SEC proposes amendments to Regulation A to expand access to capital for smaller companies

On 18 December 2013, the Securities and Exchange Commission (SEC) proposed amendments to Regulation A under the Securities Act to implement a mandate under the Jumpstart Our Business Startups Act (JOBS Act) directing the SEC to adopt rules exempting offerings of up to $50m (£30m) of securities annually from Securities Act registration.

The amendments to Regulation A are intended to expand the existing exemption to increase access to capital for smaller companies. The current Regulation A permits unregistered public offerings of up to $5m of securities in a 12-month period under the small offering exemption from registration provided by Securities Act Section 3(b). The proposed rules would update the existing exemption under Section 3(b)(1) (as Section 3(b) has been redesignated) and new Section 3(b)(2) added by the JOBS Act by authorising two ‘tiers’ of offerings. ‘Tier 1’ would consist of offerings of up to $5m in a 12-month period currently covered by Regulation A, while ‘Tier 2’ would consist of offerings of up to $50m in a 12-month period. In a significant departure from the current exemptive scheme, the proposed rules contemplate pre-emption of state ‘blue-sky’ registration and qualification requirements for Tier 2 offerings.

The SEC proposed the new regulation in a 387-page release (No. 33-9497). Comments on the proposal are due by 60 days after publication of the rule release in the Federal Register…

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