Regulation A: Questions and Answers

Q: What is the main difference between the new Reg A +

and the old one?
A: $5 million versus $50 million.
Q: Limitations on investors?
A: None, under either new or old Reg A. State laws only apply for
tier 1 (up to $20,000,000) issuers.
Q: Filing requirements?
A: Form 1-A to the SEC for review was necessary for old Reg A.
With new Reg A +, you file the same offering documents you are
distributing to investors.
Q: States?
A: Blue Sky laws apply to Tier 1 (up to $20,000,000) offerings,
ameliorated somewhat by the state registration by coordination
process. Of course if securities are sold on a national securities
exchange state law does not apply.
Q: How about re-sales?
A: No restrictions either way.
Q: What does test the waters mean?
A: It means you can use sales literature before filing your Form 1A. With the new Reg A +, it means you can use sales literature
before filing the offering statement.
Q: Financial statement requirements?
A: Under old Reg A, you needed a current balance sheet and
income statements for the last two years and for any interim
period. Financial statements still must be prepared in accordance

with GAAP but do not have to conform to Regulation S-X and do

not have to be audited. Under the new approach, audited financial
statements must be included in the offering documents only for
tier 2 offerings (up to $50,000,000).
Q: Disqualifications?
A: Felons and bad actors as defined by Securities Act Rule 262 are
disqualified under old Reg A. Felons and bad actors as defined by
Section 926 of the Dodd-Frank Act are disqualified under new Reg
A +. Both apply.
Q: Reporting requirements?
A: Under old Reg A, there are no reporting requirements other
than to disclose use of proceeds. Under new Reg A, audited
financial statements must be filed and given to investors
annually (and the SEC is permitted to ask for periodic disclosures).
Q: Other differences?
A: The new Reg A, Section 12(a) (2) of the Securities Act has
heightened civil liabilities for misrepresentation in offering
documents such as PPMs. Further, the issuer must file audited
financial statements with the SEC each year.
Q: What is wrong with Reg A + offerings?
A: Reg A + offerings are expensive, especially with state
compliance for anything less than $20,000,000, and they are
seldom cost effective for an offering under $5 million. This is for
more than $5,000,000. Less than that and economics may mean
you should stick with, say, Regulation D, Rule 506, either b) or c).
Q: Nomenclature confusion?
A: New Reg A + is actually Reg A under 3(b)(2) of the Act. It is
also referred to as Reg A+while the old Reg A remains simply
as Reg A. The new Reg A + is also known as Title IV of the JOBS
Act.

Q: Pros and cons?

A: New Reg A is expensive, time consuming, and the most similar
to full registration for an issuer. It also has the most potential for
raising a sizable amount of money with a good pitch deck
properly presented on the right online platforms. Initiating a Reg+
offering, while also pursuing a Reg D 506 offering using Rule
506(b or the new Rule 506(c), is one suggestion we have recently
made to more than one client.
Q: Can I do a Reg S offering at the same time as a Reg A
offering?
A: Yes.
Q: Can I register and offer securities on foreign stock
exchanges, such as the BSE?
A: Yes. Regulation S provides a safe harbor for offers and sales of
securities outside the United States and includes a resale safe
harbor. Securities must be sold in offshore transactions and there
can be no selling efforts directed toward the U.S. The SEC has
said it will not integrate Reg S offerings with domestic
unregistered offerings that are in compliance with Rule 506, Rule
144A and other applicable rules. Rule 144A permits general
solicitation for re-sales as long as sales are to qualified
institutional buyers.
Q: How do I go about doing any of this?
A: Contact us. Private Placement Advisors LLC has a team
available to help you design and implement a securities-compliant
action plan for raising funds. 808-238-0398
2015 Private Placement Publishing, Inc.
Follow Douglas Slain at his blog,
www.exemptofferings.com.