Rule 251(b)
We are adopting as proposed final rules that eliminate the last sentence of
Rule 251(b),108 which prohibited affiliate resales unless the issuer had net income from continuing operations in at least one of its last two fiscal years. We agree with the views expressed by commenters that the absence of net income, by itself, is not a sufficient indicator of an enhanced risk that existing shareholders will use informational advantages to transfer their holdings to the investing public that would necessitate the continued application of the prohibition in the final rules. Further, as noted in the Proposing Release, the Commission’s current disclosure review and qualification processes and enforcement programs are significantly more sophisticated and robust than they were when this provision was added to Regulation A in its original form.109 In addition, the final rules being adopted today include revised “bad actor” disqualification provisions and additional issuer eligibility requirements aimed at limiting access to the exemption for market participants with demonstrated track records of non-compliance or abuse.110
Investment Limitation