SEC is Offering Guidance Regarding Regulation A+

SEC is Offering Guidance Regarding Regulation A+

The speed with which the agency’s Division of Corporation Finance published responses to several frequently asked questions suggests that the new securities exemption may be living up to the buzz.

Regulation A+ is intended to provide small businesses with greater access to capital by expanding a little used exemption to SEC registration. Under the new regulations, businesses will be able to offer and sell up to $50 million of securities in a 12-month period, so long as they meet certain eligibility, disclosure and reporting requirements.

Tier 1 would consist of securities offerings of up to $20 million in a 12-month period, with no more than $6 million in offers by selling security-holders that are affiliates of the issuer. Meanwhile, Tier 2 would include securities offerings of up to $50 million in a 12-month period, with no more than $15 million in offers by selling security-holders that are affiliates of the issuer.

The Compliance and Disclosure Interpretations (C&DI’s) touch on a range of issues that have arisen regarding the expansion of Regulation A, including the submission of confidential documents, the use of social media to “test the waters,” and eligibility for the exemption.

Regulation A+ FAQ’s

Below is a brief sampling of the questions and answers provided by the SEC:

Can an issuer solicit interest and “test the waters” in a Regulation A offering on a platform that limits the number of characters or amount of text that can be included, thereby preventing the inclusion in such communication of the information required by Rule 255?

Yes. The staff will not object if the communication contains an active hyperlink to the required statements that otherwise satisfy Rule 255 and, where possible, prominently conveys, through introductory language or otherwise, that important or required information is provided through the hyperlink.

May a recently created entity choose to provide a balance sheet as of its inception date?

Yes, as long as the inception date is within nine months before the date of filing or qualification and the date of filing or qualification is no more than three months after the entity reached its first annual balance sheet date. The date of the most recent balance sheet determines which fiscal years, or period since existence for recently created entities, the statements of comprehensive income, cash flows and changes in stockholders’ equity must cover. When the balance sheet is dated as of inception, the statements of comprehensive income, cash flows and changes in stockholders’ equity will not be applicable.

Would a company with headquarters located within the United States or Canada, but whose business primarily involves managing operations that are located outside those countries, be considered to have its “principal place of business” within those countries for purposes of determining issuer eligibility under Regulation A?

Yes, such an issuer would be considered to have its “principal place of business” in the U.S. or Canada for purposes of determining issuer eligibility.