Series 14: 6.2.2. Small Issues: Regulation A

6.2.2. Small Issues: Regulation A

Small public offerings may bypass the normal registration process using Regulation A, sometimes known by the industry nickname Regulation A+. This exemption allows a U.S. or Canadian issuer with a legitimate business plan to sell up to $50 million in equity or debt securities over a one-year period. Reg A cannot be used by investment companies or disqualified issuers.

Regulation A offerings are divided into two tiers. Tier 1 allows a business to raise up to $20 million in a 12-month period, while Tier 2 allows up to $50 million in a 12-month period. Businesses that choose Tier 2 have to meet additional requirements, including:

• • Providing audited financial statements
• • Filing annual, semiannual, and current event reports
• • Limiting non-accredited investors to investments that do not exceed 10% of the greater of their annual income or net worth

A Regulation A offering can be a split offering. For a Tier 1 offering, up to $6 million of the offered securities can be securities already issued to affiliates of the issuer who wish to resell them as part of the Reg A offering. For Tier 2, the limit on securities already issued is $15 million.

A full registration statement is not required for a Regulation A offering. Instead, it requires an offering statement, which is similar to