Resource Guide: SEC Regulation A + Plus

664 ABA BLS Letter; MoFo Letter.
665 Item 8 to Form 1-U. We have also clarified in Item 8(b) that only periodic reports that contain disclosure regarding unregistered sales of equity securities will reset the five percent reporting threshold for unregistered sales of securities, rather than any periodic report.
666 General Instruction D. to Form 1-U. The hyperlink to EDGAR need only be active at the time of filing of the Form 1-U. Cf. Securities Act Rule 411(c) and Exchange Act Rule 12b-32.
667 ABA BLS Letter; E&Y Letter; Milken Institute Letter.
“current.” We are therefore adopting the timing requirements, as proposed. Additionally, in a change from the proposed rules, the final rules do not limit the availability of incorporation by reference to information previously filed pursuant to Regulation A. We believe that this change will continue to facilitate the provision of required information to investors, while taking a consistent approach to information previously provided to the Commission and publicly available on EDGAR.
Additionally, consistent with the changes made to Form 1-K and Form 1-SA and suggestions of at least one commenter,668 Form 1-U encourages issuers to cross-reference items within the form, where applicable.669 Further, in order to avoid incorporation by reference to stale information without requiring the latest version of the document to be
filed, Form 1-U indicates that, if any substantive modification has occurred in the text of any document incorporated by reference since such document was filed, the issuer must file with the reference a statement containing the text and date of such modification.670 A manually signed copy of the Form 1-U must be executed by the issuer and related signatories before or at the time of filing and retained by the issuer for a period of five years.671 Issuers are required to produce the manually signed copy to the Commission,
upon request.672 Any amendments to the Form 1-U must comply with the requirements
of the applicable items, and be filed under cover of Form 1-U/A.673

668 PwC Letter.
669 General Instruction D. to Form 1-U. We have clarified, however, that like with Form 1-A, they may not add a cross-reference within any financial statements that may be included to disclosures elsewhere.
670 Id.
671 See General Instruction C to proposed Form 1-U.
672 Id.
673 Rule 257(c).
Special Financial Reports on Form 1-K and Form 1-SA

We did not receive any comment on the proposed provisions for special financial reports and are adopting them as proposed with one minor clarifying change. This report serves to close lengthy gaps in financial reporting between the financial statements included in Form 1-A and the issuer’s first periodic report due after qualification of the offering statement. Where applicable, issuers conducting Tier 2 offerings must provide special financial reports analogous to those required under Exchange Act Rule 15d-2.674 The special financial report requires audited financial statements for the issuer’s most recent fiscal year (or for the life of the issuer if less than a full fiscal year) to be filed not later than 120 calendar days after qualification of the offering statement if the offering statement does not include such financial statements.675 The special financial report requires semiannual financial statements for the first six months of the issuer’s fiscal year, which may be unaudited, to be filed 90 calendar days after qualification of the offering statement if the offering statement does not include such financial statements and the offering statement was qualified in the second half of the issuer’s current fiscal year.676 The special financial report must be filed under cover of Form 1-K if it includes audited year end financial statements and under cover of Form 1-SA if it includes semiannual financial statements for the first six months of the issuer’s fiscal year.677 The financial statement and auditing requirements must follow the requirements of those

674 17 CFR 240.15d-2.
675 Rule 257(b)(2)(ii). As adopted, we are revising Rule 257(b)(2)(ii) to reference the fiscal year or other period specified in Rule 257(b)(2)(i)(A), in order to avoid potential confusion about which most recent fiscal year is covered.
676 Id.
677 Id.
forms, and the issuer must indicate on the front page of the applicable form that only financial statements are included.678
Reporting by Successor Issuers
We did not receive any comment on reporting by successor issuers, and we are adopting the proposed rules without change. Where in connection with a succession by merger, consolidation, exchange of securities, acquisition of assets, or otherwise, securities of an issuer that is not subject to the reporting requirements of Regulation A are issued to the holders of any class of securities of an issuer that is subject to ongoing reporting under Tier 2, the issuer succeeding to that class of securities must continue to file the reports required for Tier 2 offerings on the same basis as would have been required of the original Tier 2 issuer.679 The successor issuer may suspend or terminate its reporting obligations on the same basis as the original issuer under Rule 257(d).680
Exchange Act Rule 15c2-11 and Other Implications of Ongoing Reporting under Regulation A‌

Exchange Act Rule 15c2-11 governs broker-dealers’ publication of quotations for securities in a quotation medium other than a national securities exchange.681 The Commission adopted Rule 15c2-11 in 1971 to prevent fraudulent and manipulative trading schemes that had arisen in connection with the distribution and trading of certain unregistered securities.682 The rule prohibits broker-dealers from publishing quotations

678 See General Instruction A.(3) to Form 1-K and General Instruction A.(3) to Form 1-SA.
679 See Rule 257(b)(5).
680 See Section II.E.4. below for a discussion of the suspension or termination of disclosure obligations.
681 17 CFR 240.15c2-11.
682 See Rel. No. 34-39670 (Feb. 17, 1998) (Publication or Submission of Quotations Without Specified Information) (describing Rel. No. 34-9310 (Sept. 13, 1971) [36 FR 18641]). See 17
(or submitting quotations for publication) in a “quotation medium” for covered

over-the-counter securities without first reviewing basic information about the issuer, subject to certain exceptions.683 A broker-dealer also must have a reasonable basis for believing that the issuer information is accurate in all material respects and that it was obtained from a reliable source.684
A broker-dealer can satisfy its obligations under Rule 15c2-11 if it has reviewed and maintained in its records certain specified information. The particular information that is required by the rule varies depending on the nature of the issuer and includes, among other things:
for an issuer that has filed a registration statement under the Securities Act, a copy of the prospectus;
for an issuer that has filed an offering statement under the Securities Act pursuant to Regulation A, a copy of the offering circular; or
for an issuer subject to ongoing reporting under Sections 13 or 15(d) of the Exchange Act, the issuer’s most recent annual report and any quarterly or current reports filed thereafter.685

CFR 240.15c2-11(e)(1) (defining quotation medium as any “interdealer quotation system” or any publication or electronic communications network or other device which is used by brokers or dealers to make known to others their interest in transactions in any security, including offers to buy or sell at a stated price or otherwise, or invitations of offers to buy or sell).
683 17 CFR 240.15c2-11(a); See also Rel. No. 34-29094 (April 17, 1991) [56 FR 19148].
684 See 17 CFR 240.15c2-11 (Preliminary Note).
685 A broker-dealer can also satisfy its review requirements under Rule 15c2-11 by reviewing certain information published pursuant to a Rule 12g3-2(b) exemption for foreign private issuers that claim the registration exemption or information specified in Rule 15c2-11(a)(5) for non-reporting issuers.
Proposed Rules
As proposed, the ongoing reports for Tier 2 offerings under Regulation A, which would update the narrative and financial statement disclosures previously provided in Form 1-A on an annual and semiannual basis, with additional provisions for current reporting, would satisfy a broker-dealer’s obligations under Rule 15c2-11 to review and maintain records of basic information about an issuer and its securities. In this regard, we proposed to amend Rule 15c2-11 to permit an issuer’s ongoing reports filed in a Tier 2 offering under Regulation A to satisfy a broker-dealer’s obligations to review specified information about an issuer and its security before publishing a quotation for a security (or submitting a quotation for publication) in a quotation medium.686
We also solicited comment on other potential effects that Tier 2 ongoing reporting under Regulation A could have under other provisions of the federal securities laws, such as whether timely ongoing Regulation A reporting under Tier 2 should constitute “adequate current public information” for purposes of paragraph (c) of Rule 144.687 Under this provision, issuers are required to make available adequate current public information about themselves, which, for issuers not subject to Exchange Act reporting, must include certain information described in Exchange Act Rule 15c2-11(a)(5).688 We also solicited comment on whether ongoing Regulation A reporting for Tier 2 offerings

686 In addition, we proposed a technical amendment to Rule 15c2-11 to amend subsection (d)(2)(i) of the rule to update the outdated reference to “Schedule H of the By-Laws of the National Association of Securities Dealers, Inc.” which is now known as the “Financial Industry Regulatory Authority, Inc.” and to reflect the correct rule reference.
687 17 CFR 230.144(c).
688 17 CFR 230.144(c)(2); see also 17 CFR 230.15c2-11(a), (g).
should satisfy the information requirements of paragraph (d)(4) of Rule 144A.689 Under that provision, holders of Rule 144A securities must have the right to obtain from the issuer, upon request, a very brief statement of the nature of the issuer’s business and the products and services it offers, the issuer’s most recent balance sheet and profit and loss and retained earnings statements, and similar financial statements for each of the two preceding fiscal years, which information must be “reasonably current.”690
Comments on Proposed Rules

All commenters that addressed Rule 15c2-11 supported amending the rule in the manner proposed.691 Some commenters recommended further amending
Rule 15c2-11(g) to provide that an issuer that is current in its Tier 2 obligations would be deemed to have “reasonably current” financial information, even if its most current balance sheet is as of a date up to nine months old and it has not provided other updated information.692 Most commenters also recommended amending Rule 144(c) to allow for
ongoing reporting under Tier 2 to constitute “adequate current public information.”693

Other commenters recommended amending Rule 144A(d)(4) to allow for ongoing reporting under Tier 2 to satisfy the “reasonably current information” requirements of that rule.694 Although the proposal did not solicit comment on Rule 144(i), one

689 17 CFR 230.144A(d)(4).
690 Id.
691 ABA BLS Letter; Canaccord Letter; CFIRA Letter 1; KVCF Letter; Milken Institute Letter; MoFo Letter; Paul Hastings Letter; Public Startup Co. Letter 1; REISA Letter; WR Hambrecht + Co Letter.
692 ABA BLS Letter; Canaccord Letter; Milken Institute Letter; MoFo Letter.
693 ABA BLS Letter; Canaccord Letter; CFIRA Letter 1; McCarter & English Letter; Paul Hastings Letter; KVCF Letter; Milken Institute Letter; Richardson Patel Letter; REISA Letter; WR Hambrecht + Co Letter.
694 ABA BLS Letter; Canaccord Letter; Milken Institute Letter; MoFo Letter.
commenter recommended amending this rule to allow former shell companies to rely on Rule 144 if they have been current in their ongoing reporting under Regulation A for a certain period of time and without having to file a Form 10.695 One commenter also supported allowing use of the Rule 144 safe harbor for former shell companies that were not previously registered under the Exchange Act and that are now selling securities under Regulation A.696 Another commenter requested that the Commission limit the
prohibitions on reliance on Rule 144 only to Exchange Act registered issuers.697

Final Rules‌

We are adopting final rules for Regulation A that, as proposed, amend Exchange Act Rule 15c2-11(a) so that an issuer’s ongoing reports filed under Tier 2 will satisfy the specified information about an issuer and its security that a broker-dealer must review before publishing a quotation for a security (or submitting a quotation for publication) in a quotation medium. In addition, we are adopting, as proposed, a technical amendment to Rule 15c2-11 to amend subsection (d)(2)(i) of the rule to update the outdated reference to “Schedule H of the By-Laws of the National Association of Securities Dealers, Inc.” which is now known as the “Financial Industry Regulatory Authority, Inc.” and to reflect the correct rule reference.
We are not following the suggestions of some commenters that we adopt provisions in the final rules so that Tier 2 ongoing reports will satisfy the current information requirements of Rule 144 and Rule 144A for the entirety of an issuer’s fiscal

695 McCarter & English Letter.
696 Public Startup Co. Letter 1.
697 Letter from Jason Coombs, Co-Founder and CEO, Public Startup Company, Inc., March 24, 2014 (“Public Startup Co. Letter 2”).
year. While commenters were generally supportive, we do not believe that the frequency of the required Tier 2 ongoing reporting merits a broad determination that such reports will constitute “adequate public information” or “reasonably current information” on a year-round basis. On the contrary, quarterly reporting is an integral part of the resale safe
harbors provided for in Rule 144 and Rule 144A that contemplate the provision of ongoing and continuous information.698 While the semiannual reporting required under the final rules for Tier 2 offerings will result in issuers only having “reasonably current information” and “adequate current public information” for the portions of the year during which the financial statements of such issuers continue to satisfy the respective rules,699 we note that issuers may voluntarily submit on Form 1-U quarterly financial
statements or other information necessary to satisfy the respective rule requirements.700

In such instances, and provided that the financial statements otherwise meet the financial statement requirements of Form 1-SA, such voluntarily provided quarterly information could satisfy the “reasonably current information” and “adequate current public information” requirements of Rule 144 and Rule 144A. An issuer that is therefore current in its semiannual reporting required under the rules and voluntarily provides quarterly financial statements on Form 1-U will have provided reasonably current and adequate current public information for the entirety of such year under Rule 144 and Rule 144A.

698 See, e.g., Rel. No. 33-6099 (Aug. 2, 1979) (Question 20). See also Section 13(a) of the Exchange Act, which contemplates, but does not prescribe, reasonably current information in the context of annual and quarterly reporting. 15 U.S.C. 78m(a).
699 See Securities Act Rule 144(c)(2); Securities Act Rule 144A(d)(4)(ii); Exchange Act Rule 15c2-11(a) and Rule 15c2-11(g).
700 See Item 9 of Form 1-U; see also Section II.E.1.c(3). and fn. 655 above.
Exchange Act Registration of Regulation A Securities‌

Under Section 15(d) of the Exchange Act, an issuer that has had a Securities Act registration statement declared effective must comply with the periodic reporting requirements of the Exchange Act.701 Qualification of a Regulation A offering statement does not have the same effect. An issuer of Regulation A securities would not take on Exchange Act reporting obligations unless it separately registered a class of securities under Section 12 of the Exchange Act, or conducted a registered public offering.702
An issuer registering a class of securities under Section 12 of the Exchange Act must file either a Form 10703 or Form 8-A704 with the Commission. Form 10 is the general form for Exchange Act registration, while Form 8-A is a short-form registration statement. An issuer must use a Form 10 if, at the time it files its registration statement, it is not already subject to a Section 13 or Section 15(d) reporting obligation. An issuer may use Form 8-A if it is already subject to the provisions of either Section 13 or Section 15(d). Additionally, when an issuer that is not already subject to the provisions of either Section 13 or 15(d) plans to list its securities on a national securities exchange contemporaneously with the effectiveness of a Securities Act registration statement, the
Commission staff will not object if that issuer files a Form 8-A in lieu of a Form 10 in

701 While issuers with a Section 15(d) reporting obligation are required to file the same periodic reports as issuers that have registered a class of securities under Section 12, Section 15(d) reporting issuers are not subject to additional Exchange Act obligations (e.g., proxy rules, short- swing profit rules, and beneficial ownership reporting) that apply to Exchange Act registrants.
702 See also Section II.B.6. above for a discussion of the conditional exemption from Section 12(g) adopted in the final rules today.
703 17 CFR 249.210. Foreign private issuers must file a Form 20-F, 17 CFR 249.220f, or, where available, a Form 8-A.
704 17 CFR 249.208a.
order to avoid having the issuer restate the contents of its Securities Act registration statement in its Exchange Act registration statement.705
Proposed Rules

As proposed, issuers conducting offerings under Regulation A that seek to list their securities on a national securities exchange or otherwise register a class of securities under the Exchange Act would be required to file a registration statement on Form 10.
We solicited comment, however, on whether we should provide a simplified means for Regulation A issuers to register a class of securities under the Exchange Act, for example, by permitting such issuers to file a Form 8-A rather than a Form 10 in conjunction with, or following, the qualification of a Regulation A offering statement on Form 1-A.
We also invited comment on ways to facilitate secondary market trading in the securities of Regulation A issuers, such as by encouraging the development of “venture exchanges” or other trading venues that are focused on attracting such issuers.
Comments on Proposed Rules

Many commenters recommended that Regulation A issuers be allowed to use Form 8-A to register a class of securities under the Exchange Act in Tier 2 offerings.706 Some of these commenters limited their recommendation to when the issuer follows the requirements of Part I of Form S-1 in its offering circular.707 Separately, three

705 See Rel. No. 34-38850 (Sept. 2, 1997) [62 FR 39755], at 39757 (“[A]n issuer registering an initial public offering will be permitted to use Form 8-A even though it will not be subject to reporting until after the effectiveness of that Securities Act registration statement.”).
706 ABA BLS Letter; Canaccord Letter; CFIRA Letter 1; CFIRA Letter 2; Fallbrook Technologies Letter; Frutkin Law Letter; McCarter & English Letter; Milken Institute Letter; MoFo Letter; OTC Markets Letter; Paul Hastings Letter; Richardson Patel Letter; WR Hambrecht + Co Letter.
707 ABA BLS Letter; CFIRA Letter 1; WR Hambrecht + Co Letter.
commenters recommended allowing issuers to use a “super” Form 8-A that would require issuers to include any disclosure that is required in a Form 10, but is not included in the chosen offering circular format under Form 1-A.708 Several commenters suggested allowing issuers to use a Form 10 that would go effective immediately as an alternative to filing a Form 8-A.709 This process could be used to register securities under the Exchange Act when a simultaneous exchange listing was not contemplated. Other commenters recommended limiting the use of Form 8-A to situations contemporaneous
with qualification of an offering statement,710 within 12 months of qualification,711 or after a brief time period after an offering statement is qualified.712 Separately, two commenters recommended that Regulation A issuers that become Exchange Act reporting companies be considered “emerging growth companies.”713 One commenter recommended allowing issuers to use Form 8-A but to continue using Regulation A reports until its non-affiliate market capitalization reached $250 million.714
Two commenters encouraged the Commission to foster the development of venture exchanges on which Regulation A securities could be traded,715 while another commenter largely opposed the creation of venture exchanges.716

708 Canaccord Letter; Milken Institute Letter; MoFo Letter.
709 ABA BLS Letter; Canaccord Letter; MoFo Letter.
710 Milken Institute Letter.
711 Frutkin Law Letter; Richardson Patel Letter.
712 McCarter & English Letter.
713 ABA BLS Letter; MoFo Letter.
714 Paul Hastings Letter.
715 Heritage Letter; SBIA Letter.
716 OTC Markets Letter.