Regulation A, expanded by the JOBS Act and often called Regulation A+, sits between a private placement and a full IPO. It lets a company offer securities to the general public, including non-accredited investors, through an offering statement the SEC reviews and qualifies. It is often called a mini-IPO, and it has two tiers.
Tier 1: smaller offerings with state review
Tier 1 allows offerings of up to $20 million in a 12-month period. Its financial statements do not need to be audited unless audited statements already exist. There are no ongoing SEC reporting requirements beyond a final exit report on Form 1-Z. The catch is that Tier 1 does not preempt state law, so the offering must also be registered or qualified in every state where it is sold. For a multi-state raise, that state review often erases Tier 1’s cost advantage.
Tier 2: larger offerings, preempted from state review
Tier 2 allows offerings of up to $75 million in a 12-month period and preempts state registration, which makes a national offering practical. In exchange:
- Financial statements must be audited.
- The company files ongoing reports: an annual report on Form 1-K, a semiannual report on Form 1-SA and current reports on Form 1-U.
- Unless the securities will be listed on a national exchange, a non-accredited individual may invest no more than 10% of the greater of annual income or net worth.
The process
Both tiers begin with a Form 1-A offering statement, which includes the offering circular investors will read. SEC staff review the filing and typically issue comments. The offering cannot close until the SEC qualifies it. Companies may test the waters, gauging investor interest before and after filing, provided the communications follow the rules and are filed where required.
When Regulation A makes sense
- You have a customer base or community that wants to invest and is largely non-accredited.
- You can support audited financials and ongoing reporting, which is effectively the Tier 2 standard.
- You want a public-style offering without the cost and liability profile of a full S-1 registration.
Regulation A is only as successful as its distribution plan. Before filing, decide how investors will actually find the offering: a broker-dealer, an online platform, your own audience, or all three.
This article is general information, not legal advice, and reading it does not create an attorney-client relationship. Rules change; talk to counsel about your specific situation.
