In what may be indicative of the Securities and Exchange Commission’s renewed focus on small business capital formation, one of the topics that the staff (the “Staff”) of the Commission’s Division of Corporation Finance (the “Division”) is focusing on is the Regulation A exemption from registration. Notably, on June 30, the Division issued a no-action letter in which it agreed that it would not recommend enforcement action against a Regulation A issuer, BirchBioMed Inc. (“BirchBioMed”), in connection with terminating its Regulation A reporting obligations under the specific circumstances outlined below.
Under Rule 257(b) of Regulation A, Regulation A issuers are required to file annual, semi-annual and current reports. Pursuant to Rule 257(d), an issuer can suspend its reporting obligations if it (i) has fewer than 300 shareholders of record and (ii) has filed all reports required to be filed since it became a Regulation A reporting company, provided that suspension of reporting obligations is not available to issuers during the fiscal year in which a Tier 2 offering statement is qualified or if an annual report for the fiscal year in which a Tier 2 offering statement was qualified has not been filed.
BirchBioMed’s offering statement on Form 1-A in connection with a Tier 2 Regulation offering was qualified in October 2024, and BirchBioMed became subject to Rule 257(b)’s ongoing reporting requirements. In April 2025, BirchBioMed concluded that its previously-issued financial statements could no longer be relied upon, and commenced a rescission offer for the shares sold in the Regulation A offering. Following the rescission offer, there were no securities issued pursuant to Regulation A outstanding, and all funds had been released from escrow and returned to investors.
In June 2025, BirchBioMed was up-to-date in its reporting obligations and had fewer than 300 shareholders of record, and would have been eligible to cease reporting but for the fact its offering statement was qualified in its current fiscal year ending September 30, 2025 and it had not filed an annual report for such fiscal year.
In its letter to the Staff, BirchBioMed pointed out that, because there were no securities issued pursuant to Regulation A outstanding, there were no public policy considerations, such as providing information to investors and the market, that would be furthered by ongoing reporting, and the benefits of such reporting did not outweigh the burdens of filing. The Staff agreed that it would not recommend enforcement action if BirchBioMed filed a Form 1-Z to terminate its reporting obligations before the due date of its next semi-annual report. This outcome is consistent with Securities Act Rules Compliance and Disclosure Interpretation 182.16, which permits a Tier 2 issuer to withdraw an offering statement prior to making any sales, even if the issuer has not filed an annual report for the fiscal year in which the offering statement was qualified. In both cases, there were no outstanding Regulation A securities, such that there were no investor protection concerns warranting continued reporting.
In other evidence that Regulation A is coming to the Staff’s attention, in its upcoming July 22 meeting, the Small Business Capital Formation Advisory Committee (the “Committee”) plans to discuss potential regulatory improvements to Regulation A, continuing the conversation from its May meeting. Notably, the Committee’s agenda also includes a discussion of finders, or “persons who assist companies with limited capital-raising activities in private markets.” The Committee, which is intended to help promote small business capital formation, plans to focus on “access to capital for founders who are building businesses outside of prominent entrepreneurial hubs or without robust capital-raising networks.”
While the Staff is under no obligation to consider the Committee’s recommendations, it is interesting that the Committee is choosing to revisit the discussion of Regulation A when it is clearly a focus for the Staff, too. We plan to monitor this area for potential future developments.
Read the no action letter here, the incoming letter here, and the announcement about the July Committee meeting here.
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