Regulation A, generally known as Reg A, exempts public offerings from registration. However, the disclosures needed within this exemption are analogous to those needed in registered offerings. Companies that take advantage of the exemption have significant benefits over others that must register completely.
Firms that use a Reg A can sell and offer their securities to the public in two tiers, each with its own set of rules: Tier 1 and Tier 2. A company’s size determines the different tiers, but there is one requirement that these companies must meet- they must submit an offering statement with the Securities and Exchange Commission, as well as an offering circular, that represents a disclosure document for investors.
Tier 1 offerings are those that are worth up to $20 million in a 12-month period, with a max of $6 million in secondary sales by the issuer’s affiliates. Offers and sales that are related to Tier 1 are susceptible to qualifying criteria and the blue sky registration of relevant countries.
Tier 2 offerings are those that are worth up to $75 million in a 12-month period, with a max of $22.5 million in secondary sales by the issuer’s affiliates. In this case, when we are speaking about offers and sales that are related to Tier 2, they are released from qualifying criteria and the blue sky registration of relevant countries.
Following the completion of their offering, Tier 2 issuers are subject to continuous reporting requirements. That implies- Tier 2 offering investors are susceptible to investment limits or else they are accredited investors or otherwise qualify for an exemption.
