On March 25, the SEC adopted new rules that update and expand Regulation A, an existing exemption from SEC registration for small companies seeking to raise money in the public markets. The new rules, which are referred to as “Regulation A+,” create two tiers of securities offerings:
| • | Tier 1, which consists of public offerings up to $20 million in a 12-month period, with not more than $6 million in offers by selling security-holders that are affiliates of the issuer; and |
| • | Tier 2, for public offerings up to $50 million in a 12-month period, with not more than $15 million in offers by selling security-holders that are affiliates of the issuer. |
Most importantly for companies, the new rules provide for the preemption of state Blue Sky laws in Tier 2 offerings. Tier 1 offerings will be subject to federal and state registration and qualification requirements, but for state qualification issuers may take advantage of a coordinated review program developed by the North American Securities Administrators Association (NASAA).
In addition, Regulation A+ securities purchased by non-affiliates are free trading from day one. So, an ongoing secondary market can develop for investors, leading to lower capital costs for issuers.