Regulation A+ Tier 1 Offerings Do Not Preempt State Law - YouTube

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

securities and business transactions law firm.

Today is the continuation in a Law Cast series detailing Regulation A+, and in particular,

today I will discuss state law concerns.

Tier 1 offerings do not preempt state law and accordingly, any companies intending to

test the waters for a Tier 1 offering must comply with the individual state laws in which

they intend to qualify the offering.

This process can be expensive and tricky and is only practical for companies that only

intend to sell the offering in a small number of states.

The NASAA offers a coordinated review process that is helpful but I would still only advise

using Tier 1 if the offering is limited in geographic scope.

Although a Tier 2 offering does not require state registration and review, the individual

states specifically maintain the right and jurisdiction to investigate and bring enforcement

actions with respect to fraud or deceit, or unlawful conduct by an issuer, related party

or any broker, dealer or funding portal in any transaction.

Moreover, the states can require a notice filing and the payment of a fee.

The law specifically allows the states to require a copy of any document filed with

the SEC, together with annual or periodic reports of the value of securities sold, or

offered to be sold to persons located in the state as long as such filing is solely for

notice purposes and for the assessment or calculation of a fee.

States may also require the filing of a consent to service of process.

The timing and fees associated with blue sky notice filings vary.

Accordingly, even for covered securities, a review of state blue sky laws is necessary.

As a result of potential blue sky issues when testing the waters under Tier 2, I often use

an added disclaimer as follows: No offer to sell securities or solicitation of an offer

to buy securities is being made in any state where such offer or sale is not permitted

under the blue sky or state securities laws thereof.

No offering is being made to individual investors unless and until the offering has been registered

in that state or an exemption from registration exists.

Acme, Inc. intends to complete an offering under Tier 2 or Regulation A and as such intends

to be exempted from state registration pursuant to federal law.

Although an exemption from registration under state law may be available, Acme may still

be required to provide a notice filing and pay a fee in individual states.

Also, even when an offering is preempted from state blue sky laws, the ability to sell the

offering may not be.

In particular, the federal law offering preemption does not preempt broker-dealer registration

requirements associated with an offering.

Although most states offer an issuer’s exemption from broker dealer registration for those

companies selling their offering directly without a broker-dealer, five states do not

have such an exemption for public offerings such as Regulation A+.

In particular, Florida, New York, Texas, Arizona and North Dakota all require broker dealer

registration for companies who self-underwrite or self-place public offerings.

These states offer a limited broker dealer registration for companies and their officers

and directors that are selling the offering without the assistance of a FINRA member broker

dealer.

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.