JOBS ACT: No Blue Sky Compliance for Regulation A+ Tier II
Leading equity Regulation A+ offerings platform, WWW.IPOFLOW.COM, offers up a deeper understanding of the debate surrounding Blue Sky laws and Regulation A+ and proposes a helpful explanation for decisions made by the SEC regarding their definition of a qualified purchaser.
NEW YORK, Aug. 27, 2018 /PRNewswire/ -- In 2015, new rules, called Regulation A+, were adopted by the Securities and Exchange Commission (SEC) to allow small companies to get investment capital from investors through general solicitation with an exemption from registration for public offerings. There are two tiers of offerings that qualify under Regulation A+:
Tier 1: Securities up to $20 million over 12 months. These companies can determine whether they want to move forward under the requirements of either Tier 1 or Tier 2.
Tier 2: Security offerings up to $50 million for 12 months.
Tier 1 and Tier 2 offerings both have certain basic requirements, such as company eligibility requirements, disqualification provisions for felons and other "bad actors," and disclosure requirements. Tier 2, however, has added limitations on the amount of money a non-accredited investor may invest as well as audited financial statement requirements and the need to file ongoing reports.
There is one missing requirement that a couple of states, namely Massachusetts and Montana, have fought against, and that is the fact that issuers of Tier 2 offerings don't have to register or qualify their offerings through state securities regulators.
The reaction of these two states is not exactly surprising, after all, the requirements for securities to be state-registered under Blue Sky laws is one way for these states to make hundreds of thousands of dollars from companies in fees.
While similar complaints had interrupted the passing of Regulation A+ in the past, this time the justice system worked, and the SEC overcame the states' efforts to destroy this revolutionary law. In an opinion released June 14, 2016, the United States Court of Appeals for the DC Circuit Court ruled unanimously that Regulation A+ would stand as written, thus continuing to provide small companies the opportunity to raise new capital. Further, it would do so without allowing Massachusetts, Montana or any other state to force these small companies into compliance with burdensome and expensive state Blue Sky laws.
The central argument for the rejection of the states' complaints was the term "qualified purchaser." Within the JOBS Act, it states that certain Regulation A+ securities may only be sold to a "qualified purchaser," yet it neglects to define this term. Instead, it says that the SEC should define that term however it sees fit. In what is likely an effort to ensure that Regulation A+ allows companies to raise capital as easily as possible, the SEC defined the term qualified purchaser as:
Anyone who wants to buy the securities.
In other words, according to the SEC, a qualified purchaser is not limited to accredited investors but is any investor who wants to buy the security. It should also be noted that a disclaimer is required in each filing stating that the aggregate purchase price paid by an investor does not exceed the greater of 10 percent of their annual income or net worth.
IPOFLOW is a leading equity Regulation A+ offerings platform opening up the IPO process to everyone. Operated by Adamson Brothers, Corp., IPOFLOW specializes in providing small companies with channels to general public growth capital utilizing Regulation A+. With a team of professionals possessing over 30 years of business, financial and investment banking experience, IPOFLOW offers clients expert advice in corporate structure, corporate financial planning, branding, marketing and business development.