Is Regulation A Your IPO Path in the United States?
Regulation A, often referred to as “Reg A,” or “Reg A plus” (Reg A+) is a set of legal registration rules enacted by the U.S. Securities and Exchange Commission (SEC) to facilitate capital raising investors of all kinds in the U.S. public equity markets by smaller companies through a streamlined process. It provides a path to registration under the Securities Act of 1933, making it relatively easier and less costly for companies to offer and sell their securities to the public through a “mini IPO”. Offerings registered with the SEC under Regulation A are open to a broad range of investors, including both accredited and non-accredited investors and the general public.
Guiding an issuer through the Reg A+ IPO registration process is a critical task for your business operating in the United States. As financial regulations become increasingly complex, your company needs to ensure it is adhering to the requirements. Regulation A adherence not only protects investors but also enhances the credibility and reputation of your business.
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Understanding the Regulation A SEC Registration Process
Companies registering their securities offering with the SEC under Regulation A can offer and sell their securities to the public under two different “tiers” – Tier 1 and Tier 2. Each tier has its own requirements and conditions. Under both tiers, issuers must file an offering statement with the SEC using Form 1-A. Mangum & Associates can help your company with the entire process from start to finish. Unlike Regulation D or Regulation Crowdfunding, your company can only accept subscriptions for your securities from investors after your offering statement is qualified (approved) by the SEC staff after a thorough review process that can often take between 3 to 6 months to complete. Our skilled securities lawyers have over 20+ years of experience dealing with the SEC and can assist you with the entire Reg A process.
Meeting Regulation A’s rigorous legal compliance requirements can be challenging for any small business. One of the key challenges is covering the cost. In today’s market environment, companies should be prepared to expend up to $100,000 for legal, accounting, and broker/dealer due diligence costs, not including marketing allowances. Many companies pursuing a Reg A+ IPO will first turn to raise smaller seed capital rounds via Reg D or Reg CF to cover these costs. Raising sufficient capital to pay for the Reg A can be a hurdle, even with the competitive flat-rate fixed fees that Mangum & Associates offers. Navigating the complex regulatory framework of Regulation A can be overwhelming without a dedicated and seasoned securities law firm to provide legal and financial guidance. Mangum & Associates has extensive and specialized expertise in understanding these challenges and can help you streamline your Regulation A campaign to set you up for long-term success.
Common Issues Companies Face Raising Capital with Regulation A
Another common issue is engaging a FINRA-registered broker-dealer to act as an intermediary in the selling of your securities to the public under Regulation A. Some US states prohibit companies from raising capital under Regulation A without involving a broker-dealer. Also, the SEC often will question and unduly delay approving offerings filed under Regulation A unless a FINRA-licensed broker-dealer has been engaged as part of the process. This is an added cost of raising capital that needs to be addressed and your company must have a sufficient amount of money to support these costs as you proceed through the process.
Furthermore, obtaining audited financial statements from a PCAOB (Public Company Accounting Oversight Board) member accounting firm can be a challenge. Even audits for startup companies without an extensive operating history can be expensive and take several months to complete depending upon the size of the audit firm and the complexity of the company’s financial statements. Overcoming these common issues requires careful planning, professional guidance, and a comprehensive understanding of the regulatory landscape. Mangum & Associates has the resources to connect you with the resources you need, including auditors, broker-dealers, etc., and assist you through the entire process.
The Impact of Non-Compliance on Businesses
Non-compliance with Regulation A can have significant implications for your business. One of the key impacts is the potential loss of investor confidence. When your business fails to comply with regulatory requirements, it raises concerns about its financial stability and transparency. This can result in investors pulling their investment commitments and seeking opportunities elsewhere. Non-compliance can also lead to legal consequences, including fines and penalties imposed by regulatory authorities, both federal (SEC) and state.
Comprehensive Solutions for Raising Capital under Regulation A
Mangum & Associates offers comprehensive solutions for your business as you seek to streamline your plans to raise capital under Regulation A. With our deep understanding of SEC regulations and the U.S. Public and Private equity markets, and given our dedication to legal ethical standards, we offer customized strategies to assist businesses in navigating the intricate regulatory landscape of Reg A. One of the key solutions offered by Mangum & Associates is connecting you with the right broker-dealer and financial auditor to help you meet the financial and regulatory requirements of Regulation A.
Additionally, our experts at Mangum & Associates can provide guidance on the issuance of alternative forms of securities such as investment contracts, convertible debt, crypto, blockchain, asset-backed digital tokens, etc., which can be an effective way to raise capital while maintaining flexibility. With us, your business can ensure that you have the necessary resources and guidance to achieve its goals to raise capital under Regulation A.
Mangum & Associates understands that each business is unique and has different needs to raise capital. We offer tailored capital-raising strategies to help companies operating in various industries – ranging from real estate development to cryptocurrencies and from natural resources / alternative energy to artificial intelligence (AI) emerging technologies – meet the specific legal requirements under U.S. federal and state and international securities laws. With our in-depth knowledge of regulations applicable to the private and public capital markets, we help businesses navigate the complex regulatory landscape and ensure adherence to the necessary guidelines. We assist in charting a clear path to legally raise capital and managing clients’ needs to meet the regulatory requirements of Regulation A.
Additionally, we provide guidance on adhering to regulations related to raising capital for USCIS EB5 visa-compatible job-creating real estate projects and companies operating in qualified opportunity zones helping such businesses meet and satisfy all applicable laws and regulations. By harnessing our deep understanding and broad industry experience, we assist our clients in crafting tailored capital-raising strategies that align with your company’s unique needs and objectives.
Documentation and filing procedures are essential components of Regulation A compliance. Mangum & Associates can assist in preparing the necessary paperwork and submitting it to the SEC. This includes preparing a comprehensive offering statement that accurately reflects your business's objectives and planned use of capital. These offering statements provide a clear picture of your company’s business model which is crucial for obtaining SEC approval.
Additionally, your business must ensure accurate and up-to-date audited balance sheets that reflect its current financial position. A balance sheet provides a snapshot of a business's assets, liabilities, and equity and is an important document in assessing your business's adherence to financial regulations. By providing guidance on documentation and filing procedures, and connecting you with competent auditors, we help your business ensure it meets all necessary regulatory requirements.
Why Choose Mangum & Associates for Your Regulation A Legal Needs?
Choosing Mangum & Associates for your Regulation A legal needs offers several advantages. We possess extensive knowledge and proficiency in delivering legal services for businesses across diverse industries, guaranteeing that we can effectively address your unique requirements. As a trusted nationwide and global securities law firm, we understand the complexities of adhering to regulatory frameworks and can guide you through the process seamlessly. Our proficiency in hybrid capital instruments and understanding of Reg A+ and applicable U.S. regulations sets us apart as a leading securities law firm. By choosing us, your business can benefit from our industry knowledge, tailored solutions, and commitment to ensuring legal compliance.
Regulation A compliance entails ensuring that businesses adhere to regulatory requirements related to financial reporting and disclosure. This involves accurately disclosing all material facts and information regarding your company plans and objectives and structuring how investors can participate in the company’s chances of success. Mangum & Associates specializes in guiding your business through these processes, offering deep knowledge of regulatory adherence across various industries and a thorough understanding of regulatory frameworks. By choosing us, your business can benefit from customized solutions, industry knowledge, and a commitment to regulatory adherence.
The Regulation A framework offers two tiers for the amount of capital your business can raise. Tier 1 allows for offerings of up to $20 million within a 12-month period, while Tier 2 permits offerings of up to $75 million in the same timeframe. Each tier comes with its own set of requirements and regulations to ensure adherence and investor protection. Understanding these tiers is crucial when navigating Regulation A offerings to determine the most suitable option for your business's capital-raising needs.
Tier 1 capital under Regulation A allows businesses to raise up to $20 million within a 12-month period. This tier is suited for companies looking to access capital markets without the extensive reporting requirements of Tier 2. By opting for Tier 1, businesses can streamline their fundraising process while still complying with regulatory standards and attracting potential investors. At Mangum & Associates, we stand ready to assist in navigating Tier 1 capital raising, offering tailored solutions and proficiency in regulatory adherence.
Tier 2 under Regulation A presents an opportunity for businesses to raise capital of up to $75 million over a 12-month period. Unlike Tier 1, Tier 2 comes with additional reporting obligations and ongoing disclosures, making it suitable for companies seeking higher investment amounts while still benefiting from relaxed entry requirements as compared to traditional IPOs. At Mangum & Associates, our team of securities attorneys and legal professionals is well-equipped to guide your business through the complexities of Tier 2 capital raising, ensuring regulatory adherence and investor confidence every step of the way.
Capital Raising under Regulation A provides your business with flexible options to raise funds while adhering to specific regulatory frameworks. Tier 1 and Tier 2 offerings cater to different fundraising needs, allowing your company to choose the most suitable pathway based on its goals and investor relations strategies. With specialized guidance from a seasoned securities law firm like Mangum & Associates, navigating the complexities of capital raising becomes a streamlined process, ensuring regulatory adherence and investor trust throughout.
Proficiency in Regulation A for U.S. Companies Raising Capital
Mangum & Associates possesses deep knowledge of Regulation A for U.S. companies raising capital in the U.S. public capital markets. We have a deep understanding of the current regulatory landscape and are well-versed in the guidelines set by the Securities and Exchange Commission (SEC). This proficiency allows us to provide comprehensive regulatory solutions tailored to your specific needs. Whether it is navigating the complex registration process or ensuring adherence to all necessary regulations, we have the knowledge and experience to guide businesses through the entire process. Our commitment to staying up-to-date with the latest regulatory changes ensures that your business can trust us to provide accurate and timely legal support.
Frequently Asked Questions
Mangum & Associates can assist your company in streamlining the Regulation A registration process with the SEC by providing experienced and skilled guidance and support throughout the entire process. We can help ensure that your company personnel understand the requirements and can implement the necessary measures to qualify for SEC approval of the registration. From conducting financial assessments to providing advice on convertible bonds, we can help you navigate the complexities of regulatory requirements.
Raising capital under Regulation A offers several benefits for businesses. Through the transparency and accountability provided to investors under public registration with the SEC, Regulation A allows your business to tap into a wider pool of investors through the public equity markets and secure funding for your projects and growth capital for your company. Public registration under Reg A promotes trust among stakeholders and provides access to capital sources that are otherwise off-limits to private companies.
The offering statement and SEC review process for Regulation A can vary depending on the complexity of a company's operations and the extent of regulatory requirements. It involves assessing the capital adequacy ratio, managing term debt, and ensuring the stability of the financial system. The timeline for SEC registration can range from as little as three months to up to six months or longer depending on the circumstances.
Yes! Startups and small businesses can raise sizable amounts of capital from investors using Regulation A. It provides them with the opportunity to raise capital through the issuance of securities, such as preferred stock, to retail investors of all stripes on their terms – often at better valuations than could be obtained from private venture capital investors. SEC registration under Regulation A allows startups and small businesses to access funding and grow their operations.
Mangum & Associates stands out from other securities law firms due to our over 24 years of experience and proficiency in working with a wide range of businesses around the world to help them legally raise capital in the United States. We have a deep understanding of the regulatory landscape and can provide tailored solutions to meet your individual business needs. Our deep understanding of hybrid financial instruments and current U.S. and international regulations make us a trusted partner in streamlining your Regulation A registration pathway to raise capital.
Reach out to Mangum & Associates Today to Start Raising Capital under Regulation A
Successfully navigating Regulation A with the SEC is vital for businesses seeking to raise capital successfully in today’s U.S. capital markets. Legal missteps or non-compliance can have severe repercussions on operations and growth prospects. Partnering with the seasoned security law firm of Mangum & Associates provides tailored legal solutions and specialized knowledge to streamline your Reg A+ registration process efficiently. Our extensive experience and comprehensive legal services make us a reliable choice for meeting your Reg A regulatory requirements. By choosing us, your company can demonstrate success in adhering to SEC regulations. Embracing adherence to SEC regulations not only fulfills legal obligations but also sets a strong foundation for sustainable business growth. Call us today to schedule a free consultation to learn more about how we can help you raise capital under Regulation A with confidence.
