SEC Conferees Recommend Reg A+ Improvements

Last November, the SEC held its annual conference focused on small business in Austin, TX. Most of the conference consists of participants developing recommendations to the SEC. Those recommendations are then ranked by the participants and published, which they have recently done. The recommendations from these conferences are sometimes taken up by the SEC and Congress. In fact the changes to Regulation A in the Jumpstart Our Business Startups (JOBS) Act started with a recommendation at the 2010 SEC conference (where “Reg A+” was used for the first time).

The second highest ranked recommendation (out of 20) from the November meeting included a series of suggestions to improve new Reg A+. These include mandating state blue sky preemption of secondary trading in the over-the-counter markets, allowing “at-the-market” offerings, allowing reporting companies to use Reg A+, increasing the maximum offering amount to $75 million, and limiting state notice filing fees. I attended the conference and supported all these recommendations.

Many believe the most important is the increase in the maximum. There have already been a number of Reg A+ deals hitting the $50M maximum. The increase could help attract higher tier underwriters and industries such as biotech. The state notice filing fees are also a big issue. Some are charging thousands of dollars just to file, and for deals looking to cover many states that expense could be very significant. It would also be great to let reporting companies use Reg A+. Why not? Doesn’t appear to be any reason.

Congress has already been looking at some of these. The House already passed a bill to raise the maximum to $75 million. There are also bills to let reporting companies use Reg A+ moving along. Reg A+ is facing some growing pains for sure, with some negative press relating to one or two companies. In addition, with stocks of Reg A+ issuers on national exchanges generally trading down, the hope is that the emergence of higher tier underwriters will help alleviate that issue. Stay tuned!


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