SEC Adopts Final Rules for ‘A-Plus’ JOBS Act ProvisionApril 8, 2015
On March 25, the Securities and Exchange Commission (SEC), unanimously voted to adopt finalized Regulation A Plus rules, as mandated by Title IV of the 2012 Jumpstart Our Business Startups (JOBS) Act, intended to help facilitate smaller companies’ access to capital and provide investors with more investment choices.
Under the final rules for the SEC’s Regulation A exemption, community banks, technology firms and others would be able to raise up to $50 million in a 12-month period from a wide array of investors without having to register the offerings with the agency. The JOBS Act increased the current funding ceiling from the $5 million level. When the rules were proposed in Dec. 2013, the SEC sought to block state law from offering above the current $5 million cap.
The final Regulation A+ rules create two tiers of offerings. Tier 1 would consist of securities offerings of up to $20 million in a 12-month period, with not more than $6 million in offers by selling security-holders that are affiliates of the issuer. Tier 2, which consists of securities offerings of up to $50 million, with not more than $15 million in offers by selling security-holders that are affiliates of the issuer. For offerings of up to $20 million, the issuer could elect whether to proceed under Tier 1 or Tier 2. Both tiers would be subject to requirements with issuer eligibility, disclosure, and permit companies to submit draft offering statements for non-public review by the SEC.
The final rules also provide for the preemption of state securities law registration and qualification requirements for securities offered or sold to “qualified purchasers” in Tier 2 offerings. Tier 1 offerings will be subject to federal and state registration and qualification requirements, and issuers may take advantage of the coordinated review program developed by the North American Securities Administrators Association (NASAA).
On April 5, 2012, President Barack Obama signed the bipartisan JOBS Act into law—a multifaceted measure to encourage capital formation and capital access for startups and small businesses. The law made equity and debt-based crowdfunding legal, and advanced other changes to ease the capital raising process for entrepreneurs.
The final rule will become effective 60 days after its published in the Federal Register.