Regulation A has become the premier securities offering exemption program for executing an offering with public offering investor acquisition capabilities while providing a more cost effective and streamlined preparation process versus an S1.

Regulation A has two Tiers: Tier 1 which allows an issuer to raise up to $20m in a 12 months period and Tier 2 which allows up to $75m.

One key difference between Tier 1 and Tier 2 is the requirement for Tier 1 offerings to be qualified at the state level in addition to the Federal SEC qualification. Some issuers view Tier 1 as having cost savings associated with it due to the lack of an audited financials requirement. In certain cases this may be true – for example an issuer that is only selling in 1-3 states under Tier 1 and they want to avoid the audit expense.

However, for an issuer that is planning on offering and selling into a larger number of states – the cost of the state qualification process will quickly exceed what the audit cost would have been for a Tier 2. Also note that Tier 2 allows sales into all 50 states immediately upon Federal SEC qualification which is a significant advantage for most issuers.

The notion that a Tier 1 Regulation A offering will have less preparation and execution cost due to the lack of audited financials is really based on the number of states an issuer is going to offer and sell into. An issuer that is only going to offer and sell into a handful of states may derive some nominal cost savings at the expense of having a limited geographic market for securities sales. This is the reason almost all Regulation A offerings are Tier 2 offerings as the issuer has access to sales in all 50 states upon SEC qualification.

Questions about SEC Regulation A? Interested in raising capital for your company? Call us today to discuss!