Title IV of the Jumpstart Our Business Startups Act (JOBS Act) directs the SEC to write regulations providing for an exemption from Securities Act registration of public offerings of up to an aggregate of $50 million of equity, debt or convertible debt securities in a 12 month period. This provision has been termed "Regulation A+" by some observers because it is designed to be an improvement upon the SEC's Regulation A, which currently permits exempt public offerings of up to $5 million by non-SEC reporting companies. Under Title IV, the new SEC regulations must provide, among other things, that:

  • all securities offered and sold within the prior 12-month period based on the exemption cannot exceed $50 million;
  • the securities may be offered and sold publicly;
  • the securities sold will not be "restricted securities," meaning that any purchaser will be able to immediately resell the securities without a holding period or other restrictions;
  • the issuer may solicit interest in a proposed offering prior to filing an offering statement with the SEC, similar to the "test the waters" provision currently found in Regulation A; and
  • the issuer must file with the SEC audited financial statements on an annual basis.

In addition, the JOBS Act gives the SEC the ability to adopt other rules that the SEC determines to be necessary, including rules related to the disclosures to be included in an offering document and disqualification provisions similar to the disqualifications for felons and other bad actors under Section 926 of the Dodd Frank Act.

The SEC may also require the issuer to file with the SEC, and make available to investors, periodic disclosures similar to the disclosures contained in the offering statement.

Securities issued pursuant to Regulation A+ offerings will be deemed "covered securities" under the National Securities Market Improvement Act and, therefore, exempt from compliance with state securities or "blue sky" laws provided that the securities are either:

  • offered or sold on a national securities exchange; or
  • offered or sold to "qualified purchasers," to be defined by the SEC.

Regulation A+ should prove useful to smaller, private companies seeking growth capital. The advantages offered by Regulation A+ include:

  • the ability to raise greater amounts of capital ($50 million) than afforded by Regulation A ($5 million) or the "crowdfunding" provisions of the JOBS Act ($1 million);
  • the ability to raise funds in a public offering directed at all investors (including non-accredited investors) rather than in a private placement such as under Regulation D, which is typically directed only to accredited investors; and
  • because the offering is exempt from the registration provisions of the Securities Act, the issuer not becoming subject to the SEC periodic reporting regimen (Form 10-K, Form 10-Q, Form 8-K and proxy statements) provided that the number of shareholders is kept below the recently revised thresholds for mandatory Exchange Act registration (2,000 persons or 500 persons who are not accredited investors).

Unfortunately, the JOBS Act did not establish a deadline for Title IV rulemaking by the SEC. Given the plethora of regulations still required to be written by the SEC under the Dodd Frank Act and JOBS Act, issuers may not be able to use Regulation A+ for quite some time.

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.