Does Regulation A+ provide an easier route to file suit against an issuer for material misstatements or omissions in connection with an offer or sale of securities under Section 12(a)(2) of the Exchange Act, compared to an offering under Regulation D?
Yes! Here is an excerpt of an on point law firm memo published by Pillsbury Winthrop:
“Sellers of Regulation A+ securities will have the risk of Section 12(a)(2) liability in respect of offers or sales made by means of an offering statement or oral communications that include a material misleading statement or omission. Section 12(a)(2) of the Securities Act provides the buyers of securities an express remedy for material misstatements or omissions made by “any seller” in connection with the offer or sale of the issuer’s securities involving a prospectus or oral communications.
This liability risk is not present in offerings made under Rule 506 of Regulation D. Disappointed investors in a Rule 506 offering cannot sue, under the federal securities laws, for negligent misrepresentation (that is, lack of due care or due diligence). As a result of a 1995 Supreme Court decision, Gustafson v. Alloyd, which held that the liability provisions of Section 12(a)(2) of the Securities Act do not extend to a private sale, investors in Rule 506 offerings may assert federal claims only under section 10(b) and Rule 10b-5 under the Exchange Act, which require that the investor prove actual intent to defraud, or reckless indifference to the truth of the representations made in the offering. The practical effect of Gustafson has been to make it much harder for lawsuits to be maintained by investors in Rule 506 offerings.”
As a consequence, Regulation D offerings will continue to have a significant advantage over Regulation A+ offerings in terms of risk of liability.
In addition, here is what SEC Commissioner said in a speech on October 23, 2015 (just a few weeks ago) about Regulation A+ offerings.
“As for Regulation A+, which just became effective in June, it is obviously too early to draw conclusions. Companies are beginning to take advantage of the new rules in greater numbers than was the case under the prior version of the exemption, with approximately 34 companies publicly filing offering statements and 16 companies filing non-public draft offering statements. The staff has qualified three offerings so far, and it remains to be seen how investors will react to such offerings.”
I think that
