SEC Issues Regulation A+ Guidance

SEC Issues Regulation A+ Guidance- 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 highlighting some final various important points related to Regulation A+ offerings.

First, related to state law pre-emption – as mentioned a few times, Tier 1 offerings do not pre-empt state law and remain subject to state blue sky qualification. It is much easier both in terms of timing and process to begin the state blue sky process immediately upon filing the Form 1-A in reliance on the state’s “registration by coordination” programs, which coordinate with the SEC review process, rather than waiting until after the qualification of the Form 1-A to begin the state review process.

The SEC has encouraged company’s to utilize the NASAA coordinated review program for the process. The NASAA coordinated review program centralizes the state review process through an NASAA representative and multi-state lead representative.

Tier 2 offerings pre-empt state law and therefore do not require an additional state review process. However, such offerings are still subject to the state anti-fraud provisions and the state’s retain authority to investigate and prosecute fraudulent securities transactions.

Second, Regulation A+ exempts securities in a Tier 2 offering from Section 12(g) registration as long as certain requirements are met, including that the company utilize an SEC registered transfer agent, remain current in their Tier 2 ongoing SEC reporting requirements and qualifies as a small business issuer . As a reminder Section 12(g) requires companies with assets exceeding $10million and securities held by 2,000 persons to register and report with the SEC.

Third, securities sold in a Regulation A+ offering are freely tradeable. That is, they are not restricted under Rule 144.
Fourth, Regulation A+ includes a limited safe harbor from integration with prior, concurrent or near term subsequent offerings by the same company. When different offerings integrate, all such offerings must meet all the eligibility requirements for relying on Reg A+ so this is an important consideration. Registered offerings, Rule 701 compensation plan issuances, employee benefit plan issuances or securities issued more than 6 months following the Reg A+ offering will not integrate.

Finally, broker dealers that act as placement or marketing agents for Regulation A+ offerings will need to file and comply with FINRA under Rule 5110 related to underwriter compensation.

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

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