U.S. Securities & Exchange Commission urges review of Regulation A including Tier 2 resale preemption and at-the-market offerings

The U.S. Securities & Exchange Commission’s Chair, Paul S. Atkins, used remarks to the Small Business Capital Formation Advisory Committee to signal a Commission focus on expanding workable routes for entrepreneurs and smaller public companies to raise capital, with Regulation A positioned as a key area for potential reform alongside continued enforcement against fraud. Regulation A has generated roughly three times as much capital as Regulation Crowdfunding and Rule 504 combined, but represents less than one percent of capital raised under Rules 506(b) and 506(c). Despite the March 2021 increase in the Regulation A offering limit from USD 50 million to USD 75 million, few offerings have sought to use the higher cap and the number of Regulation A offerings has declined over the past two years. Atkins pointed to specific issues for further work, including whether federal preemption from state regulation should apply to secondary resales of Tier 2 securities (a recommendation the Committee made in September 2022 that the Commission has not acted on), whether the current prohibition on at-the-market offerings under Regulation A should be removed, and the reasons for the geographic concentration of Regulation A activity in six states. He also encouraged the Committee to consider broader and targeted amendments to make Regulation A a viable framework for a wider set of issuers, including those offering certain types of crypto asset securities, without disproportionate compliance costs, and indicated he expects quarterly input from the Committee.