How Do I Use Regulation A+ to Go Public? Sponsoring Market Maker Attorneys


Regulation A+ Lawyers

Do I Need A Sponsoring Market Maker To Get A Ticker After My Regulation A+ Offering Is Qualified?

Regulation A+’s new rules provide investors with more investment choices and issuers with more capital raising options during their going public transactions. Some confusion has arisen about whether SEC qualification of a Regulation A+ offering will result in the assignment of a stock ticker or trading symbol.  Companies conducting Regulation A+ offerings must submit Form 1-A to to the Securities and Exchange Commission (SEC). Form 1-A is subject to SEC review and the SEC may issue comments to the filing. Once the SEC is satisfied that the required disclosures comply with the securities laws, it will qualify the offering and the company can offer and sell the securities covered by the Form 1-A. The Regulation A+ qualification process is similar to the SEC comment process that applies to registration of securities offerings on Form S-1

Regulation A+ expands existing Regulation A, dramatically, opening new doors for capital raising for smaller issuers. Regulation A+ offerings can be used in combination with direct public offerings and initial public offerings as part of a Going Public Transaction.  The exemption simplifies the process of obtaining the seed stockholder required by the Financial Industry Regulatory Authority (FINRA) while allowing the issuer to raise initial capital. Upon qualification of a Regulation A+ offering, companies seeking to obtain a stock trading symbol must locate a sponsoring market maker to file a Form 211 with FINRA.

Q. Can Sponsoring Market Makers Be Paid To Submit 211 Filings?

A. No. Sponsoring Market Makers generally earn money by buying stock at a lower price than the price at which they sell it, or selling the stock at a higher price then they purchase it back. Despite the amount of work involved in the 211 process, FINRA prohibits market makers from charging issuers fees for filing a Form 211. 

Q. Do Sponsoring Market Makers have To Be Registered With FINRA?

A. Yes. A Sponsoring Market Maker must be a FINRA registered broker-dealer firm that accepts the risk of holding a certain number of shares of a particular security in order to facilitate trading in that security.  Broker-dealers must register with FINRA to act as a Market Maker of a security.

Q. Who Regulates Sponsoring Market Makers?

ASponsoring Market Maker activities are regulated by the Securities and Exchange Commission (“SEC”) as well as by FINRA. FINRA oversees registration, education and testing of market makers, broker-dealers and registered representatives.  FINRA rules governing Sponsoring Market Makers in going public transactions involve a variety of criteria.

Q. What Is SEC Rule 15c2-11?

A. SEC Rule 15c2-11 requires that current public information be made available to investors. This information is initially provided in going public transactions by the Sponsoring Market Maker when it submits a Form 211 and 15c2-11 application with FINRA for a ticker symbol assignment. FINRA and SEC Rule 15c2-11 require that the Sponsoring Market Maker have a reasonable basis for believing that the information provided by the company in its Form 211 is accurate and from reliable sources.  As such, the Sponsoring Market Maker’s preparation of proper disclosures is critical to the going public transaction.

Q. Does FINRA Comment On Form 211’s?

A. Yes. In a going public transaction, a Sponsoring Market Maker must submit a Form 211 application to FINRA to apply for the company’s trading symbol, and it must respond to FINRA’s comments to the application. Once FINRA is satisfied that the disclosures meet the requirements of SEC Rule 15c2-11, a trading symbol is assigned and the Sponsoring Market Maker can quote the company’s securities.

Q. What Is The Form 211 Exclusivity Period For Sponsoring Market Makers?

A. For the first 30 days after a ticker symbol assignment in a going public transaction, only the Sponsoring Market Maker who filed the Form 211 can publish quotes of the company’s securities.  Thereafter, other market makers can publish their own quotes.

Q. Will The Sponsoring Market Maker Require A Company To Have A Certain Number Of Stockholders?

A. In order to obtain FINRA approval of the Form 211, the Company going public must have enough shareholders for the sponsoring market maker to demonstrate that an active trading market can be established. This means that prior to filing a Form 211 the company should have at least 20 non-affiliate shareholders who paid cash consideration for their shares, and have owned those shares for at least 12 months.  The private company seeking to go public should have at least 1 million shares outstanding, of which at least 250,000 are free trading shares.

For further information about Sponsoring Market Makers, please contact Brenda Hamilton, Securities & Regulation A+ Lawyer at (561) 416-8956, or by email at [email protected].  This securities law Q & A is provided as a general or informational service to clients and friends of Hamilton & Associates Law Group, P.A. and should not be construed as, and does not constitute legal advice on any specific matter, nor does this message create an attorney-client relationship.  Please note that prior results discussed herein do not guarantee similar outcomes.

Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Going Public &  Regulation A+ Lawyers
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855