We have ground floor experience with the JOBS Act exemptions and support our clients through the whole process of a Regulation A+ offering – from identifying broker-dealers to support your campaign to accountants to prepare your financials – to conducting the Reg A+ offering in compliance with securities regulations and other US federal and state laws. We leverage our understanding of The Jobs Act, experience with Regulation A+, and relationships in the industry to quickly and effectively bring your offering to the SEC for review and approval.
We also provide insights to our clients on appropriate structures and the ramifications of choosing different security structures for your financing – whether you are offering debt, equity, or a revenue participation to investors.
For a consultation about structuring a Regulation Crowdfunding offering in the US please contact Sosnow PLLC by sending us an email or calling us at 917.969.2147.
What is Regulation A+?
Regulation A+ is a securities exemption that allows privately-owned companies in the US and Canada to raise capital from investors with limited marketing restrictions:
Immediate liquidity opportunity for investors as securities sold under Reg A+ are unrestricted securities
Raise up to $50,000,000 in a Tier-2 Offering
Work with broker-dealers to provide fundraising support
Accept investments from both accredited investors and non-accredited investors
Utilize social media to promote your campaign
Openly pitch your fundraising effort at events
Simplified investor on boarding with the help of technology service providers, brokers-dealers, and fundraising platforms
Eligibility: The Reg A+ exemption is limited to issuers organized and with a principal place of business in the United States or Canada. There are further limitations on eligibility that should be examined and specifically noted that issuers subject to “bad actor” disqualification as defined under Regulation D pursuant to the Dodd-Frank Act in 2013 are not eligible to rely on the new exemption.
“Eligible securities” under the final rules for Reg A+ are limited to equity securities, debt securities, and debt securities convertible or exchangeable into equity interests, including any guarantees of such securities. Asset-backed securities are expressly excluded.
For Tier 2 offerings, there is an offering limit of up to $50M within the prior 12 months in equity, debt or convertible securities, but no more than $15M by selling security holders.
For Tier 1 offerings, there is an offering limit of up to $20M within the prior 12 months, but no more than $6M by selling security holders
Testing the Waters: Issuers may generally solicit interest in a potential offering, both before and/or after the filing of the Form 1-A offering statement, so long as any solicitation materials are preceded or accompanied by a preliminary offering circular. Sales are permitted after the Form 1-A is declared qualified by a “notice of qualification” by the Division of Corporation Finance.
State law Preemption: Tier 2 offerings are generally exempt from state Blue Sky registration and qualification requirements. Still, despite federal preemption, the securities sold in Tier 2 offerings may be subject to state dealer registration, filing of all offering materials, fees and issuer consent to service of process at the state level.
Tier 1 offerings continue to be subject to Blue Sky requirements, but should review the NASAA multi-state coordinated review program that may be able to help issuers expeditiously meet state standards.
The Limitations of Regulation A+
While equity crowdfunding is being adopted as a viable method of raising capital in the US, this exemption does have its limitations and is not well-suited for all companies. Some of the most practical considerations include:
Company eligibility — the exemption is available to US and Canadian companies
State securities law compliance for Tier 1 offerings can be time consuming and expensive
Timeline must be inclusive of SEC review and qualification period
Number of investors limits under the Exchange Act
Non-accredited investor investment limits
Our Firm Provides Guidance at Every Stage of your Reg A+ Offering
While there are risks associated with raising capital under any exemption, our firm understands and has experience handling these concerns. We help our clients through every stage of your financing plan including:
Working with you to choose service providers best suited for your company and goals, including:
Offering venue - determining whether to list the investment opportunity on your own site, on a broker-dealers site or on a crowdfunding platform’s site
Accountant Selection - connecting with eligible and experienced Reg A+ CPAs
Marketing Support - introductions to reputable marketers with strong Reg A+ track records
Cap Table Management
Transfer Agent Services
Guidance on offering structure, including security type and terms
Advice relating to testing the waters and general marketing activities
Compliance with Regulation A+ during your pre-qualification period, in your offering materials, during your campaign, and after your campaign ends
Drafting and filing your compliant Form 1-A with the SEC, working with the regulators while seeking qualification of your offering
Providing post-campaign support, including advising our clients on future financing rounds, best practices in investor relations management, secondary trading issues and other matters.