Eligible Securities
Proposed Rules
Section 3(b)(3) of the Securities Act limits the availability of any exemption enacted under Section 3(b)(2) to “equity securities, debt securities, and debt securities
convertible or exchangeable into equity interests, including any guarantees of such securities.”65 The proposed rules would have limited the types of securities eligible for sale under both Tier 1 and Tier 2 of Regulation A to the specifically enumerated list of securities in Section 3(b)(3) and also would have excluded asset-backed securities, as defined in Regulation AB, from the list of eligible securities.
Comments on the Proposed Rules
Several commenters supported the exclusion of asset-backed securities from the list of eligible securities.66 One commenter recommended clarifying that warrants exercisable for equity or debt securities are eligible securities.67
Final Rules
We are adopting final rules that limit the types of securities eligible for sale under Regulation A to the specifically enumerated list in Section 3(b)(3), which includes warrants and convertible equity securities, among other equity and debt securities.68 The final rules exclude asset-backed securities from the list of eligible securities.
Asset-backed securities are subject to the provisions of Regulation AB and other rules specifically tailored to the offering process, disclosure, and reporting requirements for such securities. These rules were not in effect when Regulation A was last updated in
65 15 U.S.C. 77c(b)(3).
66 ABA BLS Letter; Carey Letter; Massachusetts Letter 2; NASAA Letter 2; WDFI Letter.
67 ABA BLS Letter.
68 See Rule 261(c); see also Rule 405 (defining “equity security” to include, among other things, warrants and certain convertible securities). We have also revised the proposed definition in Rule 261(c) to clarify that all securities, rather than just equity securities, that are convertible or exchangeable into equity interests are eligible, subject to the other terms of Regulation A.
1992.69 We do not believe that Section 401 of the JOBS Act was enacted to facilitate the issuance of asset-backed securities.
Offering Limitations and Secondary Sales