Regulation A Offerings
Regulation A Offering Counsel
Regulation A has been marketed as a "Mini-IPO" — a pathway to public capital markets that is faster, cheaper, and more accessible than traditional Form S-1 registration. The marketing is not entirely wrong. Regulation A does permit companies to raise up to $75 million annually with reduced disclosure requirements compared to a full registration statement. But the reality of SEC qualification, ongoing reporting obligations, and practical execution challenges is more complex than the marketing suggests.
Frederick M. Lehrer has counseled companies engaged in a variety of businesses through Regulation A offerings. His practice focuses on the full qualification process — from eligibility analysis and Form 1-A preparation through SEC comment letter response, qualification, and ongoing Tier 2 reporting compliance. The companies that succeed with Regulation A are those that understand its requirements, prepare adequately, and approach the process with realistic expectations.
Tier 1 vs. Tier 2: Key Differences
Regulation A creates two tiers with materially different requirements and advantages. Most companies pursuing Regulation A use Tier 2, because Tier 1 requires Blue Sky compliance in each state where securities are offered — effectively eliminating the cost advantage over a full registration statement for national offerings.
| Feature | Tier 1 | Tier 2 |
|---|---|---|
| Maximum Offering Size | $20 million per 12-month period | $75 million per 12-month period |
| Audited Financials Required | No (reviewed financials acceptable) | Yes (two years audited) |
| State Securities Law Preemption | No — state Blue Sky compliance required | Yes — preempted for listed securities and qualified purchasers |
| Ongoing Reporting | No ongoing SEC reporting required | Annual (1-K), semiannual (1-SA), current (1-U) |
| Investment Limits for Non-Accredited Investors | None | 10% of greater of annual income or net worth |
| Testing the Waters | Permitted | Permitted |
| General Solicitation | Permitted | Permitted |
| Resale Restrictions | None for investors | None for investors |
The Regulation A Qualification Process
The qualification process for a Regulation A offering involves seven distinct phases. Each phase requires careful attention to SEC requirements, and the efficiency of the process depends on the quality of preparation at each stage.
Regulation A Services
The firm provides full-service Regulation A counsel, from initial eligibility analysis through post-qualification reporting compliance:
What the SEC Is Looking For in a Form 1-A
"The SEC staff reviews a Form 1-A the same way it reviews a Form S-1 — looking for what is missing, what is misleading, and what creates investor protection concerns. The antifraud provisions of the federal securities laws apply to Regulation A offerings with the same force they apply to registered offerings. Issuers that treat the reduced disclosure requirements as permission to be less rigorous in their disclosure are creating enforcement exposure, not saving time."
Regulation A offerings are not exempt from the antifraud provisions of the federal securities laws. Issuers that make material misstatements or omissions in their Form 1-A offering circulars, their testing the waters materials, or their ongoing reports are subject to SEC enforcement action under Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act. The SEC has brought enforcement actions against Regulation A issuers for failure to disclose material related-party transactions, misrepresentation of the use of proceeds, and failure to disclose the compensation paid to promoters.
The enforcement risk in Regulation A offerings is heightened by the retail investor base that these offerings typically target. The SEC's enforcement priorities include protecting retail investors from fraud, and offerings that target retail investors with misleading materials receive close attention from the Division of Enforcement. The firm's enforcement background is directly applicable to preparing Regulation A offering circulars that satisfy the SEC staff's disclosure standards and withstand scrutiny.
The ongoing reporting obligations that Tier 2 issuers must satisfy are the aspect of Regulation A that most frequently creates post-qualification enforcement exposure. Companies that complete a Regulation A offering and then fail to maintain their Form 1-K, 1-SA, and 1-U reporting obligations become delinquent filers. The SEC has revoked Regulation A exemptions for failure to maintain required reporting, and the consequences — disgorgement of offering proceeds and potential liability for sales made while delinquent — are severe. The firm advises Tier 2 issuers on their ongoing reporting obligations from the date of qualification through the termination of their reporting obligations.
Read: Regulation A Actually Works — The Reality of SEC Qualification →Schedule a Free Consultation
Contact Frederick M. Lehrer today to discuss your Regulation A offering.