The North American Securities Administrators Association ("NASAA") requested comments on a proposed model statute and model rule that would permit "testing the waters" in Tier 1 offerings conducted under Regulation A under the Securities Act. Comments are due by January 6, 2017.
As explained in the NASAA release, the JOBS Act provided for preemption of state registration requirements where the securities are either (i) offered or sold on a national securities exchange, or (ii) offered or sold to "qualified purchasers." The SEC amendments to Regulation A – implementing this JOBS Act provision – provided for two tiers of offerings: Tier 1 offerings of up to $20 million, and Tier 2 offerings of up to $50 million.
Issuers are permitted to solicit indications of interest in a "testing the waters" campaign in either a Tier 1 or Tier 2 offering prior to making any filing with the SEC. A significant difference to note is that Tier 2 offerings are made to "qualified purchasers" (which preempts the states from requiring registration of these offerings), and Tier 1 offerings are subject to state requirements, which can vary widely.
NASAA stated that it believes the campaign can be a valuable exercise for issuers that are interested in conducting an offering, explaining:
"[Testing the waters] can provide an issuer with information about whether anyone is interested in investing in its securities, what the appropriate pricing of those securities may be, and where interested investors may reside."
NASAA acknowledged the validity of concerns about regulatory oversight in particular state jurisdictions, but said "prior regulatory review of testing the waters materials serves to mitigate or eliminate such risks."
Public comments are also requested on the proposed Solicitation of Interest form that would be required to be filed with state securities regulators.
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