NEWS FLASH: SEC Adopts Rules to Facilitate “IPO LIGHT”-Smaller Companies’ Access to up to $50 Million of Capital
26th March 2015

03/26/15 - Yesterday, the U.S. Securities and Exchange Commission adopted final rules to facilitate smaller companies’ access to capital. The exemption would be limited to companies organized in and with their principal place of business in the United States or Canada.  

The final rule provides two tiers of capital raising thresholds:

  •  Tier 1, which 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. There are no audited financial statements required.
  •  Tier 2, which would consist of securities offerings of up to $50 million in a 12-month period, with not more than $15 million in offers by selling security-holders that are affiliates of the issuer.

The new rules update and expand Regulation A, an existing exemption from registration for smaller issuers of securities.  The rules are mandated by Title IV of the Jumpstart Our Business Startups (JOBS) Act.

The updated exemption will enable smaller companies to offer and sell up to $50 million of securities in a 12-month period, subject to eligibility, disclosure and reporting requirements. 

The final rules, often referred to as Regulation A+, provide for two tiers of offerings:  Tier 1, for offerings of securities 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; and Tier 2, for offerings of securities of up to $50 million in a 12-month period, with not more than $15 million in offers by selling security-holders that are affiliates of the issuer. Both Tiers are subject to certain basic requirements while Tier 2 offerings are also subject to additional disclosure and ongoing reporting requirements.

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).

Click for SEC Release.

Click for fact sheet with more information.