax-qualified retirement plans.
For each of these exceptions, the determination would have to be made by a committee of independent directors that is responsible for executive compensation decisions, such as a compensation committee or, in the absence of such a committee, by a majority of the independent directors. In addition, as discussed below, the company would need to disclose why it did not pursue the recovery. The determination is subject to review by the applicable exchange.
Rule 10D-1 does allow companies to exercise discretion in how to accomplish recovery, recognizing that the means of recovery may vary by the type of compensation arrangement, as well as by company, provided that the recovery of excess incentive-based compensation must be pursued “reasonably promptly.” However, the rule does not provide a definition for “reasonably promptly,” noting that reasonableness may vary by the costs incident to recovery efforts.
Indemnification Prohibited. Listed companies are prohibited from indemnifying their executive officers for incentive compensation recoverable pursuant to clawback policies and from paying the premiums on any insurance policy protecting against such recoveries.
Non-Compliance. Under the rules as adopted, a company would be subject to delisting if it does not adopt a compensation recovery policy that complies with applicable listing standards, adopt a compensation recovery policy that complies with applicable listing standards, or provide the required disclosures in accordance with Commission rules.
2. Disclosure Requirements
The rules require listed companies to: (1) file their clawback policies as exhibits to their annual reports on Form 10-K, Form 20-F, or Form 40-F, as applicable; (2) make disclosures relating to their compliance with their compensation recovery policy; (3) provide the additional information in Inline XBRL; and (4) include additional check box disclosure on the cover of their Form 10-K, 20-F, or 40-F.
Additional Item 402 Disclosure. The Commission has adopted new subsection (w) to Item 402 of Regulation S-K, which requires disclosure in proxy and information statements if during or after its last completed fiscal year a listed company either (1) was required to prepare an accounting restatement that required a clawback under the company’s clawback policy or (2) had an outstanding balance of unrecovered excess incentive-based compensation relating to a prior restatement. In these circumstances, a listed company would be required to disclose:
- For each restatement:
- The date on which the company was required to prepare an accounting restatement;
- The aggregate dollar amount of erroneously awarded compensation resulting from the restatement (including an analysis of how the amount was calculated);
- If the financial reporting measure that was restated related to stock price or total shareholder return, the estimates used to determine the erroneously awarded compensation attributable to the restatement, and an explanation of the methodology used for such estimates;
- The aggregate dollar amount of erroneously awarded compensation that remains outstanding at the end of the last completed fiscal year; and
- If the aggregate dollar amount of erroneously awarded compensation has not yet been determined, disclosure of that fact and an explanation therefor, with the information required for each restatement required to be disclosed in the next filing that includes disclosure pursuant to Item 402 of Regulation S-K.
- If recovery would be impracticable, for each current and former named executive officer and for all other current and former executive officers as a group, the amount of recovery forgone and a brief description of the reason the company decided in each case not to pursue recovery; and
- For each current and former named executive officer from whom, as of the end of the last completed fiscal year, erroneously awarded compensation had been outstanding for 180 days or longer since the date the company determined the amount the individual owed, the dollar amount of outstanding erroneously awarded compensation due from each such individual.
Any disclosure regarding impracticability of recovery must include the specific exception on which the company is relying, and should provide additional context relating to that exception, such as a brief explanation of the direct expenses paid to a third party to assist in enforcing the recovery policy, identification of the provision of foreign law that recovery would violate, or a description of how recovery would cause a tax-qualified retirement plan to fail to meet the applicable statutory requirements.
The new Item 402(w) disclosure requirement is separate from the compensation discussion and analysis (CD&A) requirement, but a listed company could choose to include it in its CD&A discussion if it is required to prepare a CD&A discussion.
Additionally, if at any time during or after its last completed fiscal year a company was required to prepare an accounting restatement, and concluded that recovery of erroneously awarded compensation was not required pursuant to the company’s compensation recovery policy required by the listing standards adopted pursuant to Rule 10D-1, the company must briefly explain why application of its recovery policy resulted in this conclusion.
Information disclosed pursuant to Item 402(w) will not be deemed to be incorporated by reference into any filing under the Securities Act unless specifically so incorporated. Finally, the compensation recovery disclosures must have specific data points tagged, as well as block text tagging of the disclosures, in Inline XBRL.
Summary Compensation Table Revisions. When prior year compensation disclosed in a summary compensation table has been recovered, the amount shown in the applicable column and the total column of the summary compensation table must be reduced to include only the amount retained by the executive officer, with a footnote explaining the recovery. For example, if the company reported that in 2024 its chief executive officer earned $1 million in non-equity incentive plan compensation, and in 2025 a restatement of 2024 financial statements resulted in recovery of $300,000 of that compensation, the company’s 2025 summary compensation table would revise the 2024 reported amount for non-equity incentive plan compensation to $700,000, provide footnote disclosure explaining that the company recovered $300,000 of previously reported compensation, and make a comparable change to 2024 total compensation for such officer.
Additional Check Boxes. To promote greater transparency around accounting restatements generally, the cover page to Form 10-K, Form 20-F, and Form 40-F will include new check boxes where companies must indicate separately: (1) whether the financial statements included in the filing reflect correction of an error to previously issued financial statements and (2) whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the company’s executive officers during the relevant recovery period pursuant to Rule 10D-1.
3. Transition Period
Securities exchanges must file their proposed listing standards within ninety days after the publication of Rule 10D-1 in the Federal Register. The new listing standards must be effective no later than one year following the date Rule 10D-1 is published in the Federal Register.
Once clawback listing standards become effective, each company with securities listed on the applicable exchange must adopt a compliant clawback policy within sixty days. The clawback requirement applies to erroneously awarded compensation received on or after the effective date of the applicable listing standard.
Listed companies would have to include the new clawback disclosures in proxy or information statements and Exchange Act annual reports filed on or after the effective date of the listing standards.
E. Proxy Voting Advice
On July 13, 2022, the Commission adopted final amendments regarding the applicability of the proxy rules to proxy advisory firms, which are also known as proxy voting advice businesses (“PVABs”). The amendments relating to PVABs, such as ISS and Glass Lewis, remove certain conditions to the availability of exemptions from the information and filing requirements of the proxy rules for PVABs; these conditions were added as part of rules adopted by the previous presidential administration in 2020. The key reversal from 2020 is the rescission of the conditions that:
- Companies that are the subject of proxy voting advice have such advice made available to them before or at the same time PVABs make it available to their clients.
- Clients of PVABs are notified of any written responses by companies to such proxy voting advice.
The amendments also reversed course by rescinding a related note to Rule 14a-9 of the Exchange Act and supplemental guidance regarding the proxy voting obligations of investment advisers from the 2020 rules as described below. The amendments leave intact, however, the determination that proxy voting advice is a solicitation subject to the proxy rules—including liability under Rule 14a-9 for material misstatements or omissions of fact—and the conflicts of interest disclosure requirements that were memorialized in the 2020 rules.
The amendments became effective on September 19, 2022, and are referred to below as the “2022 amendments.”
1. Background
In 2020, the Commission adopted final rules regarding proxy voting advice provided by PVABs. The 2020 rules, among other things:
- Codified the SEC’s interpretation that proxy voting advice is generally a “solicitation” subject to the proxy rules.
- Added new conditions to exemptions that PVABs generally rely on in order to avoid the proxy rules’ information and filing requirements, including:
- New conflicts of interest disclosure requirements.
- A requirement that PVABs adopt and disclose policies and procedures designed to ensure that companies that are the subject of proxy voting advice have such advice made available to them in a timely manner, as well as a requirement that clients of PVABs are provided with a means of becoming aware of any written responses by companies to proxy voting advice.
- Added Note (e) to Rule 14a-9, the anti-fraud provision for proxy materials, to include examples of material misstatements or omissions related to proxy voting advice.
The 2022 amendments reversed the additions of Items 2(b) and 3 in the 2020 rules, which never actually went into effect, as discussed in greater detail below.
2. Final Amendments
The 2020 rules added paragraph (9) to Rule 14a-2(b), which specifies certain conditions that a PVAB must satisfy in order to rely on the exemptions from the proxy rules’ information and filing requirements. The 2022 amendments removed the conditions that:
- Companies that are the subject of proxy voting advice have such advice made available to them in a timely manner.
- Clients of PVABs are provided with a means of becoming aware of any written responses by companies to proxy voting advice.
These conditions were adopted in 2020 in response to concerns by companies that the analyses by PVABs contained errors and methodological weaknesses that could affect the reliability of their voting recommendations, and that companies did not have adequate opportunities to engage with the PVABs regarding their advice to correct errors on a timely basis. The rescission of these conditions will reignite these concerns for companies, with companies not having a prescribed avenue to respond to proxy voting advice that contains errors or with which they disagree. In addition to the rescission of the conditions themselves, the 2022 amendments removed accompanying safe harbors and exclusions that relate to these conditions. However, the other condition added in the 2020 rules for reliance on the exemptions—that PVABs provide their clients with certain conflicts of interest disclosures in connection with their proxy voting advice—remains in place.
The 2020 rules also codified that PVABs’ proxy voting advice generally constitute a solicitation subject to the proxy rules, including Rule 14a-9, which “prohibits any solicitation from containing any statement which, at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact.” Rule 14a-9 also requires that solicitations “must not omit to state any material fact necessary in order to make the statements therein not false or misleading.”
As part of the 2020 rules, Rule 14a-9 was amended to add Note (e) to provide examples of proxy voting advice that may, depending on the facts and circumstances, be misleading within the meaning of the rule, specifically citing as a potential example the failure of a PVAB to disclose its “methodology, sources of information, or conflicts of interest.” The 2022 amendments deleted Note (e) from Rule 14a-9, removing the specific examples of proxy voting advice that may be subject to the rule. However, the Commission was intentional in stating that this deletion does not alter the scope of Rule 14a-9 or its application to proxy voting advice—the deletion instead was purportedly aimed at removing the “risk of confusion” created by Note (e). The Commission also reiterated its position included in the proposing release that Rule 14a-9 liability does not extend to mere differences of opinion between PVABs and companies, subject to certain limited circumstances in which a statement of opinion contains a material misstatement or omission of fact.
Finally, the 2022 amendments rescinded supplemental guidance the Commission issued to investment advisers in 2020 about their proxy voting obligations. The 2020 supplemental guidance addressed investment advisers’ use of automated proxy voting systems hosted by PVABs, which have amounted to “robo-voting” in the views of many companies. The 2020 supplemental guidance was primarily intended to assist investment advisers in considering company responses to proxy voting advice that would have been more readily available as a result of the 2020 rules—given the rescission of the conditions discussed above, the Commission determined this guidance also should be removed.
Under the final proxy advisor rules, proxy advisory firms will be left with broad discretion in determining when and how to engage with companies relating to their voting advice. With the rescission of the conditions in the 2020 rules aimed at fostering engagement, there is no regulatory impetus for proxy advisory firms, including ISS and Glass Lewis, to engage with companies or to ensure that company responses to voting advice are received by shareholder clients. While market forces have led to engagement with companies through voluntary procedures, the timing and nature of this engagement will continue to rest with these proxy advisory firms—and there is no guarantee the current practices will be maintained.
F. Inflation Adjustments Under Titles I and III of the Jobs Act
On September 9, 2022, the Commission adopted amendments to the Jumpstart Our Business Startups Act (“JOBS Act”). Under the JOBS Act, the Commission is statutorily required to adjust rules according to inflation once every five years. These amendments applied to both the emerging growth company and Regulation Crowdfunding sections.
Emerging Growth Companies. The JOBS Act defines “emerging growth company” to mean an issuer that has a total annual gross revenue of less than $1 billion (subsequently adjusted in 2017 as noted below), indexed for inflation every five years. The Commission’s intention is to scale disclosure requirements for newly public companies, generally lasting for five years after the IPO. Due to rising inflation, and the JOBS Act recurring indexing requirement, the threshold for qualifying as an emerging growth company significantly increased. Last adjusted in 2017, the Commission increased the threshold for a business to be qualified as an emerging growth company from $1.07 billion to $1.235 billion.
Regulation Crowdfunding. The JOBS Act amended the exemption from registration requirements of section 5 of the Securities Act for certain crowdfunding transactions. The exemption is limited by a maximum amount that the issuer may sell in a twelve-month period under the crowdfunding exemption. This statute also calls for an adjustment every five years correlating to the newly indexed inflation rate. However, the Commission did not adjust the overall offering limit for Regulation Crowdfunding since the offering limit was increased effective March 2021 from $1.07 million to $5 million, and this increase was greater than the inflation-based increase that would otherwise have occurred as a result of the periodic review.
Last adjusted in 2017, the Commission made multiple dollar threshold adjustments to Rule 100 of Regulation Crowdfunding (Offering Maximum and Investment Limits):
- The threshold for assessing investor’s annual income or net worth to determine investment limits (Rules 100(a)(2)(i) and 100(a)(2)(ii)) was increased from $107,000 to $124,000.
- The 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)) was increased from $2,200 to $2,500.
- The maximum amount that can be sold to an investor under Regulation Crowdfunding in a twelve-month period (Rule 100(a)(2)(ii)) was increased from $107,000 to $124,000.
The Commission also adjusted the threshold amounts in Rule 201(t) of Regulation Crowdfunding:
- The threshold offering amount to qualify under 201(t)(1), where financial statements can be certified by the principal executive officer of the issuer, was raised from $107,000 to $124,000.
- The threshold offering amount to qualify under 201(t)(2), where financial statements of the issuer can be reviewed by a public accountant that is independent of the issuer, was raised from $535,000 to $618,000.
- The threshold offering amount to qualify under 201(t)(3), where financial statements of the issuer must be audited by a public accountant that is independent of the issuer, was raised from $1,070,000 to $1,235,000.
This final rule was considered to be exempt from the notice and comment period of the Administrative Procedures Act since it does not impose any new substantive regulatory requirements on any person.