Regulation A

Regulation A is an exemption from registration requirements—instituted by the Security Act of 1933—that applies to public offerings of securities. Companies utilizing the exemption are given distinct advantages over companies that must fully register.

Companies relying on a Regulation A exemption can offer and sell their securities to the public under two different tiers that have two different requirements—Tier 1 and Tier 2. Under both tiers, the issuer must file an offering statement on Form 1-A with the SEC. The offering statement includes the offering circular, which is the primary disclosure document for investors. Investors must be provided with, or given information on how to access, the offering circular. An issuer can only accept payment for the sale of its securities once its offering statement is qualified by the staff at the SEC. The SEC’s qualification, however, does not mean that the SEC has approved of the securities offering. The SEC also does not assess the accuracy or completeness of any of the offering documents or solicitation materials.

Under Tier 1, an issuer can raise up to $20 million in any 12-month period, including no more than $6 million on behalf of selling security holders that are affiliates of the issuer. In addition to qualification by SEC staff, companies offering securities pursuant to Tier 1 of Regulation A will also need to file and have their offering statements qualified by the state securities regulators in the states in which the issuer plans to sell its securities. Companies offering securities under Tier 1 do not have ongoing reporting requirements other than a final report on Form 1-Z on the status of the offering.

Under Tier 2, an issuer can raise up to $50 million in any 12-month period, including no more than $15 million on behalf of selling security holders that are affiliates of the issuer. Unlike Tier 1 offerings, the offering statement does not have to be qualified by a state securities regulator, and the issuer is subject to ongoing reporting requirements in the form of an annual report on Form 1-K, a semiannual report on Form 1-SA, and a current report on Form 1-U.