Cowen and Company, a publicly traded (NASDAQ:COWN) diversified financial services firm, is looking at the potential benefits of leveraging Regulation A+. Title IV of the JOBS Act allowed the SEC to update old Reg A thus creating a securities exemption that has actually experienced some recent use. Reg A+, as it is called, is divided into Tier 1 and Tier 2 offers. Tier 1 has seen a tepid response as it remains encumbered by state Blue Sky Review. Tier 2, an exemption that allows issuers to raise up to $50 million, just saw its first approved filing by the SEC as Elio Motors seeks to raise $25 million.
Cowen and Company, participating at the SEC Government-Business Forum on Small Business Capital Formation, delivered a presentation that outlined the exemptions they presently utilize. Managing Director Christoper Weekes indicated that Reg A+ is an exemption they are currently considering. Weekes also gave some recommendations as to how to improve Reg A+ rules.
From his perspective, the following changes should be incorporated;
We propose that Tier 2 of Regulation A should apply to public micro cap companies, thereby enabling these companies to raise a sufficient amount of capital needed to grow their businesses in a cost effective manner.
- We believe it may be appropriate to consider conditioning the availability of tier 2 on a micro cap company being current for the past two years in its reporting obligations in the Exchange Act
- We propose that micro cap companies should be permitted to incorporate by reference their Exchange Act reports into their Offering Circular, thereby reducing the time and the cost of a Regulation A offering
- We propose that foreign private issuers should be allowed to conduct Tier 2 Regulation A offerings
- We propose that there be a safe-harbor from Section 12(a)(2) liability for research reports prepared by broker dealers on Regulation A issuers
- We believe Regulation A should go further and preempt state blue-sky laws for re-sales of Regulation A securities as well
While I would not hold my breath on any changes soon, it is meaningful that an established banking firm like Cowen is considering Reg A+ – an exemption that allows non-accredited investors the option to invest in earlier stage companies.
The presentation is embedded below.
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