Regulation A+ will become effective June 19, 2015. It updates and expands Regulation A and was mandated by the Jumpstart Our Business Startups (JOBS) Act. Will it facilitate capital formation. I think wit probably will not because it requires greater expense than a Regulation D offering but does not offer the offering company the equity distribution to form a viable market in the way an IPO does.

The regulation provides for two tiers of offerings. Tier one provides for up to $20 Million in offerings in a 12 month period with not more than $6 Million by Selling Shareholders that are affiliates of the issuer. Tier two provides for offerings for up to $50 Million in a 12 month period with not more than $15 Million by selling shareholder affiliates. The regulation limits sales by all selling shareholders to no more than 30% of the issuers initial Reg A offering and for subsequent Reg A offerings in the 12 months following the initial offering.

Both Tier one and Tier two offerings permit issuers to submit draft offering statements for non public review bye SEC staff, permit the use of offering materials after filing the offering statement and require electronic filings.

In addition issuers utilizing Tier 2 must:

  1. Provide audited financials,
  2. File annual semiannual and current event reports,
  3. Have limitation upon non-accredited investors.

Both tiers have disclosure requirements and certain Tier 2 offerings preempt certain state security laws. The latter is being challenged in court by Secretary Galvin.

Advertisements