New Law Orders SEC To Allow Reporting Companies To Use Regulation A+

The President today signed the Economic Growth, Regulatory Relief and Consumer Protection Act. Most of the bill is centered around easing some Dodd-Frank restrictions as they apply to smaller banks. But buried in Section 508, called "Improving Access to Capital," Congress adopted a major change to Regulation A+. Previously, the Reg A+ rules required, in Section 251(b)(2), that a company cannot use Reg A+ if it is subject to the SEC reporting requirements under Section 13 or 15(d) of the Securities Exchange Act immediately prior to the offering. This includes, for example, every company listed on a national exchange such as Nasdaq or the NYSE and many companies that trade over-the-counter. The new law reverses that and orders the SEC to change the rules to permit reporting companies to utilize Reg A+.

In addition, currently, Rule 257 of Reg A+ requires companies completing Tier 2 (raising any amount up to $50 million) offerings to file specified periodic and current reports under what has become known as "light reporting" if they do not become full reporting companies. The new law directs the SEC to amend that to say that a reporting company that conducts a Tier 2 offering going forward will be deemed to have met the periodic and current reporting requirements under that rule if they file what is required of a full permanent SEC reporting company.

What are the implications of this change? Allowing already public and reporting companies to use Reg A+ will provide them access to the unique benefits of this streamlined public offering process. Over-the-counter companies...