United States: New Capital Raising Alternatives For Non-SEC Reporting Companies: Regulation A+

Non-SEC Reporting US and Canadian companies may now raise up to $50 million in a 12-month period under an expanded exemption from the registration requirements of the Securities Act of 1933 (the "Securities Act") under amendments to Regulation A; often referred to as Regulation A+. The final Regulation A+ rules were published in the Federal Register earlier this week and will become effective on June 19, 2015.

As required by the Jumpstart Our Business Start-ups Act (the "JOBS Act") enacted in 2012, the SEC adopted amendments to Regulation A, which historically provided an exemption from the registration requirements of the Securities Act for small public offerings. Prior to the adoption of the amendments, offerings under Regulation A were limited to $5 million in any 12-month period, required significant disclosure and were subject to compliance with state securities or "Blue Sky" laws. As a result, Regulation A offerings were few and far between. Instead, issuers relied on private offering exemptions like Regulation D that do not limit the amount of money that can be raised and have significantly fewer compliance requirements. Regulation A+ permits offerings of up to $50 million with reduced disclosure and compliance requirements as compared to a typical registered public offering in hopes of providing a new capital raising alternative. The potential utility of the amended rule remains subject to significant debate. Many argue that, given the $50 million maximum offering threshold, the continuing regulatory requirements and attendant costs, issuers will continue to favor other capital raising options. Others take the view that Regulation A+ will significantly alter the way that small businesses access capital.

Regulation A+ offers a potential longer-term solution to some companies with some of the benefits of being a public company, including access to capital – particularly if trading venues develop, but with reduced ongoing obligations and costs.

The amended rule creates two tiers of offerings: Tier 1 for offerings of up to $20 million in any 12-month period, and Tier 2 for offerings of up to $50 million in any 12-month period. These two tiers have different disclosure and ongoing reporting obligations. Under the amended rule, the exemption is available for sales by existing stockholders, though subject to tighter limits. The amended rule provides many of the benefits available to "emerging growth companies" under the JOBS Act, including permitting issuers to make confidential submissions to the SEC for the first offering, engage in certain test-the-waters activities and delay implementation of new accounting rules in certain circumstances. Tier 2 offerings are not subject to registration or qualification requirements under Blue Sky laws, although issuers may still be required to make filings and pay fees in states where securities are sold. Tier 1 offerings remain subject to Blue Sky laws.

Eligible Transactions

As mentioned above, the amendments provide for two tiers of offerings by US and Canadian companies that are not already subject to SEC reporting requirements under the Securities Exchange Act of 1934 (the "Exchange Act"):

  • Tier 1 offerings of up to $20 million in a rolling 12-month period, of which up to $6 million may be sold by existing stockholders; and
  • Tier 2 offerings of up to $50 million in a rolling 12-month period, of which up to $15 million may be sold by existing stockholders.

The types of securities that may be offered under Regulation A+ are limited to an enumerated list set forth in the amended rule, but includes equity securities, warrants, debt securities, convertible debt securities and guarantees. Regulation A+ is not available for sales of asset-backed securities. Regulation A+ provides for primary offerings for capital raising purposes, offerings by stockholders, securities issued upon the conversion of other outstanding securities or exercise of warrants, options or other rights or traditional shelf offerings. Notwithstanding the suggestions of commenters, the SEC did not extend the Regulation A+ exemption to at-the-market offerings.

While the amended rule provides for secondary sales by both affiliates and non-affiliates, those sales are subject to tighter limitations. The SEC recognized the tension between providing existing security-holders access to liquidity, on the one hand, and providing capital to companies and protecting investors, on the other hand. Accordingly, the amended rule limits the amount of securities that selling stockholders can sell in the issuer's first Regulation A+ offering and in any other Regulation A+ offering qualified within one year of the first offering to no more than 30% of the aggregate offering price of such offering. Sales by affiliates remain limited following the first anniversary of an issuer's initial qualification under Regulation A+ to no more than $6 million, in the case of Tier 1 offerings, or no more than $15 million, in the case of Tier 2 offerings, in each case over a 12-month period. Sales by non-affiliates are not subject to limitation following the first anniversary of an issuer's initial qualification, but will be counted for purposes of calculating compliance with the offering thresholds.

Eligible Issuers

Regulation A+ is available only to companies that are organized in, and have their principal place of business inside, the United States or Canada that are not already subject to SEC reporting requirements under the Exchange Act. However, the exemption is not available to:

  • Investment companies;
  • Special purpose acquisition companies (SPACs);
  • Business development companies (BDCs);
  • Blank check companies;
  • Companies subject to "bad boy" disqualification;
  • Issuers of fractional undivided interests in oil or gas rights;
  • Issuers that have not satisfied their ongoing reporting obligations under Regulation A+ during the immediately preceding two years; or
  • Issuers that have had their registration revoked by the SEC pursuant to Section 12(j) of the Exchange Act within the prior five years.

Investment Limitations

The amended rule limits the amount of securities that non-accredited investors (as defined under Regulation D) can purchase in a Tier 2 offering, unless the securities being sold will be listed on a national securities exchange upon qualification. Specifically, a non-accredited investor may not purchase securities with a purchase price of more than 10% of: (i) the greater of such purchaser's revenue or net assets in the case of a non-natural person or (ii) the greater of such purchaser's annual income or net worth in the case of a natural person. An issuer may rely on representations from investors to confirm compliance with these investment limitations, unless the issuer knew at the time of sale that the representation was untrue.

Offering Process

The offering process under Regulation A+ is similar to the typical registered offering process in many respects, but with some important differences, including relief from certain obligations and costs attendant to the registration process. Issuers must file their Regulation A+ offering statement with the SEC electronically via EDGAR. There are no filing fees for Regulation A+ offerings. Issuers who have not previously sold securities in a Regulation A+ offering or pursuant to registration statement under the Securities Act may submit a draft offering statement for non-public review by the SEC. All confidential filings and related correspondence must eventually be filed publicly, unless confidential treatment of particular materials has been separately requested and approved by the SEC.

The SEC has the opportunity to review and comment on offering statements before they may be qualified. An offering statement shall not be qualified less than 21 calendar days after the public filing of the offering statement, all confidential drafts of the offering statement and all non-public correspondence, subject to any separately approved confidential treatment requests.

The amended rule provides that oral offers and written offers made pursuant to a preliminary offering circular may be made prior to qualification, subject to requirements to deliver the final qualified offering statement once it is available, which in many cases is satisfied by filing the final offering statement on EDGAR.

Issuers and their representatives are permitted to contact potential investors and solicit their interest in participating in the offering, or to test-the-waters, both before and after the offering statement is filed. Companies relying on Regulation A+ can test-the-waters with all potential investors, rather than only "qualified institutional buyers" and "institutional accredited investors" as is the case for registered offerings of emerging growth companies. Solicitation materials are subject to the antifraud and other civil liability provisions of the federal securities laws and must be submitted or filed with the offering statement.

Filings with FINRA and payment of related fees will be necessary in Regulation A+ offerings in which FINRA members participate. FINRA's rules with respect to underwriting compensation would also apply.

Offering Statement – Form 1-A

The offering statement is a disclosure document that is intended to provide potential investors with information that will form the basis for their investment decision. Form 1-A, which has been amended, sets forth the content and other requirements for offering statements under Regulation A+:

  • Part I: is an online form requiring key information about the issuer, its eligibility and the offering. The SEC intends for this form to assist issuers in determining whether they satisfy the criteria to rely on Regulation A+.
  • Part II: is the narrative portion of the offering statement that requires, among other information, a description of the company's business, risk factors, information about the company's officers and directors, information about the offering and financial statements, which must be audited in the case of a Tier 2 offering.
  • Part III: requires signatures and exhibits, including organizational documents and material contracts, among others.

Ongoing Reporting and Compliance

Following termination or completion of a Regulation A+ offering, both Tier 1 and Tier 2 issuers are required to disclose information about the offering, including the date it was qualified and commenced, the amount of securities qualified, the amount of securities sold by both the issuer and selling security-holders, the price, any fees associated with the offering and the net proceeds to the issuer.

Additionally, Tier 2 issuers are required to file:

  • Annual reports on Form 1-K, with audited financial statements, within 120 days of the end of the fiscal year;
  • Semi-annual reports on Form 1-SA, within 90 days after the end of the first six months of the fiscal year;
  • Current event reports on Form 1-U, within 4 business days of the occurrence of a triggering event such as a fundamental change, change of control, change in accountants, change in officers and directors; and
  • Notice to the SEC of the suspension of their ongoing reporting obligations on Part II of Form 1-Z.

Tier 2 issuers' ongoing reporting obligations are applicable for any year in which offers and sales are made pursuant to a Tier 2 offering and for so long as the issuer has more than 300 stockholders of record.

In the final rule release, the SEC noted that these ongoing reporting obligations are intended to help foster the development of a secondary market in such securities, while balancing the compliance burden that would be imposed on smaller issuers. While the ongoing reporting provisions require a significant amount of information, Regulation A+ issuers are excepted from many of the ongoing reporting and compliance obligations applicable to public companies, including the proxy rules, quarterly reporting requirements, Section 16 reporting, Schedule 13D filings, some requirements of the Sarbanes-Oxley Act and some executive compensation disclosure requirements. But, even the significantly reduced ongoing obligations on Regulation A+ issuers are more arduous than ongoing obligations typically imposed on issuers in private offerings, which are negotiated contractual obligations and can vary widely.

Exchange Act Registration

Securities issued in a Tier 2 offering are exempt from registration under Section 12(g) of the Exchange Act if:

  • the issuer remains subject to, and is current in (as of its fiscal year end), its Regulation A+ periodic reporting obligations;
  • the issuer engages the services of a transfer agent registered with the SEC pursuant to Section 17A of the Exchange Act; and
  • the issuer has a public float of less than $75 million, determined as of the last business day of its most recently completed semi-annual period, or, in the absence of a public float, annual revenues of less than $50 million, as of the most recently completed fiscal year.

An issuer that exceeds either the public float or annual revenue thresholds, in addition to triggering the requirements to register under Section 12(g) of the Exchange Act (i.e., total assets of more than $10 million and the class of equity securities is held by more than 2,000 persons or 500 persons who are not accredited investors), would be granted a two-year transition period before it would be required to register pursuant to Section 12(g), provided it timely files all ongoing reports due during such period. An issuer entering Exchange Act reporting will be considered an "emerging growth company" to the extent that it otherwise qualifies for such status.

The amended rule also provides a simplified process for Exchange Act registration in connection with Tier 2 offerings for issuers wishing to register securities under the Exchange Act concurrent with an offering. Regulation A+ issuers may utilize the Form 8-A short form registration statement to register under the Exchange Act, if they provide expanded disclosure in the offering statement that is in-line with what would be required in a registered offering.

Secondary Markets

Since securities sold under Regulation A+ are publicly offered securities, not "restricted securities," they can generally be traded freely unlike securities sold in private placements. Additionally, broker-dealers will be able to publish quotes for securities sold in Tier 2 offerings to the extent that the issuer continues to satisfy its ongoing reporting obligations, which should facilitate a secondary market in Regulation A+ securities through the pink sheets and over-the-counter. The SEC has noted that it is considering venture exchanges as a way to provide liquidity for smaller issuers, and is contemplating the use of venture exchanges for Regulation A+ securities as part of that consideration.

Blue Sky

The amended rule provides that Blue Sky law requirements for registration or qualification are pre-empted with respect to offers and sales of securities in Tier 2 offerings. However, companies will still be required to file offering statements (in the same form filed with the SEC) with state securities regulators and pay related filing fees. Additionally, state regulators will still be entitled to police fraudulent securities transactions and unlawful activities of broker-dealers in Regulation A+ offerings.

By contrast given the anticipated more local nature of Tier 1 offerings, the SEC determined it is more appropriate for states to retain oversight over the conduct of Tier 1 offerings. In most cases, Tier 1 offerings will be subject to the multi-state coordinated review program previously implemented by the North American Securities Administrators Association for Regulation A+ offerings. The coordinated review program is intended to reduce Blue Sky law disclosure and compliance obligations for Regulation A+ offerings. The coordinated review program requires issuers to file Regulation A+ offering materials with the states electronically and contemplates a 21 business day turnaround from the time of filing of an offering statement until the issuer receives comments from the states. The coordinated review program is relatively new and there is not yet sufficient data to evaluate whether it will in fact reduce the Blue Sky law disclosure and compliance obligations of issuers in Regulation A+ offerings, but the SEC and state regulators will continue to evaluate the program going forward.


Similar to other offerings exempt from the Securities Act registration requirements, Regulation A+ offerings do not subject participants to Section 11 liability under the Securities Act. However, anti-fraud and other civil liability provisions of the federal securities laws would apply, including Sections 12(a)(2) and 17 of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5. Therefore, underwriters participating in a Regulation A+ offering will likely require a level of diligence and disclosure comparable to that required in registered offerings.

Rule Release

Final Rule Release – Amendments to Regulation A: https://www.sec.gov/rules/final/2015/33-9741.pdf.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.