Hardin Offers Regulation A Filing Services

Regulation A is an exemption from registration for public offerings. There are two options available, each with its own distinct (but some similar) requirements, referred to as Tier 1 and Tier 2.  Under both Tiers, issuers must file an offering statement on Form 1-A with the Securities and Exchange Commission (“SEC”) on the Electronic Data Gathering, Analysis and Retrieval (“EDGAR”) system.  This is known as a Regulation A filing.  The offering statement must be qualified by the SEC prior to acceptance of funds for the sale of its securities.  However, this does not prevent the issuer from soliciting interest in the offering once the offering statement has been publicly filed on EDGAR.

Tier 1 is for smaller offerings seeking to raise up to $20 million in any 12-month period.  In addition to having their offering statement “qualified[1]” by the SEC, Tier 1 offerings are required to have their offering statement “qualified” with the requisite state securities regulators where the issuer plans to market or sell its securities.  Tier 1 offerings are also subject to blue sky filing requirements.

Tier 2 is for offerings seeking to raise up to $75 million in any 12-month period.  Tier 2 offerings are not required to have their offering statement “qualified” by state securities regulators and for the most part, are not subject to blue sky filing requirements; although some states require a notice filing.  Tier 2 issuers are required to file a registration statement on Form 8-A concurrent with the offering statement in order to register the class of securities under Sections 12(g) or 12(b) of the Securities Exchange Act of 1934. Tier 2 offerings have limitations on the sale of the securities to non-accredited investors, unless the securities are listed on a national securities exchange.

Both Tiers are required to include financial statements for the prior two years, or since inception if the issuer has not been in existence for the entire two-year period.  An additional requirement for Tier 2 is that the financial statements must be audited in accordance with generally accepted account principals (“GAAP”).  Tier 2 issuers are also subject to annual and semi-annual reporting, as well as current event reports, which must be filed within four business days of certain events.  Tier 1 does not have ongoing reporting but is required to file a Form 1-Z exit report within 30 calendar days after termination or completion of the offering.  Tier 2 issuers are also required to file a Form 1-Z exit report which includes an annual report or information about sales in the offering as well as certain updates to issuer information upon conclusion or termination of the offering.  The rule does not, however, impose a deadline.  Both Tiers have limits on secondary sales and are subject to bad actor disqualification provisions under Rule 506(d) of the Investment Advisers Act of 1940.

As noted above, there are different requirements for Tier 1 and Tier 2 offerings, including blue sky requirements.  Tier 1 offerings are generally required to blue sky file in each state in which the offering will be made.  The North American Securities Administrators Association (“NASAA”) has implemented a Coordinated Review Program[2] for Regulation A Tier 1 Offerings to facilitate the filing of Regulation A offerings in multiple U.S. jurisdictions.  A Regulation A Tier 1 issuer must be filing in at least 2 states simultaneously to qualify for the coordinated review program. Subsequent to the submission of the coordinated filing, the issuer must mail filing fees to the jurisdictions where the issuer is seeking registration through the coordinated program.  Tier 2 offerings are not subject to blue sky and therefore not afforded the Coordinated Review Program.  However, Tier 2 offerings do have notice filing requirements in certain states.

Deciding whether to go with a Tier 1 or Tier 2 offering can be daunting.  Outside counsel or other qualified service providers can provide guidance and assistance with Regulation A offerings and ensure the appropriate filings with the SEC are made.  Once the registration is complete and filed with the SEC, Hardin Compliance Consulting, LLC can assist an issuer in completing blue sky or notice filings for your Regulation A offering.

If you are interested in a cost-effective approach to managing your Regulation A filings and/or blue sky filings, and in freeing up time and resources for you and your team to focus on more important matters, please reach out!    We would welcome the opportunity to discuss our services in greater detail.

[1] For both tiers under Regulation A, a company can only accept payment for the sale of its securities once its offering materials have been qualified by the staff at the SEC.  Additionally, companies that are conducting a Tier 1 offering must generally have their offering materials qualified by state securities regulators in the states in which the company plans to sell its securities.

[2] https://www.nasaa.org/industry-resources/securities-issuers/coordinated-review/regulation-a-offerings/

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Partner with Hardin Compliance

Have a compliance question or want an independent review of your compliance program?  Hardin Compliance can help!  Call us today at 1.724.935.6770, or visit our website at www.hardincompliance.com for more information.

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