On June 19, 2015, amendments to Regulation A under the Securities Act became effective. Amended Regulation A, referred to as Regulation "A+" to indicate it is an improved and modernized version of this long-standing exemption from SEC registration, allows non-reporting companies to raise up to $50 million in "mini-public offerings" qualified by the SEC.

While it remains to be seen whether Regulation A+ will be widely used, attorneys advising non-reporting companies on their capital raising alternatives should familiarize themselves with this new option.

Like former Regulation A, amended Regulation A provides for "mini-public offerings," meaning offerings exempt from SEC registration, but sharing some key characteristics with SEC-registered offerings. Offerings under amended Regulation A are public offerings that can be made using general solicitation and advertising. To offer securities under amended Regulation A, an issuer must file an offering statement on Form 1-A with the SEC, including an offering circular for distribution to investors and all required exhibits.

Form 1-A filings are subject to SEC review and comment. Before sales under Regulation A can be made, this filing and review process must culminate in the SEC's "qualification" of the Form 1-A. This is similar to a registration statement for a registered offering becoming effective. Subject to certain conditions, a Regulation A issuer is permitted to "test the waters," or communicate with potential investors to see if they might be interested in an offering, before filing a Form 1-A. Amended Regulation A mandates ongoing reporting by certain issuers (for a further discussion of this, see Regulation A Offering Tiers).

As under former Regulation A, securities sold in reliance on amended Regulation A are not restricted securities, meaning they generally can be freely resold by non-affiliates of the issuer.

Certain Regulation A offerings benefit from federal preemption of the registration and qualification requirements of state securities laws (for a further discussion of this, see Regulation A Offering Tiers). State regulators have filed a legal challenge to the provisions of Regulation A preempting state registration and qualification in certain offerings (see Legal Challenge to State Preemption).

Amended Regulation A continues to consist of Rules 251 through 263 of the Securities Act. The SEC has amended Form 1-A and added other new forms for use in the Regulation A context.

Amended Regulation A includes two tiers of Regulation A offerings.

Tier 1 provides an exemption for offerings of up to $20 million in a 12-month period, including up to $6 million of secondary sales by the issuer's affiliates. Tier 1 offerings are generally subject to state blue sky registration and qualification requirements. Tier 1 issuers are subject to minimal continuing reporting requirements.

Tier 2 provides an exemption for offerings of up to $50 million in a 12-month period, including up to $15 million of secondary sales by the issuer's affiliates. Investors in Tier 2 offerings that are not accredited investors are subject to limits on the amount they may invest in a Regulation A offering. Tier 2 offerings are exempt from state registration and qualification requirements. Tier 2 issuers are subject to ongoing periodic reporting requirements. Tier 2 issuers can benefit from a conditional exemption from Exchange Act registration or can take advantage of a simplified process for entering Exchange Act-reporting company status at the time they complete a Tier 2 offering.

On May 22, 2015, the Secretary of the Commonwealth of Massachusetts filed a petition for review of amended Regulation A with the US Court of Appeals for the District of Columbia Circuit. On the same day, a Montana official filed a similar petition for review. Arguing that the provisions of Regulation A that preempt blue sky law registration and qualification requirements in Tier 2 offerings are arbitrary, capricious and otherwise not in accordance with the Administrative Procedure Act, the petitions ask the court to:

The two challenges have been consolidated. An order for the consolidated case indicates that procedural motions are due by June 26, 2015 and dispositive motions are due by July 13, 2015.

The Montana petition indicated that Montana would ask the SEC to stay the effective date of the rule pending conclusion of the challenge. On June 16, 2015, the SEC issued an order denying Montana's motion for a stay. Montana had indicated in its petition that it would file a motion for a stay with the DC Circuit if the SEC denied its request.

To learn more about amended Regulation A, see: