In the last of its major rulemaking proposals under the JOBS Act, on December 18, 2013, the U.S. Securities and Exchange Commission (SEC) voted to publish proposed rules to modify and develop Regulation A, the so-called (and little-used) “small offering exemption.” The proposed rules would modify and expand Regulation A, which currently exempts from SEC registration offerings of securities of up to $5 million within a 12-month period. The new Regulation A will increase this maximum to $50 million.
Under the new proposed rules, Regulation A+ would allow for an exemption from registration for two tiers of offering:
- Tier 1: Up to $5 million in any 12-month period, including no more than $1.5 million sold by selling shareholders. Tier 1 offerings would still require approval from state regulators (i.e., there is no federal securities law pre-emption for these smaller offerings).
- Tier 2: Up to $50 million in any 12-month period, including no more than $15 million sold by selling shareholders. Tier 2 offerings would be exempt from state securities laws and the burdens of preparing filings and obtaining approvals in numerous states, but are subject to investment limitations, enhanced disclosure and ongoing reporting obligations.
Additionally, each tier would have modified issuer eligibility requirements, content and filing requirements for offering statements and ongoing reporting requirements for issuers.
Hat tip: Pepper Hamilton