Final Rules Allow Exchange Act Reporting Companies To Use Regulation A

On December 19, 2018, the U.S. Securities and Exchange Commission (the “Commission”) adopted final rules (the “Final Rules”) to allow Exchange Act reporting companies (“Reporting Companies”) to rely on Regulation A for their securities offerings. Prior to the adoption of the Final Rules, Reporting Companies were deemed ineligible to rely on Regulation A. In the words of Chairman of the Commission, Jay Clayton, “Regulation A provides an exemption from registration under the Securities Act for offerings of securities up to $50 million in a 12-month period…The amended rules will provide reporting companies additional flexibility when raising capital.”

The additional flexibility Chairman Clayton is referring to is summarized in the following bullet points:

• Reporting Companies will be able to rely on Regulation A to raise capital; and
• Reporting Companies will not be required to file additional reports. As long as a company remains compliant with Exchange Act reporting requirements, that company will be deemed compliant with Regulation A reporting requirements.

Approximately seven months ago, President Donald J. Trump signed the Economic Growth, Regulatory Relief and Consumer Protection Act (the “Act”) into law. The Act was introduced by the Chairman of the United States Senate Committee on Banking, Housing and Urban Affairs, Senator Mike Crapo, on November 16, 2017. For more background on the Act or for a brief overview of Rulemaking, read my previous blog.

The Final Rules will become effective immediately upon publication in the Federal Register. According to the Federal Register, it usually takes three business days for the Federal Register to process and publish a rule after an agency files it with their office.