The United States Court of Appeals, for the District of Columbia Circuit, has shot down an attempt by state regulators to turn back Title IV of the JOBS Act, also called Regulation A+.
The action filed against the SEC was brought to bear by the states of Montana and Massachusets. The ruling by Judge Karen L. Henderson, rejected the argument against Reg A+.
The SEC told the court last November;
“Regulation A [+] offers advantages for issuers and investors. Issuers do not incur the costs of preparing a registration statement and may sell their securities publicly to a broad range of investors, subject to limitations imposed by the rule challenged here. Amendments for Small and Additional Issues Exemptions Under the Securities Act (Regulation A), JA20, 22 (Jan. 23, 2014) (Proposing Release). Investors, in turn, enjoy more opportunity to participate in the capital markets with limited restrictions on resale, which enhances liquidity.”
The initiative by Massachusetts and Montana was viewed as a proxy action by the North American Securities Administrators Association (NASAA), the lobbying group that represents state securities regulators. Tier II of Regulation A+ removed state blue sky review allowing firms issuing securities under Reg A+ the ability to move forward without requesting approval from each individual state. In its previous incarnation, prior to the JOBS Act, state review effectively killed the exemption. Congress had demanded the SEC update the rules to create an effective process for firms to raise capital under Reg A.
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