Emerging Markets Law

Regulation A+ White Paper

The SEC recently finalized its rules to implement changes to Regulation A, now known as Regulation A+, mandated by the 2012 JOBS Act.  Attached is a link to our white paper, summarizing the new Regulation A+ rules.

As summarized below, Regulation A+ creates two new tiers and generally liberalizes what issuers can do under the exemption.   Tier 1 of Regulation A+ is generally similar to “traditional” Regulation A (as it existed before the new rules under the JOBS Act).  Tier 2 of Regulation A+ is an expanded exemption that allows issuers to raise up to $50 million in any 12 month period with minimal ongoing reporting obligations.

Many industry watchers believe that new Regulation A+ will create a new opportunity for capital formation for small but growing companies in a way that will replace the small-cap IPO.

  Traditional Regulation A Exemption  Tier 1 of New Regulation A+ Tier 2 of New Regulation A+
Offering Limit Up to $5 million during any 12 month period Up to $20 million in any 12 month period Up to $50 million in any 12 month period
SEC Filing Required Must file Form 1-A to be reviewed and qualified by SEC Same Same
State Blue Sky Requirements Issuer must comply with state blue sky requirements Issuer must comply with state blue sky requirements.  NASAA has new coordinated review process. Exempt from state blue sky requirements (other than anti-fraud and filing requirements).
Limitations on Investors No limitations except as provided in state law No limitations No limitations except for limitations on non-accredited investors
Restrictions on Resales No restrictions except for securities held by an affiliate of the issuer Same Same
Offering Communications Issue may “test the waters” to determine if there is interest in a potential offering before filing Form 1-A.  Promotional materials may be used before, during and after filing. Same Same
Mandatory Financial Statements Current balance sheet and past two years income statements required.  Must comply with GAAP but not Regulation S-X.  In many causes audit is not required. ·        Current balance sheet and income statement for past two years (as well as any interim period).·        Must provide audited statements if they are available.  If they are audited, they must be audited by an independent accountant (but PCAOB registration not required). ·        Current balance sheet and income statement for past two years (as well as any interim period).·        Must be audited by PCAOB-registered accountant
Disqualification Felons and listed bad actors are disqualified per Rule 262. Same, with updated Rule 262 Same, with updated Rule 262
Ongoing Reporting No reporting other than to disclose use of proceeds. Terminate report required. Ongoing reporting required; current reports, semi-annual reports and annual reports until obligations are terminated or suspended.

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