Regulation A+
Regulation A+ is an SEC mandated exemption to registration requirements for issuing securities.
The regulation exempts US and Canadian companies from filing reports under the Exchange Act to raise up to $50 million in a 12-month period. The updated Regulation A+ rules creates two tiers for securities offerings.
Tier 1 consists of securities offerings of up to $20 million in a 12-month period, with not more than $6 million in offers by selling security-holders that are affiliates of the issuer.
Tier 2 consists of securities offerings of up to $50 million in a 12-month period, with no more than $15 million in offers by selling security-holders that are affiliates of the issuer.
For offerings up to $20 million, issuers can elect to proceed under Tier 1 or Tier 2. Both tiers are subject to basic requirements such as issuer eligibility, disclosure, and other matters. Both tiers would also allow companies to submit draft offering statements for non-public review by Commission staff before filing, permit the continued use of solicitation materials after filing the offering statement and require the electronic filing of offering materials to the SEC EDGAR system.
Tier 1 offerings will be subject to federal and state registration and qualification requirements. For more information on state specific requirements, please click here.
Tier 2 has additional requirements that do not apply to Tier 1 offerings. Companies under the Tier 2 exemption are subject to the following requirements:
- Provide audited financial statements
- File annual, semiannual and current event reports.
- Limitation on the amount of securities non-accredited investors can purchase in a Tier 2 offering of no more than 10 percent of the greater of the investor’s annual income or net worth.
Contact M2 to ask us about your SEC Regulation A+ filing on Form 1-A
Here are some quick provisions included in The SEC’s Reg A+ rule:
- Raising Capital: Under Reg a+ Tier 2, the capital limit is $50 million, with no more than $15 million offered from affiliated stockholders. Under Tier 1 Reg A+, the capital limit is $20 million, with not more than $6 million offered from affiliated stockholders. The limits are set for 12-month periods.
- Testing the waters: Issuers may want to test the “waters” or overall effectiveness of their marketing campaign by pre-soliciting interest in the potential Mini-IPO, so long as any solicitation materials are preceded or accompanied by a preliminary offering circular.
- Blue Sky Exemption: Under Tier 2 of Regulation A+ securities are exempt from general state securities law registration and thus qualification requirements. While under Tier 1 of Regulation A+ offerings would still be subject to certain state Blue Sky regulations.
- Offering Circular: Issuers can confidentially file statements for SEC approval and qualification. According to regulation the offering circular must include in GAAP form audited financial statements and balance sheets for the two most recently completed fiscal years.
- Ongoing Reporting: Issuers that conduct an offering under Tier 2 Regulation A+ must meet certain financial obligations by electronically filing financial reports with the SEC, but under Tier 1 there are generally no ongoing reporting obligations by the issuer.
- Liquidity for Investors: Securities/Equity offered under both Tier 1 and Tier 2 of Reg A+ “restricted securities” under the Securities Act, and thus are freely tradable.
Reg A+ Tier 1 and Tier 2 Sec Rules
| Reg A — Tier 1 | Reg A — Tier 2 | |
| Maximum Offering | $20,000,000 | $50,000,000 |
| Investor Types | All, including non-accredited investors | All, including non-accredited investors |
| Individual Investment Limits | None | Unaccredited investors: The greater of 10% of their income or 10% of net worth; Entitles: 1096 of revenue or net assets; Accredited Investors: Unlimited |
| General Solicitation | Unrestricted | Unrestricted |
| Offering Documents | SEC Review and State Review | SEC Review |
| State Pre-emption | No; Coordinated State Review | Yes |
| Financial Disclosures | Reviewed Financials (certain states might require audits) | Audited Financials |
| Ongoing Disclosures | No Ongoing Public Financial Reporting | Annual and Semi-Annual Public Reporting including Audits |
| Ability to Terminate Ongoing Reporting Requirements | N/A | Less than 300 holders of Reg A+ stock |
| Transfer Restrictions | None | None |