SEC Statement on Opportunity Zones

Federal and State Securities Laws Considerations

The SEC’s Chairman, Jay Clayton, together with North American Securities Administrators Association (NASAA), issued a statement on July 15, explaining the potential application of state and federal securities laws to fundraising for Opportunity Zones. Additionally, SEC staff provided guidance regarding the ability of Main Street investors to participate in these offerings. 

The opportunity zone program has the potential to encourage investment and economic development in many areas across the country that are in need of capital. The staff statement released today will help market participants understand securities laws implications when seeking to raise capital for opportunity zones. In addition, the SEC is issuing staff guidance regarding the ability of Main Street investors to participate in these offerings.

I believe we should actively explore whether this complexity can be reduced in order to foster greater access to certain Opportunity Zone investments by Main Street investors, particularly those who live in or near the Opportunity Zone.

- SEC Chairman Jay Clayton

The Opportunity Zone staff statement and guidance demonstrate that Main Street investors can invest in their communities in a manner that is compliant with our securities laws. Opportunity Zones provide a community-specific incentive for long-term investment. There are well-established paths for institutional investors and high net worth individuals to invest in these projects. The path for Main Street investors and, in particular, those who live in the Opportunity Zone itself, to invest in these projects is often more complex and could cause those raising funds to exclude, or significantly restrict participation by, Main Street investors.

In addition, the SEC issued a comprehensive concept release regarding the regulation of private securities offerings. One of the key issues, which they are soliciting public comment, is whether to increase access to private securities offerings for Main Street investors, either directly or through funds or other intermediaries while maintaining appropriate investor protections.

The statement emphasized that “Opportunity Zones can provide a way for Main Street investors to invest in local communities. When considering these investments, it will be important for Main Street investors to understand the potential risks and benefits, including whether or not they will be able to take advantage of any tax benefits typically associated with Opportunity Zone projects.”

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