Regulation A+ Offering Statement
The new Regulation A+ rules are expected to take effect June 19, 2015. Tier I of Regulation A+, which does not preempt state law, allows for a raise of up to $20 million in any 12-month period and Tier II, which does preempt state law, allows a raise of up to $50 million in any 12-month period. Issuers may elect to proceed under either Tier I or Tier II for offerings up to $20 million. Tier II offerings require additional disclosures and ongoing reporting requirements. Today I am touching on the offering statement also called the offering circular.
A company intending to conduct a Regulation A+ offering must file an offering statement with, and have it qualified by, the SEC. The offering statement will be filed with the SEC using the EDGAR filing system. Prospective investors must be provided with the filed pre-qualified offering statement 48 hours prior to a sale of securities. Once qualified, investors must be provided with the final qualified offering circular. Like current registration statements, Regulation A+ rules provide for an “access equals delivery” model, whereby access to the offering statement via the Internet and EDGAR database will satisfy the delivery requirements.
There are no filing fees for the process. The offering statement will be reviewed much like an S-1 registration statement and declared “qualified” by the SEC with an issuance of a “notice of qualification.” The notice of qualification can be requested or will be issued by the SEC upon clearing comments. The SEC has indicated that reviewers will be assigned filings based on industry group.
The rules permit an issuer that is using Regulation A+ for the first time, to submit an offering statement to the SEC on a confidential basis. Confidential submissions will allow a Regulation A+ issuer to get the process under way while soliciting interest of investors using the “test the waters” provisions without negative publicity risk if it alters or withdraws the offering before qualification by the SEC. The confidential filing, SEC comments, and all amendments must be publicly filed on EDGAR at least 21 calendar days before qualification. When an S-1 is filed confidentially, the offering materials need be filed 21 calendar days before effectiveness, but the SEC comment letters and responses are not required to be filed. This, together with the requirement to file all “test the waters” communications, create significant increased pre-offering disclosure requirements for Regulation A+ offerings over an S-1 registered offering. As always, details determine diligence.