Regulation A

The SEC has issued final rules on the new Regulation A also called
Regulation A+. Regulation A has been a little used provision in
the securities laws for expensive offering sized up to $5 million in
any 12-month period. Old Reg A came with the requirement that
the offering be reviewed by the SEC plus each state in which an
issuer offering the securities.
As a result almost all private placement have been based on
Regulation D, under SEC Rule 506. There is Federal preemption of
state securities regulators (other than for fraud) for all Rule 506
offerings but Rule 506 offerings are mostly restricted to
accredited investors.
Not so with Reg A, which allows almost anyone to invest.
The hope is that these types of small IPOs will be more user
friendly and lead to capital previously unreachable.
There are two tiers.
Tier 1 has an annual offering limit of $20,000,000, of which no
more than $6 million can be sales by affiliates of the issuer.
Balance sheets and related financial statements for the two
previous fiscal year ends must be included in the offering
statement. (If the company does not have two years history as a
company, it is not expected to have financial statements when it
did not exist).
Although state securities law and regulations apply, Issuers may
use the multi-state coordinated review program which greatly
cuts down on the time and paperwork. (This is the sort of work we
do at Private Placement Advisors.com; see exemptofferings.com
or privateplacementadvisors.com).
Tier 2 has annual offering limit of $50,000,000. (No more than
$15,000,000 can be sales by affiliates of the issuer). The amount
of securities that a non-accredited investor can purchase will be

limited to the lesser of: (a) 10% of the greater of annual income or
net worth (b) 10% of the greater of annual revenue or net assets
at fiscal yearend.
Tier 1 offerings must file annual and semiannual financial
reporting. Tier 2 issuers must file audited financial statements.
For tier 2 issuers, state securities regulation governing
registration and qualification are preempted.
For both tiers, sales by founders and affiliates are limited to 30%
of the aggregate offering price in an issuers initial Regulation A
offering and other Regulation A offerings within the following 12
months.
Issuers relying on Regulation A will be permitted to test the
watersa feature that guarantees its popularity. Issuers will be
permitted to submit offering statements and amendments to the
SEC for review before formally filing such documents with the
Commission and the public.
Follow Douglas Slain on www.exemptofferings.com.