FINRA Provides Guidance on Regulation A+ Offerings

FINRA recently published Regulatory Notice 15-32 to provide guidance regarding the FINRA filing requirements and review procedures that apply to firms that participate in Regulation A+ offerings.   Specifically, FINRA’s Corporate Financing Rules require firms that participate in Regulation A+ offerings to file with FINRA information specified in the rules.   FINRA’s Communications with the Public Rule and its Suitability Rule also apply to a firm’s participation in these offerings.   FINRA also reminds firms that communications with the public concerning a Regulation A+ offering of direct participation program (DPP) securities must be filed with FINRA.

Regulation A under the Securities Act of 1933 has been a longstanding exemption from the registration requirement for offerings of up to $5 million of securities in any 12 month period.  Pursuant to Title IV of the Jumpstart Our Business Startups (JOBS) Act, the SEC recently updated and expanded  Regulation A with amendments that became effective in June 2015.  The new amendments, popularly known as Regulation A+, allow offerings of up to $50 million of securities in a 12-month period.

While Regulation A continues to require that an offering statement must be prepared on Form 1-A, the amendments provide that the offering statement must be filed electronically with the SEC on EDGAR. Offering statements continue to be subject to review and comment by the SEC and must be qualified by the SEC in a “notice of qualification” prior to any sales of securities.  Under the Regulation A+ amendments, certain issuers also have an option to submit a draft offering statement to the SEC for non-public review, which must be filed electronically on EDGAR, and all non-public submissions must be filed publicly no less than 21 calendar days before qualification of the offering statement. Amendments to an offering statement must be filed with the SEC in the same manner as the initial filing.  A post-qualification amendment must be filed to reflect any facts or events arising after the qualification date that represent a fundamental change in the information in the offering statement.

In addition, Regulation A+ provides that eligible issuers and intermediaries in Regulation A+ offerings may conduct a solicitation of interest in an offering (testing the waters), including solicitation of non-accredited investors, both before or after the filing of the offering statement.  Solicitation materials must be filed with the SEC as exhibits to the offering statement.