United States: A Guide To Regulation A+


Significant changes to Regulation A, generally referred to as Regulation A+, went into effect on June 19, 2015.

Old Regulation A

Regulation A is a previously existing exemption from the registration requirements of the Securities Act of 1933 (Securities Act) for nonpublic companies seeking to raise smaller amounts of capital. Even before the new rules went into effect, Regulation A already had several useful features. Regulation A gave smaller companies access to public markets without registration. There were no limitations on who could purchase the securities, and the securities sold were freely tradable by non-affiliates. General solicitations were allowed. Issuers could also "test the waters" and gauge investor interest before launching the offering (subject to certain state law requirements). Yet despite these features, Regulation A had been used relatively infrequently for several years. According to a recent GAO Report, there was just one qualified offering made in 2011, down from only 57 in 19981.

There are many reasons for Regulation A's lack of popularity. First and foremost, the amount of money that could be raised in a Regulation A offering was capped at $5 million. Second, the qualification process was extremely cumbersome and costly. In addition to a lengthy federal review process, the offerings were also subject to state law securities registration and review requirements, otherwise known as the "blue sky" laws. The cost and time involved with working through both the federal qualification process and the various blue sky laws was significant. Simply put, Regulation A offerings were not cost-effective.

Regulation A+

Regulation A+ contains many changes designed to address these problems. The goal of the new rules is to transform Regulation A into a workable capital-raising tool for small private companies.

As mandated by the Jumpstart Our Business Startups Act (JOBS Act), the U.S. Securities and Exchange Commission (SEC) increased the amount that can be raised by an issuer under the exemption from $5 million to $50 million and created two offering categories:

Tier 1 for offerings up to $20 million

Tier 2 for offerings up to $50 million

Investor protections have been included for Tier 2 offerings, such as requiring audited financial statements in offering materials, ongoing reporting requirements and an investment cap for non-accredited investors.

Regulation A+ also dramatically transforms the regulatory review framework for these offerings. Tier 2 offerings preempt state securities regulatory review, a change strongly supported by business interests and vehemently opposed by state securities regulators. As is described below under "State Securities Regulation – Preemption of State Regulation for Tier 2," the controversy surrounding state law preemption continues.

The SEC has also crafted an offering and disclosure regime unique to Regulation A+ and specifically designed with smaller startup companies in mind. The new rules modernize the qualification, communications and offering processes, incorporating into Regulation A+ offerings many features currently enjoyed by issuers in registered offerings, such as allowing for confidential submissions and adopting a notice-equals-access model.

In her October 28, 2015, keynote address to Practising Law Institute's 47th Annual Securities Regulation Institute, SEC Chair Mary Jo White indicated that it is too early to draw conclusions on Regulation A+ and stated:

Companies are beginning to take advantage of the new rules in greater numbers than was the case under the prior version of the exemption, with approximately 34 companies publicly filing offering statements and 16 companies filing non-public draft offering statements. The staff has qualified three offerings so far, and it remains to be seen how investors will react to such offerings.

This white paper explains Regulation A+ and the considerations that should be taken into account in deciding whether to use it.

Regulation A+ Offering Size Options

Two offering size levels are available under Regulation A+.

Tier 1 – offerings of up to $20 million over a rolling 12-month period

Tier 2 – offerings of up to $50 million over a rolling 12-month period

As explained in more detail below, both tiers are subject to certain basic requirements, while Tier 2 offerings are subject to additional investor protections. Issuers raising up to $20 million can choose to use either Tier 1 or Tier 2. Tier 1 offerings can include no more than $6 million in securities offered by selling security holders who are affiliates of the issuer. Tier 2 offerings can include no more than $15 million in securities offered by selling security holders who are affiliates of the issuer.

If the issuer is selling convertible securities, and these securities are convertible within the first year after qualification or at the discretion of the issuer, the value of the underlying securities must be included in the aggregate offering size. If the price of the underlying securities uses a pricing formula, the issuer must use the maximum estimated price.

Congress built an adjustment feature into Regulation A+. Every two years the SEC must review the $50 million offering amount limitation and, if appropriate, increase it. If the SEC decides not to increase the offering limit it must report back to Congress its reasons supporting this decision. The first review is expected by April 2016.

Secondary Sales

One of the important features of Regulation A+ is the ability of selling security holders to participate in the offering, known as secondary sales. The SEC hopes to encourage investment in startup companies by giving investors access to liquidity through secondary sales as a part of a qualified Regulation A+ offering. However, the SEC acknowledged that such secondary sales could potentially place new investors at an informational disadvantage and noted that secondary sales do not directly provide any new capital to issuers. So the SEC built into the new rules some important restrictions on these sales.

In an issuer's first Regulation A+ offering and for the 12 months following its first offering, sales by security holders are limited to no more than 30 percent of the aggregate offering price of a particular offering. This limitation applies to sales by both affiliates and non-affiliates of the issuer.

After the end of this period, secondary sales by affiliates over a 12-month period will continue to be subject to this 30 percent limitation. At this point, secondary sales by non-affiliates will only be limited to the maximum offering amount permissible under each tier ($20 million for Tier 1 and $50 million for Tier 2). Nevertheless, such amounts will be aggregated with the sales by the issuer and affiliates when calculating the maximum amount allowed under the appropriate tier.

Previously, Rule 251(b) banned all affiliate resales under Regulation A unless the issuer had net income from continuing operations in at least one of its last two fiscal years. This rule was designed to address the information disadvantage issue for new investors. With Regulation A+ the SEC has eliminated this rule. The SEC described the rule as no longer necessary due to the increased sophistication and robust nature of its current disclosure review process, qualification procedure and enforcement programs.

See "Resale Issues" below for a discussion of several reasons why secondary sales outside of a qualified Regulation A+ offering may be complicated.

Who is Eligible to Use Regulation A+?

Eligible Issuers

Only companies that are organized in, and have their principal place of business in, the United States or Canada are eligible to engage in a Regulation A+ offering.

An issuer will be considered to have its "principal place of business" in the United States or Canada for purposes of determining eligibility to use Regulation A+ if its officers, partners or managers primarily direct, control and coordinate the issuer's activities from the United States or Canada.

The following entities are not able to use Regulation A+:

  • Companies subject to reporting under the Securities Exchange Act of 1934 (Exchange Act), other than voluntary filers
  • Investment companies and business development companies
  • Blank check companies
  • Certain bad actors
  • Issuers of fractional undivided interests in mineral rights
  • Issuers who failed to file ongoing reports required by Regulation A+
  • Issuers subject to an SEC order within five years denying, suspending or revoking registration of a class of securities pursuant to Section 12(j) of the Exchange Act

A company that was previously required to file reports with the SEC under Section 15(d) of the Exchange Act, but has since suspended its Exchange Act reporting obligation, is eligible to use Regulation A+.

A private, wholly owned subsidiary of an Exchange Act reporting company is eligible to sell securities pursuant to Regulation A+, but the Exchange Act reporting company parent cannot be a guarantor or co-issuer.

While the SEC received many comment letters supporting expansion of the availability of Regulation A+, the SEC stated that it wanted to observe the market practices that will develop under these new rules before considering this kind of expansion.

Bad Actor Disqualification

Regulation A+ provides for the disqualification of certain "bad actors" (Rule 262). The Regulation A+ bad actor provisions are substantially the same as the recently adopted bad actor provisions of Rule 506 (except that in the case of certain orders, the order must bar the covered person at the time of filing the Regulation A+ offering statement).

Under Regulation A+, offerings that would have been disqualified from reliance on old Regulation A will continue to be disqualified. Triggering events that were not previously included in the bad actor rules for old Regulation A that predate effectiveness of Regulation A+ do not cause disqualification, but instead need to be disclosed in a manner similar to Rule 506(e).

The SEC also adopted a reasonable care exception to the Regulation A+ disqualification provisions on a basis consistent with Rule 506(d), so that an issuer will not be disqualified from using the Regulation A+ exemption if the issuer can show that it did not know, and in the exercise of reasonable care could not have known, of the disqualifying event.

To continue reading this white paper, please click here.


1 Factors that May Affect Trends in Regulation A Offerings, GAO-12-839 (July 2012) (available at: http://www.gao.gov/assets/600/592113.pdf) (the "GAO Report").

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.


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.