On December 19, as directed by Congress, the Securities and Exchange Commission adopted amendments to Regulation A that will enable companies that are subject to the reporting requirements of Securities Exchange Act of 1934 to use Regulation A. The amendments also permit these reporting companies to meet their Regulation A ongoing reporting obligations through their Exchange Act reports. Regulation A provides an exemption from the registration requirements of the Securities Act for offers and sales of securities up to $20 million, for Tier 1 offerings, or up to $50 million, for Tier 2 offerings. Under the current rules, Regulation A is not available to companies subject to the ongoing reporting requirement. Regulation A offerings are available only to companies organized in and with their principal place of business in the United States or Canada.
Some of the benefits of a Regulation A offering for reporting companies are:
(1) For securities not listed on a national exchange, use of Tier 2 will eliminate the need to comply with state blue sky laws, thereby expedite the offering process;
(2) Disclosures are not subject to Section 11 liability;
(3) There is a safe harbor from integration of the Regulation A offering with any prior offers or sales of securities, as well as with any subsequent offers or sales of securities registered under the Securities Act; and
(4) Regulation A offerings are generally not subject to the gun-jumping provisions of Section 5(c) due to the ability to test the waters under Rule 255
The amendments to Regulation A will become effective upon publication in the Federal Register, which should be published soon. The adopting release is available here: Adopting Release
