Regulation A+ Rules

Regulation A+ rules- The new Regulation A+ rules took effect on June 19, 2015. Tier I of Regulation A+ allows for a raise of up to $20 million in any 12-month period and Tier 2 allows a raise of up to $50 million in any 12-month period. Issuers may elect to proceed under either Tier I or Tier 2 for offerings up to $20 million. Today I am discussing the ongoing reporting requirements for both Tier 1 and Tier 2 offerings.

Both Tier I and Tier 2 issuers must file summary information after the termination or completion of a Regulation A+ offering. A Tier I company will need to file certain information about the Regulation A offering, including information on sales and the termination of sales, on the new Form 1-Z exit report, no later than 30 calendar days after termination or completion of the offering. Tier I issuers will not have any additional ongoing reporting requirements.

Tier 2 companies are also required to file certain offering termination information and would have the choice of using Form 1-Z or including the information in their first annual report on new Form 1-K. In addition to the offering summary information, Tier 2 issuers are required to submit ongoing reports including: an annual report on Form 1-K within 120 days of fiscal year end, semiannual reports on Form 1-SA within 90 days of the end of the semi-annual period, current event reports on Form 1-U within 4 days of the triggering event and notice of suspension of ongoing reporting obligations on Form 1-Z.
All filings are made electronically on EDGAR.

The ongoing reporting for Tier 2 companies is less demanding than the regular reporting requirements under the Securities Exchange Act but still, details determine diligence. There are fewer 1-K items and only semiannual 1-SA (rather than the quarterly 10-Q) and fewer events triggering Form 1-U (compared to Form 8-K).

The rules also provide for a suspension of reporting obligations for a Regulation A+ issuer that desires to suspend or terminate its reporting requirements. Termination is accomplished by filing a Form 1-Z and requires that a company be current in its reporting, have fewer than 300 shareholders of record, and have no ongoing offers or sales in reliance on a Regulation A+ offering statement.

Of course, as previously discussed a company may file a Form 10 or Form 8-A to become subject to the full Exchange Act reporting requirements.

The ongoing reports will qualify as the type of information a market maker would need to support the filing of a 15c2-11 application. An issuer that completes a Tier 2 offering could proceed to engage a market maker to file a 15c2-11 application and trade on the OTC Markets. The issuer would qualify to trade on the OTC Pink, or effective July 10, on the OTCQB. However, unless the issuer has filed a Form 8-A or Form 10, they will not be considered “subject to the Exchange Act reporting requirements” for purposes of benefitting from the shorter 6 month rule 144 holding period.

Laura Anthony, Esq.
Founding Partner
Legal & Compliance LLC.
330 Clematis Street, Ste. 217
West Palm Beach, FL 33401

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