In response to the mandate of the Economic Growth, Regulatory Relief, and Consumer Protection Act, the Securities and Exchange Commission recently issued final rule amendments permitting companies reporting under Section 13 or 15(d) of the Securities Exchange Act to offer securities pursuant to the registration exemption Regulation A. Previously, offerings pursuant to Regulation A were expressly limited to non-reporting companies. The rule amendments also provide that, so long as the reporting company is current in its Exchange Act periodic reports, the reporting company has no additional periodic reporting obligations under Regulation A. These amendments became effective on January 31, 2019, upon publication in the Federal Register.
The rule amendments provide existing reporting companies with another option for capital raising when the amount sought is less than $50 million, particularly those with non-exchange-listed securities and those not primary S-3 eligible. Recall Blue Sky exemption is available for Tier 2 offerings, and Regulation A+ broadly offers “testing-the-waters” to gauge investor interest. Another lesser-known benefit of Regulation A+ is that debt offerings using Regulation A+ are exempt from the Trust Indenture Act of 1939.
In connection with this post, we are also releasing an updated version of our popular publication “FAQs About Regulation A+ Securities Offerings,” which has been updated to incorporate the new provisions of the amendments. Below is a sample of the questions that are answered in the publication:
- Which companies are eligible to use Regulation A+?
- What is the general process for a Regulation A+ offering?
- What are the differences between a Tier 1 and a Tier 2 offering?
- Are there any ongoing reporting requirements?
- Can the company also list its securities on the NYSE or NASDAQ trading?