SEC Adopts Final REG A Rules – Tier 1 $20m / Tier 2 $50m
Finally we have a way to raise significant money for non-reporting companies.We have skilled attorneys who have gotten Reg A’s approved over the last two years, plus Funds who will invest in Reg A tier 1 and tier 2 – Give us a call for any of your needs – or a package deal – where we prepare your Reg A offering and introduce you to funds who will invest in it.
SEC Open Meeting
March 25, 2015
Highlights of the Final Rules
The final rules, often referred to as Regulation A+, would implement Title IV of the JOBS Act and provide for two tiers of offerings:
Tier 1, which would consist of securities offerings of up to $20 million in a 12-month period, with not more than $6 million in offers by selling security-holders that are affiliates of the issuer.
For offerings of up to $20 million, the issuer could elect whether to proceed under Tier 1 or Tier 2. Both tiers would be subject to basic requirements as to issuer eligibility, disclosure, and other matters, drawn from the current provisions of Regulation A. Both tiers would also permit companies to submit draft offering statements for non‑public review by Commission staff before filing, permit the continued use of solicitation materials after filing the offering statement, require the electronic filing of offering materials and otherwise align Regulation A with current practice for registered offerings.
Additional Tier 2 Requirements
In addition to these basic requirements, companies conducting Tier 2 offerings would be subject to other requirements, including:
A requirement to provide audited financial statements.
The Commission is exploring ways to further collaborate with state regulators, including a program for a representative of NASAA or a state securities regulator to work with the staff in the SEC’s Division of Corporation Finance in implementing these rules.
The exemption would be limited to companies organized in and with their principal place of business in the United States or Canada. The exemption would not be available to companies that:
Are already SEC reporting companies and certain investment companies.
Engages services from a transfer agent registered with the Commission.
Preemption of Blue Sky Law
In light of the total package of investor protections included in amended Regulation A, the rules provide for the preemption of state securities law registration and qualification requirements for securities offered or sold to “qualified purchasers,” defined to be any person to whom securities are offered or sold under a Tier 2 offering.
Under the Securities Act of 1933, when a company offers or sells securities to potential investors, it must either register the offer and sale or rely on an exemption from registration. Regulation A is a longstanding exemption from registration that permits unregistered public offerings of up to $5 million of securities in any 12-month period, including no more than $1.5 million of securities offered by security-holders of the company. In recent years, Regulation A offerings have been relatively rare in comparison to offerings conducted in reliance on other Securities Act exemptions or on a registered basis.
The JOBS Act amended the Securities Act to require the Commission to update and expand the Regulation A exemption. In particular, the JOBS Act directed the Commission to:
Adopt rules that would allow offerings of up to $50 million of securities within a 12-month period.
The rule amendments become effective 60 days after publication in the Federal Register.