SEC Adopts Regulation A+ (with Delta Strategy Group Summary)

The SEC adopted final rules to expand the scope of Regulation A in order to facilitate smaller companies' access to capital.

The final rules, which are often referred to as "Regulation A+," are mandated by Title IV of the JOBS Act and update Regulation A's existing exemption to enable smaller companies to offer and sell up to $50 million in securities within a 12-month period, subject to eligibility, disclosure and reporting requirements.

The final rules provide for two tiers of offerings: (i) Tier 1, for offerings of up to $20 million in securities within a 12-month period that do not include more than $6 million in offers by selling security holders that are affiliates of the issuer, and (ii) Tier 2, for offerings of up to $50 million in securities within a 12-month period that do not include more than $15 million in offers by selling security holders that are affiliates of the issuer. Both Tiers are subject to certain basic requirements, and Tier 2 offerings are also subject to additional disclosures and ongoing reporting requirements.

The final rules also provide for the preemption of state securities law registration and qualification requirements for securities offered or sold to "qualified purchasers" in Tier 2 offerings. Tier 1 offerings will be subject to federal and state registration and qualification requirements, and issuers may take advantage of the coordinated review program developed by the North American Securities Administrators Association ("NASAA").

All of the Commissioners voiced approval of the final rule, although Commissioner Stein stated that she would have preferred the amendments to "take a different approach to preemption." Commissioner Gallagher stated that, "as good as the rule may be, it should not be the end of the [SEC's] capital formation agenda." Once again, he voiced his support of the development of venture exchanges for small cap shares, including Regulation A issuances. He also said that the amendments "don't go far enough to help issuers that are trying to raise under $5 million."

NASAA also issued a statement regarding the final rule in which it said that the SEC appears to have "adopted a rule that fails to fully recognize the significant benefits of this program to issuers and investors alike." Additionally, NASAA argued that the rule does not maintain "the important investor protection role of state securities regulators."

Click here for a meeting summary prepared by Delta Strategy Group.

See: Text of Final Rule; SEC Press Release. See also: Chair White's Opening Statement; Commissioner Aguilar's Statement of Support; Commissioner Gallagher's Statement of Support; Commissioner Stein's Statement of Support; Commissioner Piwowar's Statement of Support; NASAA's Statement.