Tweeting Your Regulation A+ Offering – Going Public Attorneys
SEC Provides Guidance For Twitter In Regulation A+ Offerings- Testing the Waters
On June 19, 2015, new rules expanding Regulation A became effective. The expanded rules are commonly known as Regulation A+. The new rules which were promulgated under the Jumpstart Our Business Startups Act (JOBS Act), create two Tiers of exempt offerings, both of which allow securities to be offered and sold to the general public. Tier 1 offerings allow the issuer to offer and sell up to $20 million in a 12-month period. Tier 1 offerings do not preempt state Blue Sky laws. Tier 2 offerings allow the issuer to raise up to $50 million in a 12-month period. A notable advantage of Tier 2 over Tier 1 offerings is preemption of state Blue Sky laws. As discussed below, the new rules allows issuers to determine investor interest known as “Testing the Waters” before conducting their Regulation A+ offerings.
The Testing the Waters provisions of Regulation A+ allow a company to publish statements about its offering in determining investor interest right up to the time of SEC qualification of their Form 1-A Offering Circular. While there are no limitations to the type of communications used, the company must include the language set forth in Rule 255 under all circumstances. Once its Offering Statement is “qualified” by the SEC, it may only use its final Offering Circular to make written offers.
The SEC recently provided guidance in a Compliance and Disclosure Interpretation (CD&I) about the use of hyperlinks in social media communications when Testing the Waters in contemplated Regulation A+ offerings.
The SEC set forth several conditions that must be followed when using social media to promote a Regulation A+ offering on platforms that have limitations on the number of characters that may be used such as Twitter. Under these circumstances, the tweet must provide an active hyperlink to the required statements satisfying Rule 255 and, where possible, the tweet must prominently convey, through introductory language or otherwise, that important or required information is available at the hyperlink provided. The full CD&I is found at Question 182.09 set forth below:
Question: Can an issuer solicit interest (or “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?
Answer: Yes. The staff will not object to the use of an active hyperlink to satisfy the requirements of Rule 255 in the following limited circumstances:
- The electronic communication is distributed through a platform that has technological limitations on the number of characters or amount of text that may be included in the communication;
- Including the required statements in their entirety, together with the other information, would cause the communication to exceed the limit on the number of characters or amount of text; and
- 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.
Note the SEC expressly stated that where a communication is capable of including the entirety of the required statements, along with the other information, without exceeding the applicable limit on number of characters or amount of text, the use of a hyperlink to the required statements would be inappropriate. As such, the use of hyperlinks should not be used when there is no limit on the amount of text that maybe used in a social media communication.
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