David N. Feldman

Reporting Companies Cleared for Reg A+ Offerings

The Securities and Exchange Commission announced on December 19, 2018 that it has adopted final rules that will permit full SEC reporting companies to conduct public offerings utilizing the modern crowdfunding capabilities with Regulation A+. We are still awaiting the details of the new rules, but they will become effective immediately upon publication in the Federal Register, which typically happens within a few weeks of the announcement. The SEC was required to adopt these rules by the Economic Growth, Regulatory Relief and Consumer Protection Act, passed back in May.

Previously, the Reg A+ rules required that a company cannot use Reg A+ if it is subject to the SEC reporting requirements immediately prior to the offering. This includes, for example, every company listed on a national exchange such as Nasdaq or the NYSE and many companies that trade over-the-counter. The new law reversed that and now the SEC has changed the rules to permit reporting companies to utilize Reg A+.

While we await the details of the new rules, it is clear that this will benefit full reporting companies that trade over-the-counter, since they can now conduct a public offering preempted by state “blue sky” merit review of their offering. In addition, even listed companies may decide that accessing the ability to “test the waters” with any investor, not permitted with a traditional public offering, is attractive as they market a new public offering. This may also assist companies that are for some reason not eligible for short form registration of public offerings on Form S-3, such as those who went public within the last year or those who had a late SEC filing in the last year. Check this one off the list of desired changes to the already well-designed rules under Regulation A+.