20 Nov Reg A+: It’s Working Folks

I was honored 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

Some 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.

Some 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!