21. RFA/pp. 311–318
IRFA — small entities, 89 of them, no special pass
A small entity here is an issuer with ≤ $5 million in assets that is offering ≤ $5 million. The Commission thinks at least 89 small entities a year will use the rule. It considered delayed compliance, simplified reporting, performance standards and a small-entity exemption — and declined all four. The small-entity accommodation is the design of Rule 200 itself.
VIII Initial Regulatory Flexibility Act Analysis
Small-entity definition
≤ $5M assets + ≤ $5M offer
Estimated small users
≥ 89 / yr
Small-entity exemption
None
Analysis
What the text does
The IRFA is the Small Business Regulatory Enforcement Fairness Act’s tax on a proposing release. It must describe the impact on small entities, the legal basis, the overlapping rules, and the significant alternatives. Legal basis: Securities Act §§3(b), 18, 19(a), 28 and Exchange Act §§3(b), 12, 13, 15, 23(a), 36. Duplicative Federal rules: the Commission says there are none.
Small entity, for this paper, is Rule 157 / Exchange Act 0-10(a): total assets of $5 million or less on the last day of the most recent fiscal year, and engaged or proposing to engage in an offering of securities not exceeding $5 million. That definition almost is the startup exemption. The Commission estimates at least 89 small entities a year from the same 2024 Reg D/A/CF crypto census. It cannot predict more precisely because it cannot predict take-up.
The four RFA alternatives — different compliance timetables, simplified reporting, performance rather than design standards, and a small-entity exemption — are all declined. Reasons: small issuers have higher information asymmetry, so investors in them need the information more, not less; delayed compliance would undercut that; a performance standard would not produce the specific offering information the Commission wants; and the cost-mitigation is already in the design (principles-based 103, website-hosted disclosure under 200(d) matching current whitepaper practice, so small issuers do not have to become EDGAR-native for narrative).
Research
Comparables and the record
- 5 U.S.C. 601 et seq.; 17 CFR 230.157; 17 CFR 240.0-10(a).
- The IRFA concedes that compliance costs may be proportionally higher for smaller issuers and that the Commission cannot quantify a particular issuer’s cost. That concession is the hook for a letter with actual invoices.
Ideation
What to file
- Give the Commission a small-entity count. Foundations, unincorporated teams, and labs with < $5 million in assets that raised in 2024–2026 are the universe. 89 is a floor the Commission already distrusts.
- Website-hosted 103 is the stated small-entity accommodation. If it is not enough, say what would be, in hours.
- A small-entity exemption from Rule 400’s supporting analysis would be backwards — the off-ramp is the benefit. Do not ask for it.
Analysis
What the text does
The IRFA is the Small Business Regulatory Enforcement Fairness Act’s tax on a proposing release. It must describe the impact on small entities, the legal basis, the overlapping rules, and the significant alternatives. Legal basis: Securities Act §§3(b), 18, 19(a), 28 and Exchange Act §§3(b), 12, 13, 15, 23(a), 36. Duplicative Federal rules: the Commission says there are none.
Small entity, for this paper, is Rule 157 / Exchange Act 0-10(a): total assets of $5 million or less on the last day of the most recent fiscal year, and engaged or proposing to engage in an offering of securities not exceeding $5 million. That definition almost is the startup exemption. The Commission estimates at least 89 small entities a year from the same 2024 Reg D/A/CF crypto census. It cannot predict more precisely because it cannot predict take-up.
The four RFA alternatives — different compliance timetables, simplified reporting, performance rather than design standards, and a small-entity exemption — are all declined. Reasons: small issuers have higher information asymmetry, so investors in them need the information more, not less; delayed compliance would undercut that; a performance standard would not produce the specific offering information the Commission wants; and the cost-mitigation is already in the design (principles-based 103, website-hosted disclosure under 200(d) matching current whitepaper practice, so small issuers do not have to become EDGAR-native for narrative).
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