Securities and Exchange Commission Regulation A exempt offerings have seen exponential growth in issuer use and the volume of capital raised year over year since the 2015 rule changes that created the Regulation A Tier 2 program. A substantial number of corporate issuers are benefitting from the “public offering” investor acquisition capabilities of the program and are opting to execute under SEC Regulation A to maximize their capabilities for raising capital.

One significant benefit that SEC Regulation A has is the selling shareholder feature. Regulation A allows up to 30% of the offering amount to be securities sales from existing shareholders selling their personally held shares through the Regulation A offering and at the Regulation A offering price. This feature has been especially popular with asset funds as it allows an asset fund to offer a liquidity option for the fund’s investors that does not require the selling of fund assets to leverage cash for a redemption of shares. Selling shareholders are listed in the SEC Form 1-A filing for disclosure.

In fact, the selling shareholder feature is so effective for asset funds that many of these funds that were going to operate with a fixed term are now able to operate in an “evergreen” model as liquidity is provided for through annual SEC Regulation A offerings being executed each year by the fund.

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