A Message from
Under my presidency, NASAA is embarking upon a campaign for “smarter regulation” – regulation that takes advantage of technology to make the offering process more efficient for small businesses without sacrificing important protections for investors.
A first step in this direction involves Regulation A+.
Drawing upon our experience with small businesses that want to create jobs, states are committed to exploring new and innovative ways of fostering small business capital formation. But our experience with investors tells us that we also need to create an environment in which investors feel sufficiently protected.
The trick is to balance the legitimate interests of investors with the legitimate goals of entrepreneurs, and to adopt policies that are fair to both.
Like my colleagues in other states, I have no interest in throwing up needless barriers to economic development.
When a company wants to raise capital by selling securities, the company must first register those securities with the government unless the securities are sold in a way that qualifies for an exemption from the registration process. Title IV of the JOBS Act requires the SEC to adopt a rule to provide an exemption for certain offerings up to $50 million. Because of its similarity to the current exemption under Regulation A, which is capped at only $5 million, this new exemption is commonly referred to as Regulation A+.
These offerings will be exempt from SEC registration under the new Section 3(b)(2) of the Securities Act of 1933, but they will be subject to registration at the state level unless the securities are listed on a national securities exchange or sold to a qualified purchaser as defined by the SEC.
Given the risky nature of investments in startups, and the fact that the states have traditionally been the primary regulator of small offerings, NASAA believes state oversight of these offerings is essential. However, we recognize the need to change some of our longstanding policies to make Reg A+ successful.
Toward that end, NASAA has consulted with a task force of the American Bar Association to develop a proposal that peels back some of our normal guidelines to accommodate this new type of offering.
As part of the proposal, we have designed a multistate review process in which one or two states will take a lead role in reviewing a registration application and working through any deficiencies with the company issuing the securities in a set timeframe.
In addition, we are developing a multistate electronic filing platform that will allow one-stop filing with all states, and we intend to build out that system to accommodate Reg A+ filings. Think of it as the equivalent of a CRD/IARD system for multistate offerings for the corporation finance world.
NASAA recently released for public comment a proposal to establish this new multistate review program.
As we move through this process, NASAA will continue to coordinate and communicate with the SEC in an effort to keep both federal and state requirements in sync.
State securities regulators are committed to helping Regulation A+ achieve its fullest potential.
By working with the ABA and other interested parties, we are attempting to strike the best possible balance so that Regulation A+ will be an attractive option for both the small business that needs capital and the investor who is asked to provide it.
I welcome anyone with an interest in NASAA’s Regulation A+ proposal to contact me with their thoughts or suggestions for improving the state filing experience.