SEC Adopts Rules to Facilitate Smaller Companies’ Access to Capital

http://www.sec.gov/news/pressrelease/2015-49.html#.VRNjljTF-h3

by jarsin • 11 years ago

36 9 11 years ago

anigbrowl2• 11 years ago

This Forbes article has a handy summary of what the changes would mean for people who are not familiar with Regulation A: http://www.forbes.com/sites/mraneri/2015/03/11/the-new-abcs-...

zaroth4• 11 years ago

That's 506(c) - General Solicitation. Here's the A+ link: http://www.forbes.com/sites/mraneri/2015/03/23/regulation-a-...

anigbrowl2• 11 years ago

Thanks.

zaroth4• 11 years ago

The most important thing was exemption from state blue-sky laws, so this is great. The second part is who can buy them? I thought A+ was general public. What does this mean;

  The final rules also provide for the preemption of state
  securities law registration and qualification requirements for
  securities offered or sold to “qualified purchasers” in Tier 2
  offerings.

The only qualifications I heard were you can't invest more than 10% of net worth?

Reading more, it sounds like it's actually a circular-logic null requirement?

  In brief, under the proposed rules, Regulation A+ offers would be exempt from state
  securities laws (and review by state regulators) if they are either:

  1.  Sold only to “qualified purchasers”, or 
  2.  Offered and sold on a national securities exchange.

  Meeting the requirements of a national securities exchange nullifies any benefit
  of pursuing a Regulation A+ offering, so the real issue is whether issuers can
  realistically limit sales only to "qualified purchasers".  Although the term was
  not specifically defined in this context, "qualified purchaser" could reasonably
  be expected to mean "sophisticated investor", which would put Regulation A+
  offerings into a similar world as Regulation 506(c) deals.  Fortunately for issuers,
  according to the proposed definition, a "qualified purchaser" is any purchaser of a
  securities issued to Regulation A+.

  If that sounds circular to you, it's only because it is circular. To be exempt from
  state securities law requirements, Regulation A+ sales must be made only to
  "qualified purchasers" and all purchasers in Regulation A+ sales are "qualified
  purchasers".

The reporting requirement is simply audited financials, twice a year. I don't know how SOX plays in... how far is an SME sticking out their neck to sell shares under A+? What kind of review is the SEC performing? 506(b) was basically zero-cost, zero-review -- up to the investor to do their own diligence. Looking forward to learning more about what the A+ process really looks like. Depending on how it works out, this could seriously shake things up.

[1] http://www.crowdvalley.com/news/road-blocked-battle-over-the...

codecamper• 11 years ago

what does this mean? "with not more than $6 million in offers by selling security-holders that are affiliates of the issuer"

Thanks! Matt

zaroth4• 11 years ago

I think... All but that amount raised must be newly issued shares, with proceeds going to the company, not previously restricted shared held by founders and investors, where proceeds go to the shareholder.

johnthealy3• 11 years ago

The exemption would be limited to companies organized in and with their principal place of business in the United States or Canada. The exemption would not be available to companies that:

* Have not filed ongoing reports required by the rules during the preceding two years.

So does this mean that a company wishing to raise capital under A+ needs to file "annual, semiannual and current event reports" for two years prior to the offering? If so, wouldn't this regulation effectively force seed-financed companies to start filing reports immediately? Perhaps I'm misunderstanding this, but that seems like a significant burden.

SuperDuperTango• 11 years ago

I could read this one of two ways: "a company must have been continuously filing for a minimum of 2 years", or "a company must have filed at least once within the last two years". I have no idea which is right (or if i'm completely wrong on both accounts) :-S

zaroth4• 11 years ago

I think that means if you break the rules you can't raise again? Reports required by the rules wouldn't be required in the absence of an actual A+ round. The 'qualified person' clause apparently is purely circular logic, so why not this one too!

SEC Adopts Rules to Facilitate Smaller Companies’ Access to Capital

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