Tune Out the Naysayers: Reg A+ is Working

David Feldman  |

I was honored last week Thursday to speak on a panel at the SEC’s annual small business capital formation forum. I also co-moderated a breakout session developing recommendations to improve regulation of smaller reporting companies. My talk on the panel provided an update on Regulation A+ and how things are going. Spoiler alert: it’s going well! Apologize in advance for length, but here’s the summary of the points I covered:

How’s it Going?

  • The SEC’s promise of expedited review is real (average time in the SEC is 71 days). This has helped these deals result in much lower transaction costs.
  • Wall Street is partnering with Main Street to develop deals combining traditional underwriting with the new world of crowdfunding.
  • Some are choosing OTC trading, others, including a group in process now, intend to trade on national exchanges.
  • The lawsuit by several states challenging the rules was dismissed in April, that’s really when the pace of dealmaking began to accelerate.
  • It’s working – to date 15 deals have closed raising a total of $189 million, an average of $12 million per deal

What are the Issues?

  • We could use more clear guidance on some issues surrounding testing the waters – like what about media interviews? How do you put a disclaimer on those?
  • States are charging high notice filing fees, in a number of cases in the thousands of dollars, though no filings are made on deals planning to trade on a national exchange
  • More conforming guidance would be helpful vis a vis Reg A deals vs. traditional Form S-1. Some has come already including just released confirmation that Reg A+ filers can rely on FAST Act rules allowing you to eliminate certain financials in early filings if they are not likely to be included in the end.

Ideas for Improvement

  • Approve the OTC Markets’ petition to allow reporting companies to use Reg A+, allow at-the-market offerings and preempt blue sky regulation for resale of Reg A+ securities
  • Increase the maximum to be raised from $50 million
  • Consider allowing international companies to use Reg A+ on some basis – maybe smaller maximum?

Let’s all stay tuned, it will be interesting to see where we stand a year from now!

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