What is Regulation A (“Reg A”)?
For emerging companies, raising capital in compliance with U.S. securities laws can feel like navigating a maze. Traditional registered public offerings are costly and time-intensive, while private placements restrict the investor pool. Regulation A (“Reg A”), which is often called a “mini-IPO”, was designed to bridge that gap, giving companies access to public capital markets with a more streamlined regulatory framework.
After more than 30 years advising issuers, investors, and intermediaries, I’ve seen Reg A become one of the most versatile capital-raising tools available to small and mid-sized businesses. Below is a practical overview of how it works and when it makes sense.
The Statutory Framework
Regulation A is an exemption from full Securities Act registration, authorized under Section 3(b) of the Securities Act of 1933 and expanded by the JOBS Act of 2012 (commonly called “Reg A+”).
Unlike private offerings under Regulation D, Reg A offerings are public. Issuers may broadly solicit and sell securities to both accredited and non-accredited investors, subject to specific limits and disclosure requirements.
Companies must file an offering statement with the SEC, but the process is significantly less burdensome than a traditional IPO registration statement.
The Two Offering Tiers
Reg A has two tiers, each with distinct capital limits and compliance obligations.
Tier 1
Raise limit: Up to $20 million in 12 months
Investors: Accredited and non-accredited
Financials: Reviewed (not audited)
State law: Subject to Blue Sky review in each state
Ongoing reporting: Minimal
Tier 1 can work for smaller raises, but multi-state securities compliance often increases cost and complexity.
Tier 2
Raise limit: Up to $75 million in 12 months
Investors: Accredited and non-accredited
Non-accredited cap: 10% of income or net worth
Financials: Audited
State law: Preempted
Ongoing reporting: Annual, semiannual, current reports
Because Tier 2 preempts state registration and allows larger raises, it is far more commonly used.
The Offering Process
While simpler than an IPO, Reg A remains a regulated public offering. Typical steps include:
Structuring – Determine security type, pricing, and raise targets.
Form 1-A Preparation – Includes offering circular, risk factors, business disclosures, MD&A, and financial statements.
SEC Review – The SEC issues comments; once resolved, the offering is “qualified.”
Testing the Waters – Issuers may gauge investor interest before qualification using compliant marketing materials.
Marketing & Sales – Broad advertising is permitted if materials are filed.
Closing & Reporting – Funds close through escrow; Tier 2 issuers begin ongoing reporting.
Issuer Eligibility
Eligible issuers generally include U.S. and Canadian companies that are not already SEC reporting at filing.
Ineligible issuers include:
Blank check (aka “shell”) companies
Investment companies
Certain “bad actor” disqualified issuers
Companies delinquent in SEC reporting
Frequent Reg A users include real estate sponsors, fintech platforms, consumer brands, and growth-stage startups seeking retail participation.
Key Advantages
Access to Retail Investors
Reg A opens the door to the general public, not just accredited investors, expanding the universe of potential investors.
Public Marketing
General solicitation is allowed, enabling online campaigns, social media outreach, and digital platforms.
Potential Liquidity
Reg A securities are not “restricted.” Issuers may pursue OTC quotation or exchange listing, though liquidity is not guaranteed.
Brand Amplification
Investors often become customers and advocates, making the raise a dual financing and marketing event.
Testing the Waters
Pre-qualification marketing reduces execution risk and informs pricing and structure.
Challenges and Costs
Expense
Though cheaper than an IPO, Reg A is not inexpensive. Costs may include:
Securities counsel
Auditors (Tier 2)
SEC filing fees
Marketing/platform costs
Transfer agent and escrow services
Disclosure Liability
As a public offering, Reg A carries federal anti-fraud liability. Disclosure must be accurate, balanced, and complete.
Ongoing Reporting (Tier 2)
Issuers must file:
Form 1-K (annual)
Form 1-SA (semiannual)
Form 1-U (current events)
Execution Risk
Retail raises require sophisticated marketing infrastructure; not all offerings meet minimum targets.
Reg A vs. Other Capital-Raising Paths
Reg D (Rule 506)
Faster, cheaper
Mostly accredited investors
No SEC qualification
Restricted securities
Reg CF (Crowdfunding)
Up to $5M raise
Portal-only
Heavier investor caps
Simpler disclosure
Traditional IPO
Unlimited capital
Exchange listing
Extensive SEC review
Highest cost and burden
Reg A sits between private placements and full registration, giving public capital access with moderated regulation.
Secondary Sales
Reg A can facilitate both primary raises and secondary liquidity for existing shareholders. While this can create exit opportunities, resale markets depend on investor demand and trading platform access.
When Does Reg A Make Sense?
Reg A is typically well-suited where an issuer:
Seeks $10M–$75M in capital
Has a compelling consumer or investor story
Can produce audited financials
Is prepared for public disclosure
Values retail investor participation
Has a credible marketing strategy
Final Thoughts
Regulation A has reshaped the capital-raising landscape by democratizing investment access while offering companies a viable alternative to private placements and IPOs.
It is not a “light” exemption, successful offerings require disciplined disclosure, careful structuring, coordinated marketing, and ongoing compliance. With experienced securities counsel guiding the process from structuring through SEC qualification and reporting, Reg A can be a powerful financing and strategic growth tool.
The key question is not simply whether a company can conduct a Reg A offering, but whether it aligns with its capital needs, investor strategy, and long-term market objectives. When those factors align, Reg A can mark a transformative step in a company’s evolution.
Disclaimer: This blog post is provided for general informational purposes only and does not constitute legal, tax, or financial advice. Reading this post does not create an attorney-client relationship with me or my law firm. Reach out for a consultation and to obtain advice specific to your individual legal needs.