No Easy A: SEC Proposes Rules For Regulation A+

by Pepper Hamilton LLP

In the last of its major rulemaking proposals under the JOBS Act, on December 18, 2013, the U.S. Securities and Exchange Commission (SEC) voted to publish proposed rules to modify and develop Regulation A, the so-called (and little-used) “small offering exemption.” The new proposal is required by the Jumpstart Our Business Startups Act of 2012 (JOBS Act) and will be open for a 60-day comment period. The proposed rules would modify and expand Regulation A, which currently exempts from SEC registration offerings of securities of up to $5 million within a 12-month period. The new Regulation A will increase this maximum to $50 million, and allow for the first time for state securities law pre-emption in certain circumstances when offering more than $5 million and following the Tier 2 protocol, as described below.

Congress’s goal in requiring expansion of Regulation A, dubbed by many market observers as Regulation A+, was to enable small businesses to raise capital without SEC registration and as a viable, potentially more compelling alternative to accredited investors Regulation D private placements and public crowdfunding.1 Like public crowdfunding, Regulation A securities are not private placements and therefore are not restricted. Also like public crowdfunding, current public companies cannot use Regulation A to raise capital.

The Two Tiers of Regulation A+ (and the Potential Third Tier)

Under the new proposed rules, Regulation A+ would allow for an exemption from registration for two tiers of offering:

  • Tier 1: Up to $5 million in any 12-month period, including no more than $1.5 million sold by selling shareholders. Tier 1 offerings would still require approval from state regulators (i.e., there is no federal securities law pre-emption for these smaller offerings).
  • Tier 2: Up to $50 million in any 12-month period, including no more than $15 million sold by selling shareholders. Tier 2 offerings would be exempt from state securities laws and the burdens of preparing filings and obtaining approvals in numerous states, but are subject to investment limitations, enhanced disclosure and ongoing reporting obligations.
    Additionally, each tier would have modified issuer eligibility requirements, content and filing requirements for offering statements and ongoing reporting requirements for issuers.

Scope of Regulation A+

Certain issuers would be excluded from being able to use Regulation A+, including current public filers (and those who were public filers in the past two years), and certain “bad boys” - issuers that are or have been subject to any SEC order pursuant to Section 12(j) of the Securities Exchange Act of 1934, as amended, entered within five years before the filing of the offering statement. Additionally, asset-backed securities (as defined in Regulation AB) would be excluded as eligible securities and, in a Tier 2 offering, an investor would be limited to investing no more than 10 percent of the greater of annual income or net worth.

Confidential Submissions and 'Testing the Waters' Materials

You would be forgiven if you did a double-take when reading the Regulation A+ release and thought you had stumbled on an IPO frequently asked questions list. As with current Regulation A, an “offering circular” must be prepared and filed with the SEC. The SEC can review and provide comments, similar to the IPO process. As with IPOs for “emerging growth companies,” the SEC will allow confidential filings and reviews for Regulation A+ offerings. The offering circular, which must be publicly filed not later than 21 days before qualification (also similar to the IPO public S-1/F-1 filing 21 days before roadshow standard), modifies the structure allowable under Regulation A, and allows for a narrative disclosure format for the offering circular. Offering circulars will look more like prospectuses and less like RFP responses.

Qualification of the offering circular requires action by the SEC through an order. All issuers will need to file balance sheets for the two most recently completed fiscal year ends (or applicable shorter periods of existence) and Tier 2 offerings will require the inclusion of audited financial statement in their offering circulars.

Regulation A+ would also allow (and in some cases require) modern filing conveniences, such as electronic filing and “access equals delivery” delivery requirements.

Also similar to IPOs for “emerging growth companies,” under both Tier 1 and Tier 2 offerings, issuers would be permitted to “test the waters” with prospective investors before and/or after the filing of the offering circular. However, any materials used in testing the waters after publicly filing the offering circular should be preceded by or be accompanied by a preliminary offering circular or contain a notice providing instructions regarding how potential investors may obtain the most current preliminary offering circular. Remember that as “exempt securities,” Regulation A offerings are exempt from the “no offers until filing” requirements of Section 5 of the Securities Act.

Ongoing Reporting and State Securities Laws Pre-Emption

Issuers conducting a Tier 1 offering will be required to electronically file an exit report (on Form 1-Z) with the SEC no later than 30 calendar days after termination or completion of a qualified Regulation A offering (to provide information about sales in such offerings and to update certain issuer information). No other ongoing reporting is required of Tier 1 issuers. State laws must be observed as they are today.

Issuers conducting a Tier 2 offering must electronically file with the SEC annual, semi-annual and current event updates. Tier 2 issuers also may be required to provide special financial reports to provide information to investors in between the time the financial statements are included in its Form 1-A and the first periodic report after qualification of the offering statement. Tier 2 issuers may exit the Regulation A reporting regime, after completing reporting for the fiscal year in which an offering statement was qualified, by filing an exit form, provided such securities of each class to which the offering statement relates are held of record by fewer than 300 persons (also the public company deregistration standard), and offers or sales made in reliance on a qualified Regulation A offering statement are not ongoing.

State securities law registration and qualification requirements for securities offered or sold to “qualified purchasers” (defined as all offerees of securities in a Regulation A offering and all purchasers in a Tier 2 offering) are pre-empted.

Potential Third Tier

In connection with the proposed rules, an SEC commissioner has stated that, subject to public comments, if any, and further consideration by the SEC, the final rules may include an intermediate third tier, which may cover Regulation A offerings of between $10 million to $15 million, pre-empt state blue sky laws and have less-extensive continuing disclosure obligations than Tier 2 offerings. Maybe this will be called Tier 1½.

Putting it All Together: Regulation A+, Public Crowdfunding and Regulation D Rule 506

The SEC’s press release fact sheet for the proposed rules and the proposed rule amendments release identify and recognize the rarity of Regulation A offerings compared to Regulation D exemptions and registered offerings, and that the issues in cost and complexity make Regulation A less practical than other Securities Act exemptions, such as Regulation D, and registered offerings.2

Regulation A

Regulation D
(of up to $5 million)

Public Offerings
(of up to $5 million)

From 2009 through 2012

19 qualified offerings for a total offering amount of approx. $73 million

Approx. 27,000 offerings for a total offering amount of approx.$25 billion

373 offerings for a total offering amount of approx. $840 million

In 2012

8 qualified offerings for a total offering amount of approx. $34.5 million

Approx. 7,700 offerings for a total offering amount of approx. $7 billion

52 offerings for a total offering amount of approx. $132 million

In considering the use of Regulation A+, eligible issuers will likely consider: (A) a Regulation A+ cost-benefit analysis, relating the benefit of an up to $50 million capital raise in a 12-month period (for Tier 2) against the cost for the ongoing filing and compliance requirements of Regulation A+, and (B) a comparative analysis against potential additional exemptions allowable by current securities laws, including public crowdsourcing and Regulation D. We take a closer look at Regulation A+ (Tiers 1 and 2) vs. public crowdfunding vs. Regulation D private placements below (checkboxes indicate our view of most preferable or least restrictive or costly):


Public Crowdfunding

Regulation A+
(Tier 1)

Regulation A+
(Tier 2)

Regulation D Rule 506 (4(a)(2))

Maximum Total Raised

$1 million per 12 month period

$5 million per 12 month period; including up to $1.5 million for selling shareholders

$50 million per 12 month period; including up to $15 million for selling shareholders



Number of Investors

Unlimited but subject to maximum total raised





Unlimited accredited investors; up to 35 non-accredited investors unless soliciting (if soliciting- 0 non-accreds)


Investment Per Investor

Restricted by income/net worth



Restricted by income/net worth



Investor Disclosure

Required, must be filed with SEC

Required, must be filed with SEC

Required, must be filed with SEC

Not required if all accredited investors; Form D filing proposed


Intermediary Required

Yes – broker/dealer or funding portal







Subject to ongoing SEC reporting following raise

Yes, at least annually, possibly more frequently

No; as long as exit report is filed not later than 30 calendar days after termination or completion

Yes; audited financials filed annually; annual, semi-annual, current reporting required

May file exit report, so long as issuer meets certain qualifications



Disclosure Liability

Yes, full disclosure liability with a knowledge exception

Yes, full disclosure liability with a knowledge exception

Yes, full disclosure liability with a knowledge exception

Only anti-fraud liability


Shares restricted

Yes, for one year





Yes, for public companies most can sell under Rule 144 after six months

State Filing

Possibly, depends on future rules by state

Not exempt from state securities law registration and qualification

Exempt from state securities law registration and qualification if sold to “qualified purchasers,” defined to include all offerees in a Regulation A offering and all purchasers in a Tier 2 offering

Usually no if only offering to accredited investors


Advertising and general solicitation

Not allowed

"Testing the waters" permitted before filing; general solicitation permitted after qualification


"Testing the waters" permitted before filing; general solicitation permitted after qualification


Allowed if sales are made only to accredited investors and issuer takes reasonable steps to verify accredited status

Can public cos., foreign issuers, investment companies and exempt inv. companies issue


Yes, but limited

Yes, but limited



The comment period for the proposed rules will expire 60 days after their publication in the Federal Register.

Pepper Points

  • The new rules create a two-tier system under Regulation A+, each with different modified requirements for eligibility, content and filing of offering statements and ongoing reporting requirements for issuers; the first tier allowing for up to $5 million in any 12-month period and the second tier allowing for up to $50 million in any 12-month period.
  • Subject to public comment, the SEC may consider a potential third (intermediary) tier, with similarly intermediary requirements for eligibility, content and filing of offering statements and ongoing reporting requirements for issuers.
  • Public comments will likely identify whether the balance struck by the SEC in increasing the amount of money allowed to be raised under Regulation A+ and the requirements of state securities laws/federal securities laws; ongoing filing, compliance and reporting requirements; and eligibility allowances is adequate.
  • Time will tell whether the final rules in the implementation of Regulation A+ are successful in enticing small companies to use Regulation A+ as opposed to alternative public crowdfunding or Regulation D exemptions for raising capital.


1 For more information about Regulation D and recently proposed rules, please see:

For more information about crowdfunding and recently proposed crowdfunding rules, please see:; and

2 Information regarding recent IPO trends can be found at:

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Pepper Hamilton LLP | Attorney Advertising

Written by:

Pepper Hamilton LLP

Pepper Hamilton LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide

JD Supra Privacy Policy

Updated: May 25, 2018:

JD Supra is a legal publishing service that connects experts and their content with broader audiences of professionals, journalists and associations.

This Privacy Policy describes how JD Supra, LLC ("JD Supra" or "we," "us," or "our") collects, uses and shares personal data collected from visitors to our website (located at (our "Website") who view only publicly-available content as well as subscribers to our services (such as our email digests or author tools)(our "Services"). By using our Website and registering for one of our Services, you are agreeing to the terms of this Privacy Policy.

Please note that if you subscribe to one of our Services, you can make choices about how we collect, use and share your information through our Privacy Center under the "My Account" dashboard (available if you are logged into your JD Supra account).

Collection of Information

Registration Information. When you register with JD Supra for our Website and Services, either as an author or as a subscriber, you will be asked to provide identifying information to create your JD Supra account ("Registration Data"), such as your:

  • Email
  • First Name
  • Last Name
  • Company Name
  • Company Industry
  • Title
  • Country

Other Information: We also collect other information you may voluntarily provide. This may include content you provide for publication. We may also receive your communications with others through our Website and Services (such as contacting an author through our Website) or communications directly with us (such as through email, feedback or other forms or social media). If you are a subscribed user, we will also collect your user preferences, such as the types of articles you would like to read.

Information from third parties (such as, from your employer or LinkedIn): We may also receive information about you from third party sources. For example, your employer may provide your information to us, such as in connection with an article submitted by your employer for publication. If you choose to use LinkedIn to subscribe to our Website and Services, we also collect information related to your LinkedIn account and profile.

Your interactions with our Website and Services: As is true of most websites, we gather certain information automatically. This information includes IP addresses, browser type, Internet service provider (ISP), referring/exit pages, operating system, date/time stamp and clickstream data. We use this information to analyze trends, to administer the Website and our Services, to improve the content and performance of our Website and Services, and to track users' movements around the site. We may also link this automatically-collected data to personal information, for example, to inform authors about who has read their articles. Some of this data is collected through information sent by your web browser. We also use cookies and other tracking technologies to collect this information. To learn more about cookies and other tracking technologies that JD Supra may use on our Website and Services please see our "Cookies Guide" page.

How do we use this information?

We use the information and data we collect principally in order to provide our Website and Services. More specifically, we may use your personal information to:

  • Operate our Website and Services and publish content;
  • Distribute content to you in accordance with your preferences as well as to provide other notifications to you (for example, updates about our policies and terms);
  • Measure readership and usage of the Website and Services;
  • Communicate with you regarding your questions and requests;
  • Authenticate users and to provide for the safety and security of our Website and Services;
  • Conduct research and similar activities to improve our Website and Services; and
  • Comply with our legal and regulatory responsibilities and to enforce our rights.

How is your information shared?

  • Content and other public information (such as an author profile) is shared on our Website and Services, including via email digests and social media feeds, and is accessible to the general public.
  • If you choose to use our Website and Services to communicate directly with a company or individual, such communication may be shared accordingly.
  • Readership information is provided to publishing law firms and authors of content to give them insight into their readership and to help them to improve their content.
  • Our Website may offer you the opportunity to share information through our Website, such as through Facebook's "Like" or Twitter's "Tweet" button. We offer this functionality to help generate interest in our Website and content and to permit you to recommend content to your contacts. You should be aware that sharing through such functionality may result in information being collected by the applicable social media network and possibly being made publicly available (for example, through a search engine). Any such information collection would be subject to such third party social media network's privacy policy.
  • Your information may also be shared to parties who support our business, such as professional advisors as well as web-hosting providers, analytics providers and other information technology providers.
  • Any court, governmental authority, law enforcement agency or other third party where we believe disclosure is necessary to comply with a legal or regulatory obligation, or otherwise to protect our rights, the rights of any third party or individuals' personal safety, or to detect, prevent, or otherwise address fraud, security or safety issues.
  • To our affiliated entities and in connection with the sale, assignment or other transfer of our company or our business.

How We Protect Your Information

JD Supra takes reasonable and appropriate precautions to insure that user information is protected from loss, misuse and unauthorized access, disclosure, alteration and destruction. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. You should keep in mind that no Internet transmission is ever 100% secure or error-free. Where you use log-in credentials (usernames, passwords) on our Website, please remember that it is your responsibility to safeguard them. If you believe that your log-in credentials have been compromised, please contact us at

Children's Information

Our Website and Services are not directed at children under the age of 16 and we do not knowingly collect personal information from children under the age of 16 through our Website and/or Services. If you have reason to believe that a child under the age of 16 has provided personal information to us, please contact us, and we will endeavor to delete that information from our databases.

Links to Other Websites

Our Website and Services may contain links to other websites. The operators of such other websites may collect information about you, including through cookies or other technologies. If you are using our Website or Services and click a link to another site, you will leave our Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We are not responsible for the data collection and use practices of such other sites. This Policy applies solely to the information collected in connection with your use of our Website and Services and does not apply to any practices conducted offline or in connection with any other websites.

Information for EU and Swiss Residents

JD Supra's principal place of business is in the United States. By subscribing to our website, you expressly consent to your information being processed in the United States.

  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
    • Right of Access/Portability: You can ask to review details about the information we hold about you and how that information has been used and disclosed. Note that we may request to verify your identification before fulfilling your request. You can also request that your personal information is provided to you in a commonly used electronic format so that you can share it with other organizations.
    • Right to Correct Information: You may ask that we make corrections to any information we hold, if you believe such correction to be necessary.
    • Right to Restrict Our Processing or Erasure of Information: You also have the right in certain circumstances to ask us to restrict processing of your personal information or to erase your personal information. Where you have consented to our use of your personal information, you can withdraw your consent at any time.

You can make a request to exercise any of these rights by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

  • Timeframe for retaining your personal information: We will retain your personal information in a form that identifies you only for as long as it serves the purpose(s) for which it was initially collected as stated in this Privacy Policy, or subsequently authorized. We may continue processing your personal information for longer periods, but only for the time and to the extent such processing reasonably serves the purposes of archiving in the public interest, journalism, literature and art, scientific or historical research and statistical analysis, and subject to the protection of this Privacy Policy. For example, if you are an author, your personal information may continue to be published in connection with your article indefinitely. When we have no ongoing legitimate business need to process your personal information, we will either delete or anonymize it, or, if this is not possible (for example, because your personal information has been stored in backup archives), then we will securely store your personal information and isolate it from any further processing until deletion is possible.
  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at:

JD Supra Cookie Guide

As with many websites, JD Supra's website (located at (our "Website") and our services (such as our email article digests)(our "Services") use a standard technology called a "cookie" and other similar technologies (such as, pixels and web beacons), which are small data files that are transferred to your computer when you use our Website and Services. These technologies automatically identify your browser whenever you interact with our Website and Services.

How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

  1. Improve the user experience on our Website and Services;
  2. Store the authorization token that users receive when they login to the private areas of our Website. This token is specific to a user's login session and requires a valid username and password to obtain. It is required to access the user's profile information, subscriptions, and analytics;
  3. Track anonymous site usage; and
  4. Permit connectivity with social media networks to permit content sharing.

There are different types of cookies and other technologies used our Website, notably:

  • "Session cookies" - These cookies only last as long as your online session, and disappear from your computer or device when you close your browser (like Internet Explorer, Google Chrome or Safari).
  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit
  • New Relic - For more information on New Relic cookies, please visit
  • Google Analytics - For more information on Google Analytics cookies, visit To opt-out of being tracked by Google Analytics across all websites visit This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at:

- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.