Regulation A+ Tier 2 Reporting Obigations – Going Public Lawyer


Regulation A+ Ongoing Reporting

Regulation A+’s new rules provide investors with more investment choices and issuers with more capital raising options during their going public transactions. The rules adopting Regulation A+ are mandated by Title IV of the Jumpstart Our Business Startups (JOBS) Act.

Regulation A+ expands existing Regulation A dramatically opening new doors for capital raising for smaller companies.  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 stockholders required by the Financial Industry Regulatory Authority while allowing the issuer to raise initial capital.  The exemption provides for two distinct offering exemptions.  Tier 1 provides an exemption from SEC registration for offerings of up to $20 million. Tier 2 exempts offerings up to $50 million.

One of the most notable differences between the two Regulation A+ tiers is that issuers that conduct a Tier 2 offering will become subject to ongoing SEC reporting obligations, though such obligations are significantly less burdensome than those to that apply to SEC reporting issuers filing Form S-1 Registration Statements.

Presently, issuers that conduct Both Tier 1 & Tier 2 Regulation A offerings must file a Form 2-A with the SEC every six months to report sales in the offering, and submit a final Form 1-A to the SEC within 30 days after the offering is complete.  Regulation A+ eliminated Form 2-A and created Form 1-Z.

Form 1-A requires information about the amount of securities qualified and sold, as well as the price, fees, and net proceeds.

Issuers conducting Regulation A, Tier 2 offering must report the same information on Form 1-Z or, depending on when the offering is terminated, in their annual report on Form 1-K. Issuers in Regulation A, Tier 2 offerings become subject to ongoing SEC reporting obligations.

These ongoing requirements include: (i) annual reports on new Form 1-K, which will include the same information required in a Form 1-A, and Regulation A offering circular other than the offering-specific information; (ii) semiannual reports on new Form 1-SA which includes financial statements and an MD&A; (iii) current information reports on the new Form 1-U which reports “fundamental changes,”  and other specific events including bankruptcy or receivership, non-reliance on previously issued financial statements, audit report or interim review, changes in control, departure of certain executive officers and unregistered sales of 10% or more of outstanding equity securities; and (iv) depending on the financial statements included in the Form 1-A and the timing until the next annual or semiannual report, special financial reports on new Forms 1-K and 1-SA are required for certain gaps in financial reporting periods.

All Regulation A+ filings must be made through the SEC’s EDGAR database.

A Tier 2 issuer becomes subject to Regulation A reporting obligations if certain conditions are met. These include: (i) that the securities of each class covered by the Form 1-A offering statement be held of record by less than 300 persons (1,200 persons for banks and bank holding companies), (ii) offers and sales under the Form 1-A offering statement are not ongoing, and (iii) the issuer has complied with its ongoing reporting obligations. The issuer can suspend its ongoing reporting  obligations after the fiscal year in which its Form 1-A offering statement is qualified if it has filed an annual report for that fiscal year using Form 1-Z.

In addition, an issuer’s Regulation A reporting obligations will be automatically suspended if the issuer becomes subject to the expansive periodic reporting requirements imposed by the Securities Exchange Act.

For further information Regulation A+, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real South, Suite 202 North, Boca Raton, FL, (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 Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855
www.SecuritiesLawyer101.com