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Journal entry — SEC adopts final rules amending Regulation A

Published on: Mar 27, 2015

This week, the SEC adopted final rules1 that amend and expand Regulation A, which exempts certain offerings from registration under the Securities Act of 1933. The rules implement a mandate in Section 401 of the Jumpstart Our Business Startups (JOBS) Act2 to ease smaller companies’ access to capital.

Under Regulation A before the amendments, a company could offer up to $5 million of securities in a 12-month period, and no more than $1.5 million of those securities could be offered by the company’s securityholders.

The new rules enable a company to offer and sell up to $50 million of securities in a 12-month period if it meets specified eligibility, disclosure, and reporting requirements, and they create two tiers of offerings under Regulation A:

  • “Tier 1: annual offering limit of $20 million, including no more than $6 million on behalf of selling securityholders that are affiliates of the issuer.”
  • “Tier 2: annual offering limit of $50 million, including no more than $15 million on behalf of selling securityholders that are affiliates of the issuer.”

The rules establish offering and reporting requirements for issuers under both tiers; however, such requirements are more extensive for Tier 2 issuers, which are required to provide audited financial statements in their offering documents and to file annual, semiannual, and current reports with the SEC.

The rules also “preserve, with some modifications, existing provisions regarding issuer eligibility, offering circular contents, testing the waters, and ‘bad actor’ disqualification.”

The final rules will become effective 60 days after publication in the Federal Register.

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1 SEC Final Rule Release No. 33-9741, Amendments to Regulation A.

2 For more information about the JOBS Act, see the SEC’s Web site.

SEC adopts final rules amending Regulation A Image

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