5 questions and 37 answers about SEC Reg A+

Each day, our Reg A+ team (READ HERE) is fielding more questions from clients, eager to learn about the impact the new Regulation A+ can have on their potential capital raise. Here is a quick to-date Q&A compilation. Spoiler: there is a lot of industry jargon below.



Why a new Regulation A (+)?

  • Mandated by JOBS Act. Old Reg A was rarely used. Exemption only allowed $5 million capital raise. Reg D exemption much more widely used.
  • Blue sky (state) review was required
  • Updated Reg A (Reg A+) allows for capital raise up to $50 million, and Tier
  • Two raises not subject to Blue sky review
  • Reg A+ securities are not restricted (advantage over Reg D)
  • Potential liquidity advantage: exit strategy for VC

Who can use Reg A+?

  • Must be U.S. or Canadian company
  • Must NOT be already subject to Exchange Act reporting
  • Canadian companies can be listed in Canada
  • REITs allowed; BDCs NOT allowed (yet)
  • 40 Act companies, shell companies NOT allowed
  • Securities offered must be equity, debt, or convertible to equity
  • ABS NOT allowed

What are the requirements? 

Tier 1 (up to $20 million)

  • File an Offering Circular on Form 1-A. Some exhibits required
  • File an Exit Report on Form 1-Z
  • Tier 1 still subject to Blue Sky review
  • Intended for smaller, regional offerings
  • Not expected to be a large portion of the filings

Tier 2 (up to $50 million) 

  • File an Offering Circular on Form 1-A. Some exhibits required
  • Prelim/Final Offering Circulars under Form Type 253(G1-4) [similar to 424 filing on Registered side]
  • Ongoing periodic reporting (current, semiannual, annual)
  • Audited Financials
  • May see voluntary Quarterly Financial filings to allow 144A sales
  • Exit report required on 1-Z
  • Transfer Agent services likely necessary
  • Monitor number of shareholders
  • Limited exemption from Exchange Act filing, but even if over limit, 2 year transition to Exchange Act reporting

Are Confidential Draft filings allowed?

  • Similar to Emerging Growth Companies, who can file DRS
  • Reg A+ confidential filings file under DOS
  • DOS filings (and amendments) must be made public at time of 1-A filing— eliminates need to refile confidential filings as exhibits; starts 21-day clock towards qualification
  • There is no “Effectiveness” since there is no “Registration”; instead there is “Qualification”

Is Reg A+ a stepping stone to a exchange listing?

  • OTC changing its rules to allow Tier 2 Reg A+ disclosure to fully meet OTC disclosure requirements for the OTCQB Venture.
  • Partially meets OTCQX requirements (must also make quarterly financial reports, timely disclosure of material news events and have PCAOB audit standards)
  • Canadian companies must be listed on a qualified foreign exchange (e.g.TSXV)
  • Form 8-A eligible (no need for longer Form 10)

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