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SEC 2155 - Securities offerings under Regulation A
Publication date: 30 Jun 2023
us PwC SEC Volume 2155
.1 General
.11 What is Regulation A?
Regulation A is an exemption from the registration requirements of the Securities Act which allows certain issuers to offer and sell specified securities to the public using more streamlined disclosure requirements as compared to an offering registered under the Securities Act. Regulation A issuers may also be subject to more streamlined on-going reporting requirements as compared to an issuer that sold securities through an offering registered under the Securities Act.
Regulation A is set forth in Securities Act Rules 251 through 263.
You can find additional information on Regulation A offerings in:
- Amendments to Regulation A: A Small Entity Compliance Guide; and
Securities Act Rules CDI Section 182.
.12 What are the dollar limits for offerings conducted under Regulation A?
Regulation A generally provides for two levels (referred to as “tiers”) of offerings:
- Tier 1 consists of securities offerings of up to $20 million in a 12-month period including not more than $6 million in offers by selling security-holders that are affiliates of the issuer;
- Tier 2 consists of securities offerings of up to $75 million in a 12-month period including not more than $22.5 million in offers by selling security-holders that are affiliates of the issuer.
.2 Regulation A offering statement
.21 Which SEC form is used to conduct a Regulation A offering, and where can I find it?
An issuer conducting an offering under Regulation A will use Form 1-A as the offering statement. The text of Form 1-A is available on the SEC’s website (https://www.sec.gov/files/form1-a.pdf).
.22 Where can I find the disclosure requirements applicable to Form 1-A?
The disclosure requirements applicable to Form 1-A are set forth in the form and related instructions. Form 1-A is organized in three distinct parts:
- Part I: Notification (certain basic information about the issuer, its eligibility, the offering details and the jurisdiction where the securities will be offered);
- Part II: Contents of the offering circular (analogous to a prospectus in a Securities Act registration statement); and
- Part III: Exhibits
.221 Are there different options for preparing the offering circular (Part II of Form 1-A)?
Yes. When preparing the offering circular (Part II of Form 1-A), an issuer may:
- follow the Offering Circular format (i.e., follow the specific disclosure requirements contained in Part II of Form 1-A); or
- provide the information required by Part I of Form S-1 or Part I of Form S-11 (see Part II(a)(1)(ii) of Form 1-A).
The cover page of the offering circular must identify which disclosure format is being followed.
.222 Where can I find the financial statement requirements associated with Form 1-A?
The financial statement requirements of Form 1-A are set forth in Part F/S of Form 1-A. The financial statement requirements of Part F/S apply to both Part II disclosure options (see SEC 2155.221).
Part F/S(a) sets forth the general rules for preparing and presenting financial statements for purposes of the offering statement and are considered for both Tier 1 and Tier 2 offerings.
Part F/S(b) sets forth the financial statement requirements for Tier 1 offerings.
Part F/S(c) sets forth the incremental (to Part F/S(b)) financial statement requirements for Tier 2 offerings.
The age of financial statements requirements for both Tier 1 and Tier 2 offerings are set forth in Part F/S(b)(3) and (4).
If the issuer is a U.S. company, the financial statements must be prepared in accordance with accounting principles generally accepted in the United States (US GAAP). If the issuer is a Canadian company, the financial statements must be prepared in accordance with either US GAAP or International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS as issued by the IASB). If the financial statements comply with IFRS as issued by the IASB, compliance must be explicitly and unreservedly stated in the notes to the financial statements and if the financial statements are audited, the auditor's report must include an opinion on whether the financial statements comply with IFRS as issued by the IASB. See Part F/S(a)(2) of Form 1-A.
See SEC 2155.905 for additional guidance.
.223 What are the financial statement audit requirements of Form 1-A?
The financial statements included in a Tier 1 offering statement can be unaudited. However, if an audit of these financial statements is obtained for other purposes and that audit was performed in accordance with either (i) AICPA standards or (ii) AICPA and PCAOB auditing standards by an auditor that is independent pursuant to either the independence standards of the AICPA or S-X 2-01, those audited financial statements must be filed, and an audit opinion complying with S-X 2-02 must be filed along with the financial statements. The auditor does not need to be registered with the PCAOB. See Part F/S(b)(2) of Form 1-A.
Financial statements (other than interim financial statements) included in a Tier 2 offering statement are required to be audited as described in Part F/S(c)(1)(ii)-(iii) of Form 1-A. The report and qualifications of the auditor must comply with the requirements of S-X Article 2. The auditor does not need to be registered with the PCAOB.
.23 Does Form 1-A need to be filed with the SEC?
.231 Will the SEC staff review Form 1-A on a non-public basis?
Yes, under certain circumstances. Securities Act Rule 252(d) provides that under certain circumstances Form 1-A may be submitted initially as a draft offering statement for non-public SEC staff review.
.232 Will the draft offering statement and related SEC staff comments and issuer responses remain non-public?
The initial non-public submission and all related amendments and correspondence must be filed publicly at least 21 days before the offering statement will be qualified. Comment letters and related registrant responses will be made public according to the SEC staff’s normal policies. See Section 3.d. of the Amendments to Regulation A: A Small Entity Compliance Guide available on the SEC website (https://www.sec.gov/info/smallbus/secg/regulation-a-amendments-secg#3).
.3 On-going reporting requirements
.31 Are there any on-going reporting requirements applicable to Regulation A issuers?
Yes. The on-going reporting requirements depend on whether the issuer offered its securities as a Tier 1 or Tier 2 offering.
Issuers in Tier 1 offerings are required to file a Form 1-Z (Exit Report) no later than 30 calendar days after termination or completion of an offering. The text of Form 1-Z is available on the SEC’s website (https://www.sec.gov/files/form1-z.pdf). See Section 5 of the Amendments to Regulation A: A small Entity Compliance Guide available on the SEC website (https://www.sec.gov/info/smallbus/secg/regulation-a-amendments-secg#3).
Issuers in Tier 2 offerings are subject to on-going post-qualification reporting requirements including:
- Annual reports are filed on Form 1-K within 120 calendar days after the end of the fiscal year covered by the report and include two years of audited financial statements in addition to the other disclosures specified in Form 1-K. The text of Form 1-K is available on the SEC’s website (https://www.sec.gov/files/form1-k.pdf).
- Semi-annual reports are filed on Form 1-SA within 90 calendar days after the end of the first six months of the issuer’s fiscal year and include unaudited interim financial statements (which are not required to be reviewed by an auditor prior to filing) in addition to the other disclosures specified in Form 1-SA. The text of Form 1-SA is available on the SEC’s website (https://www.sec.gov/files/form1-sa.pdf).
- Current reports are filed on Form 1-U within four business days of the occurrence of one or more of the triggering events (e.g., change in auditor, non-reliance on previously filed financial statements) specified in Form 1-U. The text of Form 1-U is available on the SEC’s website (https://www.sec.gov/files/form1-u.pdf).
The duty to file these reports with the SEC is deemed to have been met if the issuer is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act and, as of each Form 1-K and Form 1-SA due date, has filed all reports required to be filed during the 12 months (or such shorter period that the registrant was required to file such reports) preceding such due date. See Securities Act Rule 257(b)(6).
.9 Frequently asked questions
.901 Is a subsequent events review required in connection with a Form 1-A?
We believe that a subsequent events review should be performed when an issuer offers securities pursuant to Regulation A.
.902 Is an accountants’ consent required to be included in a Form 1-A?
Yes, under some circumstances. See SEC 2400.44 for a discussion of accountants’ consents in connection with Form 1-A. See also Part III-Item 17 (11) of Form 1-A and Securities Act Rule 252(f)(ii).
.903 Will the SEC staff object if a consent is not included in a Form 1-K?
No. See SEC 2400.441 for a discussion of accountants’ consents in connection with Form 1-K. See also Securities Act Rules CDI 182.19.
.904 Is “Experts” language required in a Regulation A offering statement?
No. See SEC 2300.16 for a discussion of “Experts” language in connection with a Regulation A offering statement.
.905 May a company filing or non-publicly submitting an offering statement pursuant to Regulation A omit financial statements for historical periods if it reasonably believes that those financial statements will not be required at the time of the qualification of the Form 1-A?
Yes. See Securities Act Rules CDI 182.14.
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