On March 25, 2015 the SEC amended Regulation A, commonly referred to as Reg. A+, to further implement Title IV of the JOBS Act.
The amended regulation seeks to create an environment where emerging enterprises can efficiently raise public capital through crowdfunding.
Historically, Reg A has not been widely used for two reasons:
1) the $5M offering size limit was perceived as too low
2) the blue ski registration and qualification requirements were too onerous.
To address these concerns, Reg A+ increases the offering size limit to $50M in a Tier 2 offering and up to $20M in a Tier 1 offering.
Additionally, certain Reg A+ companies will be able to avoid the SECs blue sky reporting regime.
Reg A+ are public offerings, similar to an IPO, however the regulatory obstacles are far lower thereby making this type of investment much more accessible to all investors, accredited or otherwise.
This is particularly welcoming to small and medium sized businesses that struggle to raise capital from high net worth investors or institutions. These small and medium businesses can now raise capital from a much larger pool of investors (commonly referred to as the crowd) which will increase capital formation thereby growing jobs and the economy as a whole.
There are still many nuances associated with Reg A+ but overall the SEC’s amendment is widely seen as a step in the right direction. Some of the differences between Tier 1 and Tier 2 regulations are outlined the chart below: