300 See discussion in Section II.G. below.
301 The primary purpose of Item 3 (Affiliate Sales) in Part I of Form 1-A (2014) is to ensure compliance with certain restrictions on affiliate resales under Rule 251(b). See discussion in Section II.B.3. above.
We do not, however, believe that the additional disclosure items suggested by some commenters,302 such as the issuer’s website address and the jurisdiction of the issuer’s principal place of business, are necessary additional disclosures in Part I of Form 1-A. As proposed and adopted, Item 1 (Issuer Information) of Part I requires issuers to disclose the location of their principal executive offices, while Item 1 (Cover Page of Offering Circular) of Part II requires issuers to provide investors with their website address, if the issuer has a website. In light of these required disclosures, we do not believe that the additional suggested disclosure items for Part I are necessary or would provide investors with any additional relevant information about the issuer.
Additionally, notwithstanding the view of some commenters,303 we do not believe that
the disclosure requirements for the application of Rule 262 (Disqualification Provisions) in Item 3 to Part I of Form 1-A need to include descriptions and addresses of persons that trigger disqualification for several reasons. An issuer that has a disqualified person involved in its offering will not be eligible to conduct a Regulation A offering, issuers will have to certify their compliance with Rule 262, and, with the exception of the addresses of covered persons, much of the requested disclosure, as it applies to persons that would have been disqualified but whose conduct occurred before effectiveness of the final rules or have received a waiver from disqualification,304 will be required in Part II of
302 NASAA Letter 2; WDFI Letter.
303 Id.
304 Rule 262(b)(1)-(2).
the offering statement.305 Therefore, as proposed and adopted, the final rules for Part I of Form 1-A no longer require the disclosure of such information.
Consistent with a comment received,306 we are making technical amendments to the financial statement requirements of Item 1 (Issuer Information) of Part I to clarify and require the use of certain industry-specific terminology and, wherever possible, to use terminology that is consistent with Regulation S-X and GAAP. These changes are designed to minimize potential confusion on the part of issuers in the banking and insurance industries that could result from the use of more general financial accounting terminology. We disagree, however, with the suggestion that we eliminate the financial statement section.307 As we noted in the Proposing Release, the disclosure of this type of information will provide the Commission (and market participants) with more information about the Regulation A market as it develops to use as it considers potential changes to the regulation in the future. We also believe that the disclosure of this information will provide relevant and useful information about issuers and their offerings to investors and market participants that will help to facilitate informed investment
decisions. We do not anticipate that the disclosure of financial information in response to Item 1 to Part I of Form 1-A will materially alter the compliance obligations of issuers given that the requirements draw from disclosure already required in the financial statements included in the offering circular. Additionally, we are revising Item 1 to
305 See paragraph (a)(2) to Part II of Form 1-A. Additionally, underwriters, those receiving sales commissions and finders’ fees, promoters, counsel, executive officers, directors, and significant securityholders, among others, must be identified in the offering statement in most instances. See, e.g., Item 4 of Part I and Items 1, 10, and 11 of the Offering Circular, Part II of Form 1-A.
306 E&Y Letter.
307 Id.
require issuers to provide up to two e-mail addresses to which the Commission’s staff may send comment letters relating to an offering statement, rather than making this optional as proposed. The e-mail addresses, however, will no longer be disseminated with the filings. We believe this change will result in faster reviews of offering statements by the Commission’s staff.308 Finally, consistent with the concerns underlying a comment we received, we recognize that the use of the term “publicly traded” in the outstanding securities table of Item 1 may be confusing in the context of a Regulation A offering.309 Accordingly, we have revised Item 1 to only request the name of the trading center or quotation medium, if any, for outstanding securities.
Consistent with the views of several commenters,310 we are clarifying that in the fee table included in Item 4 of Part I (Summary Information Regarding the Offering and Other Current or Proposed Offerings), auditor fees only need to be disclosed when the issuer is providing audited financial statements because, for example, an auditor might not be used for a Tier 1 offering.311 This and similar items in the fee table could be left blank if not applicable and responses could be clarified in the text box following the table.
308 In the review of registered offerings the Commission’s staff will call filers to obtain e-mail addresses so as to issue comment letters electronically. Depending on the responsiveness of the filer, this can be a time consuming process.
309 See E&Y Letter.
310 See fn. 292 above.
311 Disclosure is only required in the fee table to the extent applicable fees were incurred by the issuer in connection with the offering.
As suggested by one commenter,312 we are expanding the list of jurisdictions in Item 5 (Jurisdiction in Which Securities are to be Offered) so that issuers can indicate the Canadian provinces in which they intend to conduct their offerings.313
Finally, in response to one comment,314 we are clarifying, in this release, that the
scope of the term “affiliated issuer” in proposed Item 6 of Part I is only meant to include affiliates of the issuer that are issuing securities in the same offering for which qualification is currently being sought under Regulation A. We believe this clarification is necessary in the final rules in order to avoid potential confusion among issuers as to the scope of the definition, in light of the broader definition of “affiliate” as it appears in Securities Act Rule 405.315