Regulation A (Reg A)
Regulation A (Reg A) is a provision under the U.S. Securities and Exchange Commission's (SEC) securities laws that allows companies to raise capital from the public through a streamlined process. Reg A is also known as the "Mini IPO" because it allows companies to raise up to $50 million in a 12-month period without going through the traditional IPO process.
Under Reg A, companies must file an offering statement with the SEC, which includes information about the company's financials, business plan, risks, and other information. The offering statement is subject to SEC review and approval before the company can begin selling securities to the public.
Reg A offerings are divided into two tiers. Tier 1 offerings allow companies to raise up to $20 million in a 12-month period, and are subject to state securities laws in addition to SEC regulations. Tier 2 offerings allow companies to raise up to $50 million in a 12-month period, and are subject only to SEC regulations.
Companies that use Reg A to raise capital must comply with ongoing reporting requirements, including annual and semiannual reports, current event reports, and special financial reports. These reporting requirements are less extensive than those required for public companies, but are more extensive than those required for private companies.
Overall, Reg A is a securities law provision that allows companies to raise up to $50 million from the public through a streamlined process. Companies that use Reg A must comply with SEC and state securities laws, and are subject to ongoing reporting requirements. Reg A is a useful tool for companies that want to raise capital from the public without going through the traditional IPO process.
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