Business Description
Over the time, SEC has adopted various exemptions intended to reduce the complexities of registering the securities that may impede raising the capital for issuers. We have laid out a few exemptions from registrations that are widely considered.What are SEC Reg A+, SEC Reg D, and Reg S?
Reg A was updated in 2015 as part of the Jumpstart Our Business Startups (JOBS) Act, now known as SEC Reg A+. Reg A+ allows companies to generate income under two separate tiers, Tier 1 and Tier 2, representing two different types of investments. Regulation A+ can be assumed as a substitute for a small registered IPO. It is an exemption from the registration requirements that allow companies to offer and sell their securities without registering their offering with the SEC.
Regulation A + is bifurcated into two offering tiers: Tier 1, for offerings of up to $20Mn in 12 months; and Tier 2, for offerings of up to $75Mn in 12 months. For offerings of up to $20 million, companies can choose to proceed either with Tier 1 or Tier 2.
Ongoing compliance and reporting:
Both the offerings from Tier 1 and Tier 2 financial statements are required for at least the last two fiscal years or since the company’s inception if it is less than two years old.
The offerings listed under Tier 2 require the statements to be professionally and independently audited according to generally accepted auditing standards (GAAS) or as per the Public Company Accounting Oversight Board (PCAOB) standards.
Tier 1 offerings are spared with the ongoing reporting regime; only the exit report (Form 1-Z) is obligatory to be filed within 30 days after the offer’s closing.
Filing of annual (Form 1-K) and semi-annual (form 1-SA) reports on an ongoing basis is mandatory for the issuers conducting Tier 2 offerings. In addition, they are also supposed to file the current event reports (Form 1-U) whenever certain changes to the business occur.
