13 Jul Bill Would Allow Reporting Companies to Use Reg A+

Update August 1, 2017: The Financial Services Committee approved this bill on July 25, 2017 in a rare 59-0 vote. it now heads to the full House of Representatives.

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.