SEC to Allow Reporting Companies to Use Reg A+ Securities Exemption to Raise Capital

Long requested by Reg A+ fans, the Securities and Exchange Commission (SEC) has approved final rules that will allow reporting companies to utilize the Regulation A (frequently referenced as Reg A+) exemption to raise capital.

The amendments to Reg A+ will become effective upon publication in the Federal Register.

Regulation A was improved under Title IV of the JOBS Act of 2012 and is viewed as one of three crowdfunding options for firms to raise capital online. Currently, issuers that are reporting companies, firms that trade on a regulated exchange, may not use Reg A+.

Reg A+ has also become popular with aspiring security token issuers, although not a single security token offering under the exemption has been qualified by the SEC.

SEC Chairman Jay Clayton stated:

“Regulation A provides an exemption from registration under the Securities Act for offerings of securities up to $50 million in a 12-month period. The amended rules will provide reporting companies additional flexibility when raising capital.”

The amendments, mandated by the Economic Growth, Regulatory Relief, and Consumer Protection Act, will enable companies that are subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 to use Regulation A. The amendments also permit such reporting companies to meet their Regulation A ongoing reporting obligations through their Exchange Act reports.

The SEC has provided a Fact Sheet for updated Reg A+ Rules

Action

Regulation A provides an exemption from registration under the Securities Act of 1933 for offerings of securities up to $50 million in a 12-month period.  Currently, Regulation A is not available to companies that are Exchange Act reporting companies. The Economic Growth, Regulatory Relief, and Consumer Protection Act, enacted earlier this year, required the Commission to revise Regulation A to allow reporting companies to use the exemption.

The final rules amend Securities Act Rule 251 to permit companies subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act to use Regulation A. The final rules also revise Securities Act Rule 257 to provide that companies that meet the reporting requirements of the Exchange Act will be deemed to have met the reporting requirements of Regulation A.

In connection with these amendments, the Commission also made other conforming changes to Regulation A and Form 1-A.

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