Chapter 1 — Introduction to Initial Public Offerings

1.8 Offerings Made in Accordance With Regulation A

Regulation A, as amended in 2015 (also referred to Reg A or Reg A+), provides an exemption from the ordinary requirements of the Securities Act. This exemption allows U.S. and Canadian companies to raise up to $75 million in a 12-month period by issuing certain types of securities, including equity securities. Regulation A requires that certain disclosure documents be submitted via EDGAR and allows for the confidential review of offering documents. Two tiers of offerings are provided under Regulation A:

Tier 1, which consists of securities offerings of up to $20 million in any 12-month period, including no more than $6 million on behalf of the selling securities holders that are affiliates.
Tier 2, which consists of securities offerings of up to $75 million in any 12-month period, including no more than $22.5 million on behalf of the selling securities holders that are affiliates.

For offerings of up to $20 million, the issuer can elect whether to proceed under Tier 1 or Tier 2. All issuers that pursue offerings in accordance with Regulation A are required to submit an offering statement on EDGAR that may be reviewed by the SEC staff. Before an issuer can begin selling securities, its offering statement must be “qualified” by the SEC and the issuer must receive a “notice of qualification,” which is similar to a notice of effectiveness in registered offerings. The offering statement includes a disclosure document and financial statements. While disclosures required in the offering statement are “scaled” or reduced to be in line with the size of the company, many are similar in nature to disclosures required under Form S-1.

Tier 2 issuers are required to include audited financial statements in their offering documents and to file annual, semiannual, and current reports with the Commission on an ongoing basis.10 In accordance with the form requirements for Regulation A, separate forms are used for offerings (Form 1-A) and ongoing reporting requirements (Form 1-K, Form 1-SA, and Form 1-U for annual, semiannual, and current reports, respectively). Except for securities that will be listed on a national securities exchange upon qualification, purchasers in Tier 2 offerings must be either accredited investors or be subject to certain limitations on their investment. For more information about Regulation A offerings, see the “Amendments to Regulation A: A Small Entity Compliance Guide” page on the SEC’s Web site.

Footnotes

While a Regulation A Tier 1 issuer must provide financial statements in its offering document, such financial statements do not need be audited unless the issuer’s financial statements were already audited for other purposes. Regulation A Tier 1 issuers are not subject to ongoing reporting requirements.