Securities and Exchange Commission Issues Final Rules on Regulation A+

April 13, 2015

On Wednesday, March 25, 2015, the Securities and Exchange Commission adopted final rules that will assist certain small businesses and startups in fundraising efforts by creating an updated exemption from registration for certain small issuers of securities. The final rules are commonly referred to as “Regulation A+”.

The Securities Act of 1933 and applicable state securities acts provide that in order to be sold to investors, securities must either be registered with the appropriate authorities or subject to an exemption from registration. Exemptions are often sought to avoid costly and time-consuming registration processes. The definition of “securities” for the purposes of the Act is defined broadly and includes debt and equity offerings.

The updated exemption from registration will allow those certain small issuers of securities to raise up to $50 million of securities within a 12-month period, subject to certain eligibility, disclosure and reporting requirements. The structure of an offering under Regulation A+ is being referred to as a “mini-IPO” and is subject to certain SEC filings, including an offering statement that must be reviewed and qualified by the SEC, disclosure of financial statements and the filing of ongoing reports. Also of note is that offerings under Regulation A+ are not limited solely to “accredited investors”, which substantially broadens the market of potential investors for a fundraising entity. Regulation A+ offerings can also be advertised publicly as there is no general prohibition on solicitation.

If you’re interested in getting into the weeds on the full text of the final rules, they can be found here.

Matt Landis is an attorney at Russell, Krafft & Gruber, LLP, in Lancaster, Pennsylvania. He received his law degree from Widener University and works regularly with business owners and entrepreneurs.