Can Regulation A+ Succeed Where Regulation A Failed?

On March 25, 2014, the Securities and Exchange Commission (SEC) adopted final amendments to Regulation A under the Securities Act of 1933, or what is now being referred to as Regulation A+. While much of the existing framework of Regulation A was preserved, Regulation A+ expands the prior exemption to allow an issuer to offer and sell up to $50 million of securities over a 12-month period in a public offering, without complying with the registration requirements of the Securities Act. Regulation A+ was adopted to implement the rulemaking mandate of Title IV of the Jumpstart Our Business Startups Act (or JOBS Act), which was signed into law in April 2012 and differs slightly from the amendments to Regulation A as proposed by the SEC in December 2013.

This White Paper summarizes the impetus for and most important provisions of Regulation A+, as well as the possible implications of the Final Rules.

Background -

Regulation A, as it existed prior to the Final Rules, provided an exemption from registration requirements of Section 5 of the Securities Act for certain smaller securities offerings of up to $5 million by private companies. Historically, Regulation A has been rarely utilized as a capital raising tool. This lack of use is widely attributed to two factors: (i) the offering costs, and burden of SEC review, relative to the dollar amounts being raised, and (ii) the necessity of complying with state blue sky laws in each state where an offering is conducted. From 2012 to 2014 only 26 Regulation A offerings were qualified by the SEC.