Regulation A
Regulation A is a Securities Act exemption that permits eligible issuers to conduct public offerings under either Tier 1, up to $20 million, or Tier 2, up to $75 million in a 12-month period.
Regulation A is public, but exempt
Regulation A permits eligible companies to offer securities to the public without using a conventional Securities Act registration statement.[1]
That makes it different from both a traditional registered IPO and a private Regulation D offering.
The process uses an offering statement on Form 1-A that must be qualified before sales proceed under the exemption.[1]
Tier 1 and Tier 2
Regulation A has two tiers.[1][2]
| Feature | Tier 1 | Tier 2 |
|---|---|---|
| Maximum in 12 months | $20 million | $75 million |
| Public offering permitted | Yes | Yes |
| Audited financial statements | Not universally required by federal rule | Required |
| Ongoing SEC reports | More limited | Annual, semiannual and current reporting applies |
| State registration/qualification | Generally relevant | Federally preempted, though notice/fees and enforcement remain |
For offerings of $20 million or less, an eligible issuer can choose either tier.[1]
Why it is called a “mini-IPO”
The label comes from the combination of public solicitation, SEC-filed disclosure and a capital-raising process that resembles a registered offering but is less extensive.[2]
The nickname can be useful, but it can also mislead investors.
A Regulation A issuer is not necessarily subject to the same reporting regime as an Exchange Act reporting company.
Who can invest?
Regulation A can reach the investing public rather than only accredited investors.[1]
Tier 2, however, applies investment limits to certain non-accredited investors unless the securities will be listed on a national securities exchange, subject to the rule's conditions.[1]
That makes Regulation A materially different from Rule 506(c), where every purchaser must be accredited.
Securities are generally not restricted in the same way
Securities sold in Regulation A offerings are not generally treated as restricted securities merely because they were sold under Regulation A.[3]
That can improve potential transferability relative to many Regulation D securities.
Practical liquidity is still a separate question. A security can be legally transferable and still have little or no active market.
Ongoing reporting matters
Tier 2 issuers have continuing SEC reporting obligations after the offering, including annual and semiannual reports and specified current reports.[2]
That can provide investors with more standardized post-offering information than many private placements.
It is still essential to determine whether the issuer remains current with its obligations.
Common mistakes
“Regulation A securities are SEC-approved.”
No. Qualification of an offering statement is not an endorsement of the investment.
“Mini-IPO means the company trades on an exchange.”
No. Exchange listing is separate.
“Tier 2 has no state involvement at all.”
No. State registration is preempted, but notice fees, filings and antifraud authority can remain.[1]
“Public offering means liquid security.”
No. Market depth must be evaluated separately.
Example
An investor evaluating a transaction involving Regulation A should identify the exact exemption, eligibility rule, disclosure framework and resale constraints that apply.
Professional note
For Regulation A, focus on which tier was used, whether the Form 1-A was qualified, the issuer's reporting status, capitalization after the raise, and whether a real secondary market exists. The “mini-IPO” label is not enough.
Related terms
- Registration Statement
A registration statement is a filing with the SEC that provides required disclosures when a security or securities offering is registered under federal securities laws.
- Regulation D
Regulation D is a set of SEC rules that provides exemptions and safe harbors from Securities Act registration for qualifying securities offerings.
- Rule 506(b)
Rule 506(b) is a Regulation D safe harbor that permits an issuer to raise an unlimited amount without Securities Act registration while prohibiting general solicitation and allowing limited participation by sophisticated non-accredited investors.
- Rule 506(c)
Rule 506(c) is a Regulation D exemption that permits general solicitation and advertising if all purchasers are accredited investors and the issuer takes reasonable steps to verify accredited status.
- Form D
Form D is an SEC notice filing used for offerings relying on Regulation D and certain other exempt-offering provisions.
- Accredited investor
An investor who meets SEC income or net worth thresholds and may access private offerings.
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