Regulation A and Blue Sky Registration - YouTube

I’m attorney Laura Anthony founding partner of Legal & Compliance, a full service corporate,

securities, and business transactions law firm.

Today is the continuation in a LawCast series talking about Regulation A.

The original Regulation A still required was adopted in the 1960s as sort of short-form

registration process with the SEC.

However, since Regulation A still required a lengthy and expensive state review and qualification

process, known as blue sky registration, over the years it was used less and less until

it was barely used at all.

Literally years would go by with only a small handful, if any, Regulation A filings; however,

the law remained on the books and the authors and advocates behind the JOBS Act saw the

potential to use Regulation A to democratize the IPO process by implementing some changes.

Without going down a rabbit hole on blue sky laws from a high level, in addition to the

federal government, every state has its own set of securities laws and securities regulators.

Unless the federal law specifically pre-empts or overrules state law, every offer and sale

of securities must comply with both the federal and the state law.

There are 54 U.S. jurisdictions, including all 50 states and 4 territories, each with

separate and different securities laws and securities regulators.

Even in states that have identical statutes, the state’s interpretations or focus under

the statutes can differ greatly.

On top of that, each state has a filing fee and a review process that takes time to deal

with.

It’s difficult, time-consuming and expensive.

Title IV of the JOBS Act that was signed into law on April 5, 2012, set out the framework

for the new Regulation A and required the SEC to adopt specific rules to implement the

new provisions, which it did.

The new rules came into effect on June 19, 2015.

New Regulation A, which is often referred to as Regulation A+, has a path to pre-empt

state law, and allows for unlimited marketing as long as certain disclaimers are used, and

of course, subject to antifraud laws; you have to be truthful.

As with all of the provisions in the JOBS Act, Regulation A+ was created to provide

a less expensive and easier method for smaller companies to access capital.

One of the biggest impediments to reaching potential investors has always been strict

prohibitions against marketing offerings, whether the offerings were registered with

the SEC or under a private placement.

Historically, companies wishing to sell securities could only contact people they know and have

a prior business relationship with, which was a small group for anyone.

Even the marketing of non-Regulation A registered offerings and IPO’s have been strictly limited.

The use of a broker-dealer would be helpful because a company could then access that broker’s

client base and contacts, but broker-dealers are not always interested in helping smaller

companies raise money.

And there are good reasons for that.

But that’s a topic for another day.

The JOBS Act made the most dramatic changes to the landscape for the marketing and selling

of both private and public offerings since the enactment of the Securities Act of 1933,

one of which is the overhaul of Regulation A.

In essence, the new Regulation A has given companies a mechanism and tools to empower

them to reach out to the masses in completing an IPO and has concurrently put protections

in place to prevent an abuse of the process.

I am securities attorney Laura Anthony, founding partner of Legal & Compliance, and producer

of LawCast.

Should you have any questions about today’s topic, please visit SecuritiesLawBlog.com

and LawCast.com, or contact me directly.

Inquiries of a technical nature are always encouraged.