Reg A and Reg D: Evolving Securities Exemptions for Private Offerings

Over the last several years, Congress and the SEC created or expanded several exemptions from federal registration of securities offerings. In November 2020, the SEC established a framework for issuers to move from one exemption to another and increased the current offering and investment limits for certain private offerings. These changes provided new opportunities for capital raising for startups and small companies, without the expense of federal, and in some cases state, registration of securities offerings.

Regulation A+ exempts from registration a securities offering of up to $75 million to a broad base of accredited and unaccredited investors alike. It provides for two tiers of offerings: Tier 1 for offerings up to $20 million and Tier 2 for up to $75 million. Counsel should understand the reporting requirements and state law preemption associated with each.

The FAST Act codified the current practice of private resales of restricted securities, giving greater certainty of exemption to specific sellers under certain circumstances. But the issuer must comply with several conditions on accredited investors, the issuer, and class of securities sold to qualify for the exemption.

Rule 506(c) under Regulation D permits general solicitations to accredited investors, however, issuers must take reasonable steps to verify the accredited investor status of purchasers. The SEC's 2020 amendments to the definition of "accredited investor" expanded the category of investors eligible to participate in private offerings to include those that qualify based on certain professional certifications or credentials, irrespective of wealth. There is pending federal legislation to broaden the definition of accredited investor beyond the current wealth and income thresholds.

Listen as our authoritative panel analyzes the current exemptions available under Regulations A and D and the conditions attached to each. The panel will also discuss the SEC's expansion of "accredited investor" and its impact on private offerings. Lastly, given increased interest in digital assets and cryptocurrencies, the panel will provide a high level overview of the state of regulation under the securities laws relating to such assets.

I. Introduction to Reg A and Reg D exemptions

II. Regulation A+

A. Tier 1 and Tier 2

B. State law preemption

III. FAST Act and the private resale of securities: exemption requirements

IV. Rule 506(b) and 506(c): verifying "accredited investors"

V. Recent SEC guidance

A. Regulation A filing process and related guidance

B. Integration of offerings with other exempt offerings

VI. Digital assets under securities laws

VII. Practitioner pointers and key takeaways

The panel will review these and other key issues:

• What are the different reporting obligations in Tier 1 and Tier 2 offerings under Reg A+?
• What are the conditions imposed under the FAST Act rules to allow for private resales without registration?
• How have the revisions to the accredited investor definition impacted Reg D offerings? What changes are potentially on the horizon in this area based on the pending legislation currently in Congress?
• What are the latest digital asset and cryptocurrency-related developments?