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The New And Improved Regulation A: A Short Summary

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September 16, 2016
Mark Roderick

he New and Improved Regulation A:  A Short Summary

The JOBS Act created three flavors of Crowdfunding:

1)      Title II Crowdfunding, which allows issuers to raise an unlimited amount of money from an unlimited number of investors using unlimited advertising – but is limited to accredited investors.

2)      Title III Crowdfunding, which allows issuers to raise up to $1 million per year from anyone, including non-accredited investors.

3)      Title IV Crowdfunding, which modified the old Regulation A and is sometimes referred to as Regulation A+.

Quick Summary of Regulation A

Two Tiers

Theoretically, there are two “tiers” under Regulation A:

 

Tier One

Tier Two

Amount Per Year

$20 million

$50 million

Non-Accredited Allowed

Yes

Yes

Limits on Investment

None

For non-accrediteds, 10% of income or net worth, whichever is greater, per offering.

Audited Financials

No

Yes

Registration with SEC

Yes

Yes

Registration with State

Yes

No

Excluded from Exchange Act Limits

Yes

Yes

Shares Freely Tradeable

Yes

Yes

Post-Offering Reporting

No

Yes

Testing the Waters

Yes

Yes

Online Distribution Allowed

Yes

Yes

Bad Actor Limits

Yes

Yes

Because of the exemption from State registration, most companies will choose Tier Two.

Companies That Cannot Use Regulation A

Investment Companies

Companies that own stock or other securities in other companies.

Foreign Companies

Issuers must be organized and have their principal place of business in the U.S. or Canada.

Oil and Gas Companies

Can’t sell fractional undivided interests in oil and gas rights, or a similar interest in other mineral rights.

Public Companies

Can’t be a publicly-reporting company.

Companies Selling Asset-Backed Securities

For example, interests in a pool of credit card debt.

Where Regulation A Makes the Most Sense

Additional Resources

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