Regulation A+ (Mini-IPO)

Regulation A+ — enacted under Section 3(b)(2) of the Securities Act of 1933 as amended by the JOBS Act 2012 and rules effective June 2015 — permits public securities offerings exempt from full SEC registration. Unlike Regulation D, which restricts participation to accredited investors (under Rule 506(c)) or requires burdensome Blue Sky compliance, Reg A+ creates a pathway to raise capital from the general investing public — including retail, non-accredited investors — through a streamlined SEC review process and federal preemption of state Blue Sky laws (for Tier 2).

Tier 1 and Tier 2

Tier 1: Maximum offering size of $20 million in any 12-month period (including up to $6 million on behalf of selling security holders). Tier 1 offerings are subject to review and qualification by both the SEC and by each state in which the securities are sold, making multi-state offerings administratively complex. No individual investment limits apply.

Tier 2: Maximum offering size of $75 million in any 12-month period (including up to $22.5 million by selling security holders). Tier 2 preempts state Blue Sky laws — federal qualification suffices for all US states. However, non-accredited investors are subject to an investment cap: the greater of 10% of their annual income or net worth. Tier 2 issuers must provide audited financial statements and file ongoing annual (Form 1-K), semi-annual (Form 1-SA), and current event (Form 1-U) reports with the SEC.

Most security token issuers pursuing Reg A+ use Tier 2 for its national reach, preemption of state law, and larger raise capacity.

SEC Review Process

Unlike Regulation D (which is self-executing and requires only a Form D filing after first sale), Reg A+ requires SEC qualification before sales may begin. The issuer submits an Offering Statement on Form 1-A, comprising:

• Part I: Notification (basic issuer information)
• Part II: Offering circular (analogous to a prospectus — business description, risk factors, use of proceeds, financial statements)
• Part III: Exhibits (consents, certificates, material agreements)

The SEC reviews the offering circular and issues comments. The process typically takes 60–150 days, significantly longer than a Reg D filing. Testing the waters — soliciting non-binding indications of interest before qualification — is permitted under Reg A+ and used by some token issuers to gauge demand.

Qualified Purchaser Preemption

Reg A+ Tier 2 securities sold to qualified purchasers (as defined in Section 18(b)(3) of the Securities Act) are covered securities, exempt from state qualification requirements. The SEC has defined all purchasers in a Reg A+ Tier 2 offering as qualified purchasers for this purpose, providing de facto national preemption.

Use in Security Token Offerings

Reg A+ has been used in a limited number of security token offerings, including early STOs on platforms such as tZERO and Republic. Its appeal is access to retail investors — a broader pool than accredited-only Reg D raises — without the cost of a full S-1 registration.

However, Reg A+ has limitations in the STO context:

• $75M cap: Insufficient for large real estate or infrastructure tokenization programmes
• Ongoing reporting: Tier 2 annual reports, semi-annual reports, and current event reports create administrative burden for issuers unaccustomed to SEC reporting obligations
• Review timeline: The 60–150 day SEC qualification process is slow relative to Reg D’s self-executing nature
• Trading restrictions: Reg A+ securities are not freely tradable on national exchanges without a separate Exchange Act registration; secondary trading typically occurs on ATSs

Comparison to Full S-1 Registration

A full S-1 registration statement — required for a traditional IPO — subjects the issuer to the complete Securities Act registration and disclosure regime, SEC review of the prospectus, underwriter due diligence, and full ongoing reporting as an Exchange Act reporting company. Reg A+ offers a lighter-touch alternative: SEC qualification rather than registration, audited-only (not PCAOB-audited for Tier 1) financials, and a more limited ongoing reporting obligation.

Related entries: Regulation D, Regulation S, Accredited Investor, Security Token Offering (STO)

Primary source: SEC Regulation A+