CLS Blue Sky Blog

SEC Issues Proposed Regulation A+

The following is the SEC’s press release and fact sheet, originally published here.  The proposed regulation is available here and the video of the SEC’s open meeting is available here.

The Securities and Exchange Commission today voted to propose rules intended to increase access to capital for smaller companies.

The SEC’s proposal would build upon Regulation A, which is an existing exemption from registration for small offerings of securities up to $5 million within a 12-month period.  The updated exemption would enable companies to offer and sell up to $50 million of securities within a 12-month period.

The rules are mandated by Title IV of the Jumpstart Our Business Startup (JOBS) Act.

“This proposal is intended to help increase access of smaller companies to capital,” said SEC Chair Mary Jo White.  “In shaping this proposal, we sought to develop an effective, workable path to raising capital that, very importantly, also builds in necessary investor protections.”

The SEC’s proposal will undergo a 60-day public comment period after it is published in the Federal Register.

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Regulation A

SEC Open Meeting

Dec. 18, 2013


When a company offers or sells securities to potential investors in order to raise capital, the company is required under the Securities Act of 1933 to register the offer and sale – unless it can rely on an exemption.

One longstanding exemption from Securities Act registration is Regulation A, which permits unregistered public offerings of up to $5 million of securities in a 12-month period, including no more than $1.5 million of securities offered by security-holders of the company.

Current Regulation A requires companies to submit an offering statement that is then reviewed by the SEC staff.  Additionally, offering statements under current Regulation A must comply with requirements regarding form, content, and process.  Current Regulation A, however, tailors those requirements for smaller companies and does not mandate ongoing reporting after the offering is completed.  Current Regulation A offerings also are subject to state-level registration and qualification requirements.

In recent years, Regulation A has been used very rarely, and issues have been raised that the cost and complexity of federal and state law compliance make it less practical than other Securities Act exemptions.  A GAO Report last year identified this factor and others that may explain why few companies rely on Regulation A.

When Congress passed the JOBS Act, it included a requirement to update and expand the Regulation A exemption to make it more useful for small companies seeking to raise capital.  In particular, the JOBS Act directs the Commission to:


The SEC’s proposed rules would update and expand the Regulation A exemption by creating the following two tiers of Regulation A offerings:

For offerings up to $5 million, the company could elect whether to proceed under Tier 1 or 2.

Basic Requirements

Under Tier 1 and Tier 2, companies would be subject to basic requirements, including ones addressing issuer eligibility and disclosure that are drawn from the existing provisions of Regulation A.  The proposed rules also would update Regulation A to among other things:

Additional Tier 2 Requirements

In addition to these basic requirements, companies conducting Tier 2 offerings would be subject to the following requirements:


Regulation A would be available to companies organized in and with their principal place of business in the United States or Canada, as is currently the case under Regulation A.

The exemption would not be available to companies that:

Preemption of Blue Sky Law

Under current Regulation A, offerings are subject to registration and qualification requirements in the states where the offering is conducted unless a state-level exemption is available.  This has been identified by the GAO and market participants as a central factor for the limited use of current Regulation A.

In view of the range of investor protections provided under the proposal, state securities law requirements would be preempted for Tier 2 offerings.  The proposal also explores alternative approaches to addressing this matter, including the coordinated review program proposed by the North American Securities Administrators Association.

What’s Next

The Commission will seek public comment on the proposed rules for 60 days.  The Commission will then review the comments and determine whether to adopt the proposed rules.

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