What Is Regulation A? Definition, Update, Documenation, and Tiers

Regulation A is a type of exemption from registration with the Securities and Exchange Commission (SEC) for certain securities offerings. It is intended to make it easier for small businesses to raise capital by allowing them to avoid the more costly and time-consuming registration process.

Regulation A was first adopted in 1933 as part of the Securities Act of 1933. It was amended in 1992 to create two tiers of offerings, Tier 1 and Tier 2. Tier 1 offerings are limited to $20 million, while Tier 2 offerings can be up to $50 million.

In 2015, Regulation A was further amended to create a new type of offering called Regulation A+. Regulation A+ offerings are subject to the same requirements as Tier 2 offerings, but they do not have a limit on the amount of capital that can be raised.

To qualify for Regulation A, an offering must meet certain requirements. These requirements include:

* The offering must be made by a company that is not a reporting company under the Securities Exchange Act of 1934.
* The offering must be made through a registered broker-dealer.
* The offering must be made in compliance with the anti-fraud provisions of the federal securities laws.

The documentation required for a Regulation A offering will vary depending on the size of the offering. For Tier 1 offerings, the company must file a Form 1-A with the SEC. For Tier 2 offerings, the company must file a Form 1-A and a Form 1-K with the SEC.

The fees associated with a Regulation A offering will also vary depending on the size of the offering. For Tier 1 offerings, the company must pay a filing fee of $25,000. For Tier 2 offerings, the company must pay a filing fee of $50,000.

Regulation A is a valuable tool for small businesses that need to raise capital. It is a relatively inexpensive and quick way to raise capital, and it does not require the company to be a reporting company under the Securities Exchange Act of 1934.

However, there are also some drawbacks to Regulation A. One drawback is that the offering is subject to the anti-fraud provisions of the federal securities laws. This means that the company must take steps to ensure that investors are not misled about the offering. Another drawback is that the offering is not as widely publicized as a registered offering. This means that the company may have to do more marketing to attract investors.

Overall, Regulation A is a good option for small businesses that need to raise capital. It is a relatively inexpensive and quick way to raise capital, and it does not require the company to be a reporting company under the Securities Exchange Act of 1934. However, the company must take steps to ensure that investors are not misled about the offering, and the offering may not be as widely publicized as a registered offering.