Securities and Exchange Commission Unanimously Approves Regulation A+ Rules under JOBS Act’s Title IV

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CFIRA applauds new Regulation A+ rules as a first step toward securities-based crowdfunding for small- and medium-sized businesses

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The U.S. Securities and Exchange Commission (SEC) unanimously adopted final rules yesterday (March 25, 2015) to expand Regulation A, an existing securities registration exemption, under Title IV of the JOBS Act, often referred to as “Regulation A+.” The expansion of Regulation A will expand capital markets for small public securities offerings. The final rules, which will become effective in the coming months, will preempt state Blue Sky laws for certain offers under Regulation A.

"The Crowdfund Intermediary Regulatory Advocates praises the Commission for moving forward securities rules for small businesses and investors, including unaccredited ones, which will further serve as a catalyst to capital formation and economic stimulus,” said Kim Wales, founder and CEO of Wales Capital and CFIRA executive committee board member. “This is the first real step to true securities-based crowdfunding as intended by the JOBS Act."

The regulations divide Regulation A into Tier 1 and Tier 2:

Tier 1 - requires SEC and state reviews and payment of state filing fees; companies can raise up to $20 million per year; open to unaccredited investors, with no audit required.

Tier 2 - requires SEC review but no state review, companies can raise up to $50 million per year, also open to unaccredited investors (limited to the greater of 10 percent of income or net worth), annual issuer audit is required, and must use a registered transfer agent.

Both tiers are open to unaccredited investors and can be used by existing and new businesses. The SEC is conditionally exempting companies that use Regulation A from having to become fully registered with the SEC by reason of having triggered the number-of-shareholders threshold. Issuers will have the ability to generally solicit and advertise to investors using Regulation A+ for both Tiers 1 and 2.

“Reg A+ should be seen as the first real securities-based ‘crowdfunding’ as this class of securities can be bought by anyone, not just accredited investors,” said D.J. Paul, co-chair of CFIRA and a member of the SEC Advisory Committee on Small and Emerging Companies. “While Title III rules are yet to be finalized, this ruling is a huge step in that direction as it allows working- and middle-class people to buy stock in emerging companies, which was previously only available to the wealthy. It also allows small- and mid-sized companies, which employ over 80 percent of Americans, to access working capital in a way that was previously only available to large companies raising hundreds of millions of dollars through traditional IPOs.”

“This is fantastic news for small businesses, which are the jobs engine of our economy. Regulation A+ and the small public markets it creates will improve capital formation that will create new wealth and help businesses across the country grow and expand,” said Chris Tyrrell, CEO of Offerboard Group and chair of CFIRA.

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About CFIRA
The Crowdfund Intermediary Regulatory Advocates, or CFIRA, was established following the signing of the Jumpstart Our Business Startups (JOBS) Act. CFIRA is an organization formed by the crowdfunding industry’s leading platforms and experts. The group works with the Securities & Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), and other affected governmental and quasi-governmental entities to help establish industry standards and best practices. For more information, visit http://www.CFIRA.org.

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Joy Schoffler
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