Resource Guide: SEC Regulation A + Plus

1096 See discussion in Section II.C.3.b. above.
equity securities; changes in the issuer’s certifying accountant; and non-reliance on previous financial statements.
Form 1-Z is required for issuers in both Tier 1 and Tier 2 offerings to report summary information about a completed or terminated Regulation A offering. Issuers conducting Tier 2 offerings also will be subject to the additional provision in Form 1-Z that relates to the voluntary termination of an issuer’s continuous reporting obligations under Tier 2; however, we expect its use by small entities will be limited.
Although we estimated in the Proposing Release that approximately 188 issuers would enter the proposed Tier 2 ongoing reporting regime every year, we believe that very few small businesses will do so. A small business under our rules will only be required to file ongoing reports under Regulation A if it elects to conduct a Tier 2 offering.
Agency Action to Minimize Effect on Small Entities

The Regulatory Flexibility Act directs us to consider significant alternatives that would accomplish the stated objective of our proposals, while minimizing any significant adverse impact on small entities. In connection with the final amendments and rules, we considered the following alternatives: (1) the establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities; (2) the clarification, consolidation or simplification of compliance and reporting requirements under the rule for small entities; (3) the use of performance rather than design standards; and (4) an exemption from coverage of the rules, or any parts of the rules, for small entities.
We considered whether it is necessary or appropriate to establish different compliance or reporting requirements, timetables, or to clarify, consolidate, or simplify compliance and reporting requirements under the final rules for small entities. We have made several changes from the proposal that may reduce compliance burdens on small entities. For example, in response to public comment, the final rules provide for the further scaling of disclosure items pertaining to executive compensation and related party transactions for entities offering securities pursuant to Tier 1, which are likely to be smaller entities.
With respect to using performance rather than design standards, we used performance standards to the extent appropriate under the statute. For example, issuers have the flexibility to customize the presentation of certain disclosures in their offering statements.1097
We also considered whether there should be an exemption from coverage of the

rules, or any parts of the rules, for small entities. As discussed above, we are adopting different compliance reporting requirements for issuers that qualify $20 million or less in securities annually under Tier 1. Those issuers, which are more likely to be small entities, are not subject to ongoing reporting requirements and the requirement to provide audited financial statements, although such entities retain the flexibility to comply with more rigorous initial and ongoing compliance obligations if they so choose. While audited financial statements are not a Tier 1 requirement, in comparison to the proposed rules, the final rules provide certain additional flexibility as to the independence standards required to be followed by auditors of financial statements for issuers of less

1097 See Section II.C.3.b. above.
than $20 million that conduct Tier 1 offerings—to the extent an issuer elects to provide audited financial statements—by allowing such auditors to comply with the independence standards of either the AICPA or Article 2 of Regulation S-X. We believe that further distinctions in compliance requirements for Form 1-A users beyond the different sets of requirements for Tier 1 and Tier 2 issuers may lead to investor confusion or reduced investor confidence in Regulation A offerings, especially considering that the disclosure requirements are already less than what is required by Form S-1 for registered offerings. Further, we anticipate that the burden for preparing a Form 1-A should be less for
companies at an earlier stage of development and with less extensive operations that are likely to be small entities.1098 For these reasons, we believe that small entities should be covered by the final rules to the extent specified above.
STATUTORY BASIS AND TEXT OF AMENDMENTS

The amendments and forms contained in this document are being adopted under the authority set forth in Sections 3(b), 19 and 28 of the Securities Act of 1933, as amended, Sections 12, 15, 23(a) and 36 of the Securities Exchange Act of 1934, as amended, and Section 304 of the Trust Indenture Act of 1939, as amended.

1098 See discussion in Section IV.A.1. above.
List of Subjects 17 CFR Part 200
Administrative practice and procedure, Authority delegations (Government agencies), Organization and functions (Government agencies).
17 CFR Parts 230, 232, 239, 240, 249, and 260

Reporting and recordkeeping requirements, Securities.

In accordance with the foregoing, title 17, chapter II of the Code of Federal Regulations is amended as follows:
PART 200 – ORGANIZATION; CONDUCT AND ETHICS; AND INFORMATION AND REQUESTS
The authority citation for part 200 is revised to read in part as follows: Authority: 15 U.S.C. 77c, 77o, 77s, 77z-3, 77sss, 78d, 78d-1, 78d-2, 78o-4, 78w,
78ll(d), 78mm, 80a-37, 80b-11, 7202, and 7211 et seq., unless otherwise noted.

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