Regulation A+ will have little impact leaving most entrepreneurs waiting for additional laws to be passed. The JOBS Act Title II passing in April 2012 inspired the online investing in startups, but limited this market to accredited investors. Title III was expected to allow the reamining 95% of the population to invest, but has been delay to the beginning of 2016.
Regulation A+ rules was released by SEC on March 25, 2015, to help growth companies raise funds from non-accredited investors in a mini-IPO style. Regulation A+ would go into effect 60 days after publication(June 2015). Regulation A+ has different rules for Tier I and Tier II. Tier I is for the companies raising up to $20 million, while Tier II is $1 to $50 million.
Highlights of Regulation A+
- High Maximum Raise: Issuers can raise up to $20,000,000 for Tier 1 and $50,000,000 in a 12 month period for Tier 2.
- Anyone can invest: including non-accredited investors. For Tier 2 investors, however, they will have some limits.
- Investment Limits: For Tier II, individual investors can invest a maximum of the greater of 10% of their net worth or 10% of their net income in a Reg A+ offering (per offering). There is no limits for Tier I investors.
- Self-Certification of Income: Investors can self-certify their income or net wealth and don't need documents to prove their wealth.
- You can advertise your offering: General soliciation or advertise the offering is permitted.
- Offering Circular Approval Required: the issuers need to file a disclosure document and audited financials with the SEC.
- Audited Financials Required: For Tier II, The issuers will be required to provide two-year audited financial statement beside Offering Circular. Tier I only need to offer reviewed financials(not audited).
- Ongoing Disclosure Requirements: For Tier 2, the issuer will be required to make an annual disclosure filing, a semi-annual report, and current reports. These reports will also require ongoing audited financials.There are no ongoing disclosure requirements for Tier 1.
Comments on Regulation A+
"Regulation A+ can be used by every investor, either accredited or non-accredited. Right now all IPO are general limited to people with wide connection. Regulation A+ is going to open up by IPO to allow more people to get into the first step to the bottom line that maybe the extra potential to make money. But it doesn't seem that startups can take many advantages. Regulation A+ is more for the step-up companies, but just smaller. There is still a lot of money and documents to be required. If you don't have a business plan, you can't have a blank check. It is still too expensive for startups to involve.
For Title III, it was delayed because there are too many competing people speaking, and I don't think they want to be involved with any extra potential. It's too hard to make the hood. To pass the Title III, the biggest question is if SEC has the encouragement to do it. I don't think anything there to encourage them to put up Title III rules. Right now they are letting a space into the raw rules. They just give Regulation A with the probability to buy some time."