Category: Regulation A+

Regulation A+: On December 18, 2013, the SEC published proposed rules to implement Title IV of the JOBS Act, commonly referred to as Regulation A+. Since that time there has been very little activity towards the advancement of a final rule. The comment period closed March 24, 2014, and presumably the SEC is analyzing the information and deciding on the next reiteration…

Mar012016

State Blue Sky Concerns; Florida and New York

ABA Journal’s 10th Annual Blawg 100

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I have often written about state blue sky compliance and issues in completing offerings that do not pre-empt state law, including Tier 1 of Regulation A+ and initial or direct public offerings on Form S-1. I’ve also often expressed my opinion that the SEC, together with FINRA, is best suited to govern most securities-related registrations and exemptions, including both for offerings and broker-dealer matters, and that the states should be more focused on state-specific registrations and exemptions (such as intrastate offerings) and investigation and enforcement with respect to fraud or deceit, or unlawful conduct.

Despite the SEC support for the NASAA-coordinated review program to simplify the state blue sky process for securities offerings, such as under Tier 1 of Regulation A+, only 43 states participate. I say “only” in this context because the holdouts – including, for example, Florida, New York, Arizona and Georgia – are extremely active states for small business

Jul142015

More On Regulation A/A+; Thoughts On The Practical Effects And New SEC Guidance

ABA Journal’s 10th Annual Blawg 100

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On March 25, 2015, the SEC released final rules amending Regulation A. The new rules are commonly referred to as Regulation A+.  The existing Tier I Regulation A, which does not preempt state law, has been increased to $20 million and the new Tier 2, which does preempt state law, allows a raise of up to $50 million.  Issuers may elect to proceed under either Tier I or Tier 2 for offerings up to $20 million.  The new rules went into effect on June 19, 2015.

On June 23, 2015, the SEC updated its Division of Corporation Finance Compliance and Disclosure Interpretations (C&DI) to provide guidance related to Regulation A/A+.  The SEC published 11 new C&DI’s and deleted 2 related to forms and in particular, related to paper filings and annotations which are no longer relevant or applicable. 

Practical Effects of New Regulation A/A+

I believe, and the feedback I hear supports,

Jul072015

OTC Markets Amends Listing Standards For OTCQB To Include Regulation A+ Issuers

ABA Journal’s 10th Annual Blawg 100

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OTC Markets has unveiled changes to the quotations rule and standards for the OTCQB, which changes become effective July 10, 2015.  The OTC Markets rule amendments will allow a company to use its required Regulation A+ ongoing reporting requirements to satisfy the initial and ongoing OTCQB disclosure requirements.

Concurrently with this substantive amendment, OTCQB has made clarifying general amendments to its listing standards for all listed and prospective OTCQB companies.  OTC Markets has invited comments on the proposed changes. 

To summarize, the Regulation A related amendment to the OTCQB rules and regulations includes:

  • The addition of definitions for “Regulation A” and “Regulation A Reporting Company”
  • Initial Disclosure Obligations – a Regulation A Reporting Company can meet the OTCQB initial disclosure obligations by having filed all required reports on EDGAR, including annual audited financial statements;
  • OTCQB Certification – clarifying amendment to the OTCQB Certification including that a Regulation A Reporting Company is required to
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Jun092015

Regulation A+; An In-Depth Overview

ABA Journal’s 10th Annual Blawg 100

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On March 25, 2015, the SEC released final rules amending Regulation A. The new rules are commonly referred to as Regulation A+.  The existing Tier I Regulation A, which does not preempt state law, has been increased to $20 million and the new Tier 2, which does preempt state law, allows a raise of up to $50 million.  Issuers may elect to proceed under either Tier I or Tier 2 for offerings up to $20 million.  The new rules are expected to be effective on or near June 19, 2015.

On March 31, 2015, I published a blog with a high-level summary of the new rules.  In this blog, I will give a deeper review of the entire new Regulation and then in future installments will drill down on different aspects of the new rules as such become relevant to this new offering regime. 

Background on Rules

On December 18, 2013, the

Mar312015

SEC Has Published Final Rules Adopting Regulation A+

ABA Journal’s 10th Annual Blawg 100

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On March 25, 2015, the SEC pleasantly surprised the business community by releasing final rules amending Regulation A. The new rules are commonly referred to as Regulation A+.  The existing Tier I Regulation A, which does not preempt state law, has been increased to $20 million and the new Tier II, which does preempt state law, allows a raise of up to $50 million.  Issuers may elect to proceed under either Tier I or Tier II for offerings up to $20 million.  As is becoming common in the industry, I will refer to the new rules, including both Tier I and Tier II offerings, as Regulation A+.

In its press release announcing the passage, SEC Chair Mary Jo White was quoted as saying, “These new rules provide an effective, workable path to raising capital that also provides strong investor protections.  It is important for the Commission to continue to look for ways

Dec302014

First Issuer Completes NASAA Coordinated Review For Regulation A Offering

 ABA Journal’s 10th Annual Blawg 100

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The first issuer has completed the NASAA coordinated review process to qualify to sell securities in multiple states under Regulation A.  As the first and only issuer to complete this process, the issuer (Groundfloor Finance, Inc.) took the time to write a comment letter to the SEC with respect to its Regulation A+ rulemaking and in particular to discuss its experience with the NASAA coordinated review process.  The issuer’s comment letter was followed by a letter to SEC Chair Mary Jo White from the House Financial Services Committee requesting that the SEC study the NASAA Coordinated Review Program.

 The Coordinated Review Process 

The NASAA coordinated review process is well put together and seems to have a focus on both investor protection and supportive assistance for the issuer.  An issuer elects to complete the coordinated review process by completing a Form CR-3b and submitting the application together with a copy of the completed Form

Dec022014

Private Offering Rule Changes Since JOBS Act

ABA Journal’s 10th Annual Blawg 100

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As the end of 2014 approaches, I find myself reflecting on the significant successes and failures in the private offering arena since the enactment of the Jumpstart our Business Startups Act (“JOBS Act”) on April 5, 2012.  Some provisions under the JOBS Act became law without further rule-making action on the part of the SEC; others took time to pass; and significantly, Title III Crowdfunding, the most anticipated change in capital market access, has completely stalled.  This blog is a summary of the in-depth detailed blogs I’ve previously written on each of these topics with some added commentary.

506(c) – The Elimination of the Prohibition Against General Solicitation and Advertising in Private Offerings to Accredited Investors; Broker-Dealer Exemption for 506(c) Funding Websites

The enactment of new 506(c) resulting in the elimination of the prohibition against general solicitation and advertising in private offerings to accredited investors has been a slow but sure success.  Trailblazers

Aug192014

NASAA and US Senate Oppose State Law Pre-Emption in Proposed Regulation A+

On December 18, 2013, the SEC published proposed rules to implement Title IV of the JOBS Act, commonly referred to as Regulation A+.  Since that time there has been very little activity towards the advancement of a final rule.  The comment period closed March 24, 2014, and presumably the SEC is analyzing the information and deciding on the next reiteration.

NASAA

The North American Securities Administrators Association (NASAA), a group whose members are comprised of state securities regulators, while supportive of the Regulation A+ concept as a whole, has been vocal of its opposition of the proposed state law pre-emption provisions.

Notably, on April 8, 2014, Commissioner Luis A. Aguilar, the NASAA liaison, gave a speech at the North American Securities Administrators Association commenting on the NASAA’s position.  In the speech Mr. Aguilar praised the concept of the rule itself, including the two-tier structure, offering amount limits and importantly ongoing reporting requirements.  He expressed agreement with many of the same

Feb252014

SEC Proposes Rules for Regulation A+

On December 18, 2013, the SEC published proposed rules to implement Title IV of the JOBS Act, commonly referred to as Regulation A+.  The proposed rules both add the new Section 3(b)(2) (i.e., Regulation A+) provisions and modify the existing Regulation A.  This blog is limited to a discussion of the new Regulation A+.

Background

Title IV of the JOBS Act technically amends Section 3(b) of the Securities Act, which up to now has been a general provision allowing the SEC to fashion exemptions from registration, up to a total offering amount of $5,000,000.  Regulation A is and has historically been an exemption created under the powers afforded the SEC by Section 3(b).

Technically speaking, Regulation D, Rule 504 and 505 offerings and Regulation A offerings are promulgated under Section 3(b), and Rule 506 is promulgated under Section 4(a)(2).  This is important because federal law does not pre-empt state law for Section 3(b) offerings, but it does so for Section

Jun192013

Crowdfunding Using Regulation A? Yes, You Can- Right Now!

As everyone waits for the SEC to begin rule making on Title III of the JOBS Act, a few innovative entrepreneurs are using Regulation A as a vehicle to crowdfund today.Although the procedure, as described in this blog, is not the crowdfunding procedure that will be implemented under Title III of the JOBS Act, it does allow for the use of social media and the Internet to solicit and obtain equity investment funds from the general population including unaccredited investors, of a particular state or states.

Moreover, the laws that allow for this method of fundraising are not new.The vehicle of choice is Regulation A—the existing Regulation A, not the new Regulation A+, which will be implemented under Title IV of the JOBS Act. Using Regulation A to offer securities involves the time and expense of a registered offering; however, the registered securities are free trading and may be offered to unaccredited investors.Regulation A does not preempt state