Reg A+: Only a Partial Win for Small Business Capital Access
Thaya Knight
Tuesday, the SEC approved final rules for so-called Reg A+, a new and revitalized version of the Regulation A exemption, created by the JOBS Act of 2012. While the new rules remove barriers for issuers seeking a raise near the top of the $50 million cap, they fail to remove the greatest barrier – state registration – for the smaller issuers, effectively leaving them out in the cold.
Reg A has been essentially unusable for years. The exemption allows a company to sell securities to the public without full registration, provided the issuer raises no more than $5 million and provided the offering complies with all applicable state securities (“blue sky”) laws. Because of the low $5 million cap and, more importantly, the heavy burden of complying with at least two regulatory regimes – federal and one or more states – this exemption has become almost entirely obsolete. Hoping to make a new, workable version, Title IV of the JOBS Act directs the SEC to create an additional class of securities under the exemption. In addition to raising the cap to at least $50 million, Title IV left the door open for state preemption.
Surprising no one, the state regulators objected. Although Reg A had languished for years even as small business clamored for better capital access, the North American Securities Administrators Association (NASAA), a group representing state regulators, only very recently announced it had “solved” the Reg A problem. NASAA...
Source: Cato-at-liberty - Category: American Health Authors: Thaya Knight Source Type: blogs
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