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Bill Would Allow Reporting Companies to Use Reg A+

It would seem logical to expand the availability of Reg A to reporting companies.
David N. Feldman is a partner at Duane Morris LLP, where he concentrates his practice on corporate and securities law and mergers and acquisitions, as well as general representation of public and private companies, entrepreneurs, investors, and private equity and venture capital firms. Mr. Feldman also advises small businesses with regard to alternatives to traditional financing through initial public offerings. His popular blog at www.DavidFeldmanBlog.com, focusing on entrepreneurship and the regulatory environment, has been recognized by LexisNexis as a Top 25 corporate law blog, and his videos appear on his YouTube channel, The Entrepreneur’s Advocate. Mr. Feldman is a 1985 graduate of the University of Pennsylvania Law School, where he was managing editor of the student newspaper, the Penn Law Forum, and a graduate of the Wharton School of the University of Pennsylvania. He has served as chair of the board of Wharton’s global alumni association.
David N. Feldman is a partner at Duane Morris LLP, where he concentrates his practice on corporate and securities law and mergers and acquisitions, as well as general representation of public and private companies, entrepreneurs, investors, and private equity and venture capital firms. Mr. Feldman also advises small businesses with regard to alternatives to traditional financing through initial public offerings. His popular blog at www.DavidFeldmanBlog.com, focusing on entrepreneurship and the regulatory environment, has been recognized by LexisNexis as a Top 25 corporate law blog, and his videos appear on his YouTube channel, The Entrepreneur’s Advocate. Mr. Feldman is a 1985 graduate of the University of Pennsylvania Law School, where he was managing editor of the student newspaper, the Penn Law Forum, and a graduate of the Wharton School of the University of Pennsylvania. He has served as chair of the board of Wharton’s global alumni association.

The House Financial Services Committee is considering a bill that would permit full SEC reporting companies to use Tier 2 of Regulation A+ to effect a streamlined, lower cost public offering of their securities. In implementing rules under the Jumpstart Our Business Startups (JOBS) Act in 2015, the SEC retained the historical restriction that only non-reporting companies could utilize Reg A. There was really no particular reason this could not have been changed.

Now that practitioners have witnessed the closing of well over 30 Reg A+ deals, three of which are now successfully trading on national exchanges, it would seem logical to expand the availability of Reg A to reporting companies. They would have a history of full disclosure, and could clearly benefit from utilizing a faster and cheaper option to raise money from the public. OTC Markets, Inc. had submitted a petition several years ago that encouraged this, and my law firm submitted a letter to the SEC in support of that petition. Presumably this would only benefit companies that are not eligible for short registration Form S-3, including companies with less than a $75 million market cap and trading over-the-counter.

As noted in Crowdfund Insider, the new Republican-led SEC could, on its own, simply implement this change and avoid the need for Congress to pass a bill. There are some questions to address, however, such as would the relaxed financial reporting requirements apply before the offering is approved by the SEC? Would the testing the waters rules be the same? It will be interesting to see if this develops further.

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