United States: SEC Radically Revamps Regulation A - Part 2

Last Updated: May 26 2015
Article by Dean F. Hanley, Paul Bork and Jeremy Arak

For many years, SEC Regulation A languished as an exemption from registration that nobody really used. Although securities issued in a Regulation A offering are not "restricted securities" and are thus freely tradable (if there is a market), the exemption was cumbersome, unfamiliar to both investors and securities practitioners, and limited to $5 million. Regulation D, particularly Rule 506, has been exponentially more important in the capital markets as a way for private companies to raise money.

Under the JOBS Act, which became law in April 2012, the SEC was directed to revise Regulation A so as to make it useable and available for offerings up to $50 million. On March 25, 2015, the Commission promulgated final rules and regulations to amend Regulation A. The new rules will become effective June 19, 2015. The dramatically altered Regulation A has been nicknamed "Regulation A+" but in this Alert we will simply refer to it as Regulation A.

This Alert is in three parts (click here for Part 1). Part 2 focuses primarily on the Regulation A offering statement and its contents, the availability of continuous or delayed offerings under Regulation A, qualification of the offering statement by the Commission, and rules about "testing the waters."

Offering Statement

Electronic Filing/Delivery Requirements

Regulation A offering statements are filed on Form 1-A, which must be filed electronically on EDGAR. Form 1-A has three parts: (1) a fillable online form, similar to Form D or Form ID, that requires basic information about the issuer and the offering, (2) an offering circular (OC) that is used to market the offering to potential investors, and (3) exhibits required by Regulation A.

Regulation A has adopted an "access equals delivery" model for all documents. This means that issuers, intermediaries and dealers can satisfy delivery obligations by simply filing documents on EDGAR, provided that they have noted on any preliminary OC that any delivery obligation may be satisfied electronically. This allows "electronic-only" offerings, provided that there is investor consent or proof of e-delivery of either the preliminary OC or, if applicable, the final OC.

Issuers may use preliminary OCs to offer securities before qualification by the SEC, but the preliminary OC must be delivered 48 hours before the mailing of the confirmation of sale. There is an exception to this rule for issuers subject to Tier 2 reporting obligations, as they already provide continuous, ongoing information to the market.

Finally, issuers and participating broker-dealers must provide purchasers, within two days of the completion of the sale, with either a copy of the final OC or a notice that the sale occurred pursuant to a qualified OC, including the URL where the relevant document can be found on EDGAR.

Confidential Submission of Draft Offering Statements

Issuers that have not previously sold securities under either Regulation A or an effective registration statement under the Securities Act may submit a draft offering statement for confidential review by the SEC. This filing must be substantially complete and must be submitted via EDGAR. All non-public filings made in this way must be publicly filed via EDGAR not less than 21 calendar days before the qualification of the OC.

Form and Content

As noted above, Form 1-A has three distinct parts. The first part of the Form includes information about the issuer's identity, industry, size, capital structure, and financial statements. It also includes information about the issuer's eligibility to use Regulation A, any "bad actor" disqualifications under Rule 262, information about the offering, including size (including whether this is a Tier 1 or Tier 2 offering), information about underwriters, auditors and counsel, and the type of securities being offered.

The second part of Form 1-A is the OC, which is presented as disclosure that complies with either the requirements of Part II of Form 1-A, or the requirements of Part I of Form S‑1 or S‑11. An issuer choosing to follow Form 1‑A must provide information as follows:

  • Cover Page – including name, address, date, title and amount of securities offered, price, underwriting discount and commissions, proceeds to the issuer, and proceeds to others 
  • Table of Contents 
  • Summary (optional) and Risk Factors 
  • Dilution 
  • Plan of Distribution – underwriter commitments, dealer discounts and commissions, any distribution other than through underwriters, any selling security holders and related details 
  • Intended Use of Proceeds 
  • Business Description – narrative description of the issuer's business over the past three years (or the period of existence, if shorter) 
  • Property Description – narrative description of the issuer's principal plants or other material physical properties 
  • Management's Discussion and Analysis of Financial Condition and Results of Operations, including:
    • Operating results that affect income, revenue or expenses, including a discussion of material changes in price, volume, or products that result in material changes in net sales or revenues.
    • Liquidity and capital resources.
    • Plan of Operations – any issuer that has not received revenue from operations during any of the three previous years must describe a plan of operation for the following 12 months and whether additional capital will be necessary during the following 6 months.
    • Trend information related to production, sale, and inventory.
  • Details on directors, executive officers, and significant employees 
  • Compensation of Directors and Executive Officers (in Tier 1 offerings, this information can be provided in the aggregate rather than individually)
  • Ownership of securities by executive officers, directors, and 10% holders
  • "Interested" or related party transactions (any transaction greater than $50,000 for Tier 1, and greater than $120,000 or 1% of total assets for Tier 2, with any executive officers, directors, and greater than 10% shareholders, or promoters)
  • Description of the material terms of the securities being offered
  • Financial Statements
    • For all offerings, financial statements must be prepared in accordance with GAAP (unless the issuer is a Canadian company, in which case the statements may be prepared in accordance with GAAP or under International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB)).
    • For Tier 1 offerings, the financial statements need not be audited, and thus must be labeled "unaudited." However, if the issuer obtained an audit for other purposes, those audited results must be filed in a Tier 1 offering. In Tier 2 offerings, the issuer must provide audited financial statements under GAAS or PCAOB standards.
    • Issuers in Tier 2 offerings must comply with Article 8 of Regulation S-X (Financial Statements of Smaller Reporting Companies).
    • Financial statements must be provided for the previous two years. Any interim statement must cover at least six months.

An issuer may elect to provide disclosure based on Part 1 of Form S‑1 or Form S‑11 in lieu of Part II of Form 1-A. Issuers that would qualify as "smaller reporting companies" under those forms may rely on the reduced disclosure obligations required for such companies.

The third part of Form 1-A calls for required exhibits, to the extent applicable, as follows:

  • Underwriting Agreement
  • Charter and By-laws
  • All instruments defining security holder rights
  • Subscription Agreement
  • Voting Agreement
  • Material Contracts
  • Plan of acquisition, reorganization, arrangement, liquidation, or succession
  • Escrow Agreements
  • Any letters regarding the issuer's change of its certifying accountant
  • Power of Attorney
  • Consents
  • Legal Opinion
  • Any "Testing the Waters" Materials
  • Any non-public draft offering statement

Form 1-A must then be signed on behalf of the issuer.

Continuous or Delayed Offerings and Offering Statement Supplements

If an issuer is current in filing its annual and semiannual reports pursuant to Regulation A (discussed in Part 3), the issuer is permitted to sell securities in a continuous or delayed offering. In that case, the offering statement must be amended annually to provide updated financial statements. The offering statement must also be updated whenever a fact or event arises that represents a "fundamental change" to the information in Form 1-A.

Continuous or delayed offerings are limited to the following types:

  • Securities offered or sold by or on behalf of a person other than the issuer or its subsidiary or a person of which the issuer is a subsidiary
  • Securities offered and sold pursuant to a dividend or interest reinvestment plan or an employee benefit plan of the issuer
  • Securities issued upon the exercise of outstanding options, warrants, or rights
  • Securities issued upon conversion of other outstanding securities
  • Securities pledged as collateral
  • Securities that are part of an offering that commences within two calendar days after the qualification date, will be offered on a continuous basis, may continue to be offered for a period in excess of 30 days from the date of initial qualification, and will be offered in an amount that, at the time the offering statement is qualified, is reasonably expected to be offered and sold within two years from the initial qualification date.

Offering statement supplements may be filed by issuers after qualification. Supplements must be filed no later than two days from the earlier of the date of first use of the OC after qualification or the date of determination of pricing information. These supplements contain information omitted from the OC, which can include:

  • Final pricing information for offerings where the OC is qualified based on a bona fide price estimate
  • Underwriter syndicate information
  • New information regarding the volume/price range, provided that this new information does not materially change the disclosure


An offering statement is qualified under Regulation A only when it is declared qualified by the Commission or by the Division of Corporate Finance. An offering statement cannot be qualified by the passage of time after including a delaying notation. The SEC Staff must have the opportunity to review and comment on an offering statement before it can become qualified.

Solicitation of Interest (Testing the Waters)

Under Regulation A, issuers may "test the waters" by soliciting investors to determine interest in an offering before Form 1-A is qualified. Issuers may use solicitation materials before and after the offering statement is qualified. After the offering statement is filed, the current preliminary OC must accompany (including, if applicable, delivery by EDGAR URL) any "testing the waters" materials. If any information in the post-filing "testing the waters" materials is or becomes materially inadequate or inaccurate, the issuer must distribute revised information. Issuers must submit or file these solicitation materials as an exhibit to Form 1-A.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
McGuireWoods LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
McGuireWoods LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions