1.1.1.3. Public Offerings Exempt from Registration: Regulation A Small Business Offerings
As long as a business does not seek to raise more than $75 million in equity or debt over a one-year period, the business can raise money under the Regulation A exemption from SEC registration. Regulation A exemptions are open to U.S. and Canadian issuers with a legitimate business plan. Regulation A is not open to investment companies or bad actors. (You will sometimes hear people in the securities industry refer to Regulation A as Regulation A+. This is not a separate regulation. It is a nickname given after Regulation A received a major revision several years ago that allowed far more issuers to take advantage of it.)
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 $75 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