520 Federal Register / Vol. 84, No. 21 / Thursday, January 31, 2019 / Rules and Regulations 

will submit a report containing this rule 

and other required information to the 

United States Senate, the United States 

House of Representatives, and the 

Comptroller General of the United 

States prior to the rule taking effect. The 

Office of Information and Regulatory 

Affairs (OIRA) has designated this rule 

as not a ‘‘major rule’’ as defined by 5 

U.S.C. 804(2). 

List of Subjects in 12 CFR Part 1083 

Administrative practice and 

procedure, Consumer protection, 

Penalties. 

Authority and Issuance 

For the reasons set forth above, the 

Bureau amends 12 CFR part 1083 as set 

forth below: 

PART 1083—CIVIL PENALTY 

ADJUSTMENTS 

■ 1. The authority citation for part 1083 

continues to read as follows: 

Authority: 12 U.S.C. 2609(d); 12 U.S.C. 

5113(d)(2); 12 U.S.C. 5565(c); 15 U.S.C. 

1639e(k); 15 U.S.C. 1717a(a); 28 U.S.C. 2461 

note. 

■ 2. Section 1083.1 is revised to read as 

follows: 

§ 1083.1 Adjustments of civil penalty 

amounts. 

(a) The maximum amount of each 

civil penalty within the jurisdiction of 

the Bureau of Consumer Financial 

Protection to impose is adjusted in 

accordance with the Federal Civil 

Penalties Inflation Adjustment Act of 

1990, as amended by the Debt 

Collection Improvement Act of 1996 

and further amended by the Federal 

Civil Penalties Inflation Adjustment Act 

Improvements Act of 2015 (28 U.S.C. 

2461 note), as follows: 

TABLE 1 TO PARAGRAPH (A) 

U.S. Code citation Civil penalty description 

Adjusted 

maximum civil 

penalty 

amount 

12 U.S.C. 5565(c)(2)(A) ............................................................. Tier 1 penalty ............................................................................. $5,781 

12 U.S.C. 5565(c)(2)(B) ............................................................. Tier 2 penalty ............................................................................. 28,906 

12 U.S.C. 5565(c)(2)(C) ............................................................. Tier 3 penalty ............................................................................. 1,156,242 

15 U.S.C. 1717a(a)(2) ................................................................ Per violation ................................................................................ 2,014 

15 U.S.C. 1717a(a)(2) ................................................................ Annual cap ................................................................................. 2,013,399 

12 U.S.C. 2609(d)(1) .................................................................. Per failure ................................................................................... 94 

12 U.S.C. 2609(d)(1) .................................................................. Annual cap ................................................................................. 189,427 

12 U.S.C. 2609(d)(2)(A) ............................................................. Per failure, where intentional ...................................................... 190 

12 U.S.C. 5113(d)(2) .................................................................. Per violation ................................................................................ 29,192 

15 U.S.C. 1639e(k)(1) ................................................................ First violation .............................................................................. 11,563 

15 U.S.C. 1639e(k)(2) ................................................................ Subsequent violations ................................................................ 23,125 

(b) The adjustments in paragraph (a) 

of this section shall apply to civil 

penalties assessed after January 31, 

2019, whose associated violations 

occurred on or after November 2, 2015. 

Dated: January 6, 2019. 

Kathleen L. Kraninger, 

Director, Bureau of Consumer Financial 

Protection. 

[FR Doc. 2019–00488 Filed 1–29–19; 4:15 pm] 

BILLING CODE 4810–AM–P 

SECURITIES AND EXCHANGE 

COMMISSION 

17 CFR Parts 230 and 239 

[Release No. 33–10591; File No. S7–29–18] 

RIN 3235–AM42 

Conditional Small Issues Exemption 

Under the Securities Act of 1933 

(Regulation A) 

AGENCY: Securities and Exchange 

Commission. 

ACTION: Final rule. 

SUMMARY: The Securities and Exchange 

Commission is adopting amendments to 

Regulation A under the Securities Act of 

1933 (the ‘‘Securities Act’’). Regulation 

A provides an exemption from 

registration under the Securities Act for 

offerings of securities up to $50 million. 

As mandated by the Economic Growth, 

Regulatory Relief, and Consumer 

Protection Act (the ‘‘Economic Growth 

Act’’), the amendments revise 

Regulation A to permit entities subject 

to the reporting requirements of Section 

13 or 15(d) of the Securities Exchange 

Act of 1934 (the ‘‘Exchange Act’’) to use 

the exemption and provide that entities 

meeting the reporting requirements of 

the Exchange Act will be deemed to 

have met the reporting requirements of 

Regulation A. The amendments also 

make conforming changes to Form 1–A. 

DATES: 

Effective date: January 31, 2019. 

Comment date: Comments regarding 

the collection of information 

requirements within the meaning of the 

Paperwork Reduction Act of 1995 

should be received on or before March 

4, 2019. 

ADDRESSES: Comments may be 

submitted by any of the following 

methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (http://www.sec.gov/ 

rules/final.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number S7– 

29–18 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Brent J. Fields, Secretary, Securities 

and Exchange Commission, 100 F Street 

NE, Washington, DC 20549–1090. 

All submissions should refer to File 

Number S7–29–18. This file number 

should be included on the subject line 

if email is used. To help us process and 

review your comments more efficiently, 

please use only one method. The 

Commission will post all comments on 

the Commission’s internet website 

(https://www.sec.gov/rules/final.shtml). 

Comments are also available for website 

viewing and printing in the 

Commission’s Public Reference Room, 

100 F Street NE, Washington, DC 20549, 

on official business days between the 

hours of 10:00 a.m. and 3:00 p.m. All 

comments received will be posted 

without change. Persons submitting 

comments are cautioned that we do not 

redact or edit personal identifying 

information from comment submissions. 

You should submit only information 

you wish to make available publicly. 

FOR FURTHER INFORMATION CONTACT: 

Charlie Guidry, Staff Attorney, or 


khammond on DSKBBV9HB2PROD with RULES
Federal Register / Vol. 84, No. 21 / Thursday, January 31, 2019 / Rules and Regulations 521 

1 15 U.S.C. 77a et seq. 

2 17 CFR 239.90. 

3 17 CFR 230.251–230.263. 

4Public Law 115–174, 132 Stat. 1296 (2018). 

5 17 CFR 230.251(b)(2). 

6This change to Item 2 of Part I of Form 1–A will 

be implemented on the eXtensible Markup 

Language (XML) based fillable form available on 

EDGAR after the effective date of the amendments. 

Until such time as the change is implemented, we 

will not object if an issuer subject to section 13 or 

15(d) of the Exchange Act that meets the other 

listed eligibility criteria checks the box in Item 2. 

7 17 CFR 239.16b(a). 

8 17 CFR 230.144(c)(1). 

9Rule 251(c) provides issuers with a safe harbor 

that offerings conducted pursuant to Regulation A 

will not be integrated with prior offers and sales of 

securities or with certain subsequent offers and 

sales of securities. See 17 CFR 230.251(c). A 

reporting company issuer contemplating concurrent 

registered and Regulation A offerings will need to 

analyze its specific facts and circumstances with 

regard to integration concerns and the solicitation 

restrictions arising from each offering type. In 

addition, a reporting company issuer conducting an 

offering under Regulation A continues to be subject 

to the requirements of the Exchange Act. For 

example, a reporting company that elects to solicit 

indications of interest in conjunction with a 

prospective Regulation A offering in reliance on 17 

CFR 230.255 (‘‘Rule 255’’) remains subject to 

Regulation FD (17 CFR 244.100–244.102). 

10Prior to the amendments being adopted in this 

release, an issuer that was not subject to the 

reporting requirements of Section 13 or 15(d) of the 

Exchange Act that conducted a Tier 2 Regulation A 

offering and concurrently registered the class of 

securities under the Exchange Act would have had 

its Regulation A reporting obligations suspended, 

regardless of whether it had remained current in 

Exchange Act reporting. Under the amendments, 

such an issuer technically will be subject to both 

reporting regimes; however, as long as the issuer 

remains current in its Exchange Act periodic 

reporting, its Exchange Act reports will be deemed 

to satisfy its ongoing reporting obligations under 

amended Rule 257(b). 

11See Exchange Act Section 12(g)(4) and Section 

15(d)(1), and 17 CFR 240.12g–4 and 240.12h–3 

(‘‘Rules 12g–4 and 12h–3’’). 

12A Tier 2 issuer that has filed all reports 

required by Regulation A for the shorter of: (1) The 

period since the issuer became subject to such 

reporting obligation, or (2) its most recent three 

fiscal years and the portion of the current year 

preceding the date of filing Form 1–Z is permitted 

to immediately suspend its ongoing reporting 

obligation under Regulation A at any time after 

completing reporting for the fiscal year in which the 

offering statement was qualified, if the securities of 

each class to which the offering statement relates 

are held of record by fewer than 300 persons (1,200 

persons for a bank or bank holding company) and 

offers or sales made in reliance on a Tier 2 offering 

statement are not ongoing. See Rule 257(d)(2)–(4). 

Jennifer Zepralka, Office of Small 

Business Policy, Division of Corporation 

Finance, at (202) 551–3460. 

SUPPLEMENTARY INFORMATION: We are 

adopting amendments to 17 CFR 

230.251 (‘‘Rule 251’’) and 17 CFR 

230.257 (‘‘Rule 257’’) under the 

Securities Act.1 We are also amending 

Form 1–A.2

I. Background 

Regulation A 3 provides an exemption 

from the registration requirements of the 

Securities Act for offers and sales of 

securities up to $20 million, for Tier 1 

offerings, or up to $50 million, for Tier 

2 offerings. Under the current rules, 

Regulation A is not available to 

companies subject to the ongoing 

reporting requirements of Section 13 or 

15(d) of the Exchange Act. The 

Economic Growth Act 4 requires that the 

Commission amend Rule 251 of 

Regulation A to allow these reporting 

companies to use the exemption 

provided by Regulation A. In addition, 

under Rule 257(b), an issuer that has 

filed an offering statement for a Tier 2 

offering that has been qualified pursuant 

to Regulation A must file specified 

periodic and current reports with the 

Commission. The Economic Growth Act 

requires that the Commission amend 

Rule 257, with respect to a Tier 2 

offering, to deem a reporting company 

issuer as having met the periodic and 

current reporting requirements of Rule 

257 if such issuer meets the reporting 

requirements of Section 13 of the 

Exchange Act. 

II. Rule Amendments 

A. Amendments to Regulation A and 

Form 1–A 

As mandated by Section 508 of the 

Economic Growth Act, we are amending 

Rule 251 of Regulation A by deleting 

Rule 251(b)(2), which prohibits 

companies subject to the ongoing 

reporting requirements of Section 13 or 

15(d) of the Exchange Act from using 

Regulation A.5 We also are making 

conforming changes to Item 2 of Part I 

of Form 1–A, which lists the issuer 

eligibility criteria to use such form.6

To implement the Economic Growth 

Act’s requirement with respect to Rule 

257 reporting obligations, we are adding 

a new paragraph to Rule 257(b) 

specifying that the duty to file reports 

under Rule 257 shall be deemed to have 

been met if the issuer is subject to the 

reporting requirements of Section 13 or 

15(d) of the Exchange Act and, as of 

each Form 1–K and Form 1–SA due 

date, has filed all reports required to be 

filed by Section 13 or 15(d) of the 

Exchange Act during the 12 months (or 

such shorter period that the registrant 

was required to file such reports) 

preceding such due date. The Economic 

Growth Act provides that an issuer’s 

Regulation A reporting obligations will 

be deemed satisfied if the issuer 

‘‘meets’’ its Exchange Act reporting 

requirements. To implement this aspect 

of the statutory mandate, the 

amendments use a 12-month lookback 

period consistent with the standard 

applied in Commission rules in other 

contexts. Such a lookback period is 

used, for example, in determining 

eligibility to use Form S–8 7 and 

satisfaction of the ‘‘current public 

information’’ requirement of 17 CFR 

230.144 (‘‘Rule 144’’).8

We also are deleting Rule 257(d)(1), 

which currently provides for an 

automatic suspension of the duty to file 

reports under Rule 257 if and so long as 

the issuer is subject to the duty to file 

reports required by Section 13 or 15(d) 

of the Exchange Act. The automatic 

suspension provision will no longer be 

necessary in light of the mandated 

amendment to deem the Rule 257(b) 

obligation met by Exchange Act 

reporting. 

As a result of these amendments, an 

Exchange Act reporting company will 

be eligible to rely upon the Regulation 

A exemption from registration 9 and, 

upon qualification of an offering 

statement for a Tier 2 offering, will 

become subject to Rule 257(b)’s 

reporting requirements. So long as the 

issuer is current in its Exchange Act 

reporting as of the due dates for periodic 

reports on Form 1–K and Form 1–SA 

required under Rule 257(b) (including, 

as applicable, the due dates for any 

special financial reports on such forms), 

its Rule 257 reporting obligation will be 

deemed to be met. However, if at the 

relevant Form 1–K or Form 1–SA due 

date the issuer is not current in its 

Exchange Act reporting, the issuer’s 

Rule 257 reporting obligation will not be 

deemed to be met, and at that time the 

issuer will be required to file Regulation 

A reports.10

In light of the deletion of the 

automatic suspension provision, we are 

also amending Rule 257(e) to clarify the 

operation of the rule if a reporting 

company issuer that is relying on new 

Rule 257(b)(6) to deem its Rule 257 

reporting obligation met then terminates 

or suspends its duty to file reports 

under the Exchange Act in accordance 

with the Exchange Act and relevant 

rules thereunder.11 This revision will 

not change the operation of Rule 257(e). 

If an issuer terminates or suspends its 

reporting obligations under the 

Exchange Act and if the issuer is 

eligible to suspend its Regulation A 

reporting obligation under Rule 

257(d)(2) by filing a Form 1–Z at that 

time, then the ongoing reporting 

obligations under Rule 257 will 

terminate automatically.12 No Form 1– 

Z filing will be required to terminate the 

issuer’s Regulation A reporting 

obligation. If, on the other hand, the 

issuer is not eligible to file a Form 1– 

Z at that time, it will be required to 


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522 Federal Register / Vol. 84, No. 21 / Thursday, January 31, 2019 / Rules and Regulations 

13Part F/S of Form 1–A requires consolidated 

balance sheets, statements of comprehensive 

income, cash flows and changes in stockholders’ 

equity. In addition, the financial statements must be 

prepared in accordance with U.S. GAAP (or 

International Financial Reporting Standards (IFRS) 

as issued by the International Accounting Standards 

Board (IASB) for Canadian issuers), which requires 

footnotes. 

14 17 CFR part 210. 

15As noted above, under paragraph (b)(2) of Part 

F/S, a reporting company issuer conducting a Tier 

1 offering that has available audited financial 

statements prepared for other purposes is required 

to include such audited financial statements in its 

Form 1–A. As is the case for non-reporting 

companies, reporting company issuers in either Tier 

1 or Tier 2 offerings will not be permitted to 

incorporate their financial statements by reference 

into the Form 1–A or any amendment thereto. 

16Part F/S requires issuers in both Tier 1 and Tier 

2 offerings to include financial statements in Form 

1–A that are dated not more than nine months 

before the date of non-public submission, filing, or 

qualification, with the most recent annual or 

interim balance sheet not older than nine months. 

For filings made more than three months but no 

more than nine months after the end of the issuer’s 

most recently completed fiscal year end, issuers are 

required to include a balance sheet as of the two 

most recently completed fiscal year ends. For filings 

made more than nine months after the end of the 

issuer’s most recently completed fiscal year end, the 

balance sheet is required to be dated as of the two 

most recently completed fiscal year ends and an 

interim balance sheet must be included as of a date 

no earlier than six months after the end of the most 

recently completed fiscal year. If interim financial 

statements are required, they must cover a period 

of at least six months. 

17See 17 CFR 230.252(a). 

18Public Law 112–106, 126 Stat. 306. 

19See Section 2(a) of the Sarbanes Oxley Act, 15 

U.S.C. 7201(a). 

commence its Regulation A reporting 

with the report covering the most recent 

financial period after that included in 

any effective registration statement or a 

filed Exchange Act report. 

Finally, we are making a technical 

amendment to Rule 251(b)(6) to define 

the term ‘‘Exchange Act.’’ This term had 

been defined in Rule 251(b)(2), which is 

being deleted. 

B. Implementation Guidance 

Because we are limiting the rule 

amendments adopted in this release to 

those necessary to implement the 

Economic Growth Act’s mandate, we are 

providing the following guidance to 

clarify the operation of our rules in the 

context of a Regulation A offering by an 

Exchange Act reporting company. 

1. Financial Statements to be Provided 

in Form 1–A 

In both Tier 1 and Tier 2 offerings, 

issuers are required to file financial 

statements for the two previous fiscal 

years (or such shorter time that they 

have been in existence).13 Tier 1 and 

Tier 2 issuers have different form and 

content requirements for their financial 

statements. Part F/S of Form 1–A 

permits Tier 1 issuers to follow the 

requirements set out in Part F/S, rather 

than the requirements in Regulation S– 

X.14 In contrast, Tier 2 issuers are 

required to follow 17 CFR 210.8–01 

through 210.8–08 (‘‘Article 8 of 

Regulation S–X’’), as if the issuer were 

a smaller reporting company conducting 

a registered offering on Form S–1, 

except the age of financial statements 

may follow the Part F/S requirements. 

Another difference between the two 

tiers is in the audit requirements for 

such financial statements. In a Tier 1 

offering, the financial statements are not 

required to be audited, although 

paragraph (b)(2) of Part F/S states that: 

(i) If an issuer has already obtained an 

audit of its financial statements for other 

purposes, (ii) if that audit was 

performed in accordance with U.S. 

Generally Accepted Auditing Standards 

(‘‘U.S. GAAS’’) or the standards of the 

Public Company Accounting Oversight 

Board (‘‘PCAOB’’), and (iii) if the 

auditor was independent pursuant to 

the standards of either 17 CFR 210.2–01 

(‘‘Rule 2–01 of Regulation S–X’’) or of 

the American Institute of Certified 

Public Accountants, then those audited 

financial statements must be filed. The 

financial statements in a Tier 2 offering 

are required to be audited in accordance 

with either U.S. GAAS or the standards 

issued by the PCAOB, and the report 

and qualifications of the independent 

accountant must comply with the 

requirements of 17 CFR 210.2–01 

through 210.2–07 (‘‘Article 2 of 

Regulation S–X’’). The accounting firm 

conducting the audit for any audited 

financial statements included in an 

offering circular may, but need not, be 

registered with the PCAOB. 

We are not at this time amending the 

requirements of Part F/S. Exchange Act 

reporting companies using Regulation A 

are therefore required, at a minimum, to 

include in the Form 1–A financial 

statements for the two previous fiscal 

years (or such shorter time that they 

have been in existence), prepared in 

accordance with the form and content 

requirements of Part F/S.15 Similarly, 

with respect to the age of financial 

statements required in a Form 1–A, we 

are not amending the age requirement 

applicable to Regulation A offerings at 

this time.16 However, under 17 CFR 

230.252 (‘‘Rule 252 of Regulation A’’), 

issuers must include in an offering 

statement ‘‘any other material 

information necessary to make the 

required statements, in light of the 

circumstances under which they are 

made, not misleading.’’ 17 Therefore, if 

at the time a reporting company issuer 

files a Form 1–A (or when the offering 

statement is qualified), it has made 

publicly available more recent audited 

or reviewed financial statements 

prepared in accordance with the 

standard required for the issuer’s 

Exchange Act reports, including such 

financial statements in the offering 

statement may be necessary to make the 

required statements therein, in light of 

the circumstances under which they are 

being made, not misleading. 

2. New or Revised Accounting 

Standards 

Part F/S of Regulation A permits 

issuers, where applicable, to delay the 

implementation of new accounting 

standards to the extent such standards 

provide for delayed implementation by 

non-public business entities, similar to 

accommodations for emerging growth 

companies under Section 102(b) of the 

Jumpstart Our Business Startups Act 

(‘‘JOBS Act’’).18 This accommodation 

will continue to be available to issuers 

that are not reporting companies (i.e., 

are not ‘‘issuers’’ for purposes of the 

Sarbanes-Oxley Act) 19 at the time of 

their Regulation A offering. However, it 

does not apply to a reporting company 

issuer (including an emerging growth 

company that did not elect delayed 

implementation in connection with its 

initial registration of securities) that is, 

at the time of the Regulation A offering, 

subject to the rules that apply to public 

business entities. 

3. Canadian Issuers 

Regulation A is available only to 

companies organized in and with their 

principal place of business in the 

United States or Canada. Outside the 

Regulation A framework, a Canadian 

company may file reports with the 

Commission under the Exchange Act 

multijurisdictional disclosure system 

(‘‘MJDS’’). The MJDS allows eligible 

Canadian issuers to register securities 

under the Securities Act and to register 

securities and report under the 

Exchange Act by use of documents 

prepared largely in accordance with 

Canadian requirements. A Canadian 

reporting company issuer, whether or 

not filing under the MJDS, will be 

deemed to have met its Rule 257 

reporting obligations so long as it is 

current in its applicable Exchange Act 

reporting obligations. The disclosure 

requirements for Canadian issuers 

reporting under the MJDS will continue 

to be established under home country 

standards. The other implementation 

guidance provided in this Section B also 

applies to Canadian reporting company 

issuers. 


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Federal Register / Vol. 84, No. 21 / Thursday, January 31, 2019 / Rules and Regulations 523 

20See Rule 12g5–1(a)(7). To take advantage of 

Rule 12g5–1(a)(7), an issuer must have had, as of 

the last business day of its most recently completed 

semiannual period, a public float of less than $75 

million or a public float of zero and annual 

revenues of less than $50 million as of its most 

recently completed fiscal year. Rule 12g5–1(a)(7) 

also requires that the issuer is required to file 

reports pursuant to Rule 257(b) of Regulation A, is 

current in filing annual, semiannual and special 

financial reports as of its most recently completed 

fiscal year end, and has engaged a transfer agent 

registered pursuant to Section 17A(c) of the 

Securities Act to perform the function of a transfer 

agent with respect to the securities. 

21 15 U.S.C. 77c(b)(5). 

22See 5 U.S.C. 553(b). 

23 Id. 

24This finding also satisfies the requirements of 

5 U.S.C. 808(2), allowing the amendments to 

become effective notwithstanding the requirement 

of 5 U.S.C. 801 (if a federal agency finds that notice 

and public comment are impractical, unnecessary, 

or contrary to the public interest, a rule shall take 

effect at such time as the federal agency 

promulgating the rule determines). The 

amendments also do not require analysis under the 

Regulatory Flexibility Act. See 5 U.S.C. 604(a) 

(requiring a final regulatory flexibility analysis only 

for rules required by the APA or other law to 

undergo notice and comment). 

25See 5 U.S.C. 553(d). 

26 Id. 

27 Id. 

28Section 2(b) of the Securities Act [15 U.S.C. 

77b(b)] requires the Commission, when engaging in 

rulemaking where it is required to consider or 

determine whether an action is necessary or 

appropriate in the public interest, to consider, in 

addition to the protection of investors, whether the 

action will promote efficiency, competition, and 

capital formation. 

29See Report to Congress, Access to Capital and 

Market Liquidity (Aug. 2017), https://www.sec.gov/ 

files/access-to-capital-and-market-liquidity-study2017.pdf, at 49–51. 

30Offerings are identified based on CIK and file 

number; offerings that were withdrawn or 

abandoned are excluded; offerings identified as 

duplicates are consolidated. Amendments are 

consolidated with the original offering for purposes 

of the number of offerings. Rounding affects totals. 

Dollar amounts sought are based on the maximum 

offering amounts reported by companies in Parts I 

and II of Form 1–A. 

31Capital raised is based on information reported 

by companies in Forms 1–Z, 1–K, 1–SA, 1–U, and 

offering circular supplements pertaining to 

completed and ongoing Regulation A offerings and 

post-qualification amendments, and for issuers 

whose shares have become exchange-listed, 

information from other public sources. Estimates 

represent a lower bound on the amounts raised 

given the time frames for reporting proceeds 

following completed or terminated offerings and 

Continued 

4. Securities ‘‘Held of Record’’ for 

Section 12(g) Purposes 

Under 17 CFR 240.12g5–1(a)(7) (‘‘Rule 

12g5–1(a)(7)’’), Tier 2 securities issued 

by certain small reporting companies 

may, subject to certain conditions, be 

excluded from the count of securities 

‘‘held of record’’ for purposes of 

Exchange Act Section 12(g).20 We are 

not amending this provision at this 

time. As a result, securities issued in a 

Tier 2 offering by an Exchange Act 

reporting company that meets the 

requirements of the rule will be 

excluded from the ‘‘held of record’’ 

count. 

C. Future Review 

Section 401 of the JOBS Act added 

Section 3(b)(5) 21 to the Securities Act, 

which requires the Commission to 

review the $50 million Tier 2 offering 

limit not later than two years after 

enactment of the JOBS Act and every 

two years thereafter. The Chairman 

directed the staff to begin the next 

review in 2019. In connection with such 

review or in other future rulemaking, 

the Commission may explore whether 

additional changes to Regulation A 

should be made to address the 

application of the rule to Exchange Act 

reporting companies, including the 

topics addressed in Section B of this 

release. 

III. Procedural Matters 

The Administrative Procedure Act 

(‘‘APA’’) generally requires an agency to 

publish notice of a proposed rulemaking 

in the Federal Register and provide an 

opportunity for public comment.22 This 

requirement does not apply, however, if 

the agency ‘‘for good cause finds . . . 

that notice and public procedure are 

impracticable, unnecessary, or contrary 

to the public interest.’’ 23

As discussed above, Section 508 of 

the Economic Growth Act directs the 

Commission to amend Rules 251 and 

257 of Regulation A to permit entities 

subject to the reporting requirements of 

Section 13 or 15(d) of the Exchange Act 

to use Regulation A and to provide that 

entities meeting the reporting 

requirements of the Exchange Act will 

be deemed to have met the reporting 

requirements of Regulation A. Because 

the amendments are necessary to 

conform Regulation A to the 

requirements of the Economic Growth 

Act and involve limited exercise of 

agency discretion, we find that notice 

and public comment are unnecessary.24

The APA also generally requires that 

an agency publish an adopted rule in 

the Federal Register 30 days before it 

becomes effective.25 This requirement, 

however, does not apply if the agency 

finds good cause for making the rule 

effective sooner.26 For the same reasons 

as we are forgoing notice and comment, 

we find good cause to make the rules 

effective immediately upon publication 

in the Federal Register. In addition, we 

find that the amendments relieve a 

restriction in our rules.27

IV. Economic Analysis 

We are mindful of the costs imposed 

by and the benefits obtained from our 

rules and amendments.28 The 

discussion below addresses the 

potential economic effects of the 

amendments, including the likely 

benefits and costs. The Commission is 

adopting amendments to implement the 

specific statutory mandates of Section 

508 of the Economic Growth Act. 

Accordingly, the costs and benefits of 

the amendments stem almost entirely 

from the statutory mandates of Section 

508. 

At the outset, we note that, where 

possible, we have attempted to quantify 

the economic effects of the 

amendments. However, in some cases 

we are unable to quantify the economic 

effects. For example, it is difficult to 

quantify the number of reporting 

companies that will use Regulation A 

instead of a registered offering; the 

extent to which the amendments will 

attract new issuers; the types of 

reporting companies that will rely on 

Regulation A; and the effects of 

Regulation A’s use by reporting 

companies on the amount and cost of 

capital raised in the Regulation A 

market. As we discuss below, the effects 

of the amendments are likely to be 

driven by issuers switching from small 

registered offerings to Regulation A 

offerings, which may limit the aggregate 

net economic effects of the 

amendments. We discuss the potential 

effects of the amendments relative to the 

baseline, which includes existing 

Regulation A requirements and market 

practices, as well as information about 

reporting companies and other parties 

likely to be affected by the amendments. 

A. Baseline and Affected Parties 

1. Regulation A 

As discussed in Section I above, 

Regulation A is an exemption from 

registration under the Securities Act 

that includes two overlapping offering 

tiers (Tier 1—$20 million limit; Tier 2— 

$50 million limit) with different 

requirements. Companies subject to 

Exchange Act reporting requirements 

were ineligible to use Regulation A prior 

to the amendments being adopted in 

this release. 

Regulation A’s use has increased in 

relative terms since the 2015 

amendments.29 However, Regulation 

A’s use remains modest in absolute 

terms. Between June 19, 2015 (the 

effective date of the 2015 amendments) 

and September 30, 2018, there were 

approximately 260 qualified offerings 

seeking up to approximately $5.8 billion 

in the aggregate.30 In the same period, 

approximately $1.3 billion in aggregate 

proceeds was reported to have been 

raised by 123 issuers.31 Tier 2 accounted 


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given that offerings qualified during the report 

period may be ongoing. In particular, proceeds in 

ongoing offerings disclosed in periodic reports of 

Tier 2 issuers may be amended at a future date. 

Issuers that report proceeds of zero are excluded 

from the count. Changes over time in cumulative 

amounts reported raised may reflect the timing of 

reporting by the company rather than the time at 

which the capital was raised, and therefore should 

not be used to gauge trends in capital raising 

activity. If an issuer reported proceeds both from a 

Tier 1 and a Tier 2 offering, that issuer is counted 

twice (once under Tier 1 and once under Tier 2). 

32Under Section 18(b)(1) of the Securities Act, 

securities that are listed or authorized for listing on 

a national securities exchange are exempt from state 

securities law registration and qualification 

requirements. See Section 18(b)(1), 15 U.S.C. 

77r(b)(1). 

33The estimate is based on the number of unique 

issuers with registration statements on Forms S–1, 

S–3, S–4, S–11, F–1, F–3, F–4, and F–10, excluding 

amendments, declared effective during calendar 

year 2017 with registration size up to $50 million. 

Issuers incorporated outside the U.S. and Canada 

and issuers with SIC code 6770 (denoting blank 

checks) are excluded. Data is obtained from 

Intelligize. 

34 Id. Issuers that had at least one registration 

statement on Form S–3 or F–3 declared effective, 

irrespective of registration size, during calendar 

year 2017 are excluded. 

35The number of Regulation A issuers is based on 

the number of unique filers of Form 1–A or prequalification amendments to it that were qualified 

during calendar year 2017, excluding offerings 

withdrawn after qualification. Regulation A issuers 

that became reporting companies are identified 

based on subsequent exchange listing, effectiveness 

of registration on Form 8–A, or subsequent filing of 

Exchange Act reports after the qualification of a 

Regulation A offering. Given the short period of 

observation and small number of issuers, it is not 

possible to conclude whether that period was an 

outlier. 

36 Id. 

37This estimate is based on Form BD filings as 

of December 2017. It is not limited to underwriters 

of small offerings due to data availability reasons. 

38This would be particularly applicable to issuers 

offering securities in states with merit review. 

39Non-accredited investors in Tier 2 offerings of 

non-exchange-listed securities may invest no more 

than 10% of the greater of their income or net worth 

in a given offering. See 17 CFR 230.251(d)(2)(i)(C). 

40See Regulation A Adopting Release, 80 FR 

21806, 21840 (April 20, 2015) (‘‘Regulation A 

Adopting Release’’). 

41While Regulation A solicitation provisions are 

the same for both tiers, blue sky restrictions may 

limit solicitation before state qualification of a Tier 

1 offering. See Regulation A Adopting Release, fn. 

998. 

for most of the Regulation A capital 

raising activity (approximately 180 

qualified offerings seeking up to 

approximately $5.1 billion with 

approximately $1.1 billion in aggregate 

proceeds reported raised by 98 issuers). 

In other words, Tier 2 accounted for 

approximately 88% of the amount 

sought to be raised and approximately 

85% of the amount reported to have 

been raised during this period. 

2. Affected Parties 

The amendments will affect reporting 

companies that will be newly eligible to 

seek financing under Regulation A. We 

anticipate that the amendments will 

affect U.S. and Canadian reporting 

companies seeking to conduct a public 

offering within the Regulation A 

offering limit. Among such issuers, the 

amendments will likely have the most 

impact on issuers in offerings of 

securities that fall within Regulation A 

offering limits and that are not listed on 

a national securities exchange (because 

blue sky preemption is available for Tier 

2 of Regulation A, but is generally not 

available for non-exchange-listed 

securities sold in registered offerings).32

This may afford issuers additional 

flexibility in raising capital and lower 

their costs. Among such issuers, 

reporting company issuers ineligible for 

a streamlined registration process on 

Form S–3 or F–3 may be incrementally 

more likely to rely on Regulation A (due 

to incrementally lower preparation costs 

of Form 1–A). During calendar year 

2017, there were approximately 584 

reporting companies with registered 

securities offerings of up to $50 million 

that may be eligible for Regulation A 

under the amendments, including 

approximately 267 of those that were 

not exchange-listed.33 Excluding issuers 

that have used Form S–3 or F–3,34 there 

were approximately 326 reporting 

companies with registered securities 

offerings of up to $50 million that may 

be eligible for Regulation A under the 

amendments, including approximately 

215 that were not exchange-listed. In 

addition, we expect that the 

amendments may affect past Regulation 

A issuers that became reporting 

companies to the extent that such 

issuers may seek follow-on Regulation A 

financing. Among issuers in Regulation 

A offerings that were qualified during 

calendar year 2017, nine became 

reporting companies during that 

period.35

The amendments also may affect 

Regulation A issuers that are not 

reporting companies to the extent that 

they compete for capital with reporting 

companies that are newly eligible for 

Regulation A. During calendar year 

2017, there were approximately 90 

issuers in qualified Regulation A 

offerings, including issuers that later 

became reporting companies.36

However, the extent of competition for 

capital in the Regulation A market may 

remain unchanged if the amendments 

draw additional investors to the 

Regulation A market, as discussed in 

Section IV.B.3 below. 

The flexibility afforded by the 

amendments may lead some new issuers 

that are not reporting companies and 

that have not previously conducted a 

public offering to seek Regulation A 

financing or to become a reporting 

company. 

The amendments also will affect 

Regulation A investors and 

intermediaries. Data on the number of 

Regulation A investors is not available 

to us because this information is not 

required to be disclosed. Currently very 

few intermediaries participate in the 

Regulation A market. Based on Part I of 

Form 1–A, approximately 30 

intermediaries received underwriting or 

sales compensation or served as 

promoters or finders in Regulation A 

offerings qualified during calendar year 

2017. The flexibility afforded by the 

amendments may lead intermediaries 

that have not previously participated in 

Regulation A offerings to begin 

participating in such offerings. Overall, 

there were approximately 971 registered 

broker-dealers that reported being 

underwriters or selling group 

participants for corporate securities in 

2017.37 Such intermediaries may 

increase their participation in 

Regulation A offerings after the 

amendments. 

B. Economic Effects of the Amendments 

1. Amendments to Rule 251 

Below we discuss the potential 

economic effects of the amendments to 

Rule 251(b) that permit companies 

subject to Exchange Act reporting 

obligations to rely on Regulation A. 

a. Effects on Issuers 

Reporting companies that are newly 

eligible under Regulation A may realize 

several benefits from the amendments. 

First, reporting companies may 

benefit from the additional flexibility in 

raising capital permitted under 

Regulation A. Reporting companies 

offering securities not listed on a 

national exchange that use Tier 2 are 

eligible for blue sky preemption, which 

can expedite the offering process, allow 

offerings involving a wider range of 

reporting companies and offering 

terms,38 and enable offers of securities 

in multiple states to a broader range of 

investors.39 However, Regulation A does 

not permit at-the-market offerings, 

which may limit the attractiveness of 

this offering method for some reporting 

companies.40

Second, Regulation A, particularly 

Tier 2,41 may also provide additional 

flexibility with respect to solicitation of 

investor interest (i.e., ‘‘test-the-waters’’ 

communications), as compared to 

registered offerings, particularly for 

reporting companies that either do not 

qualify as emerging growth companies 


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42Section 5(d) of the Securities Act allows EGCs 

to test the waters with qualified institutional buyers 

and institutional accredited investors without a 

requirement to file test-the-waters materials. 

However, EGCs may not solicit other investors 

under Section 5(d). Non-EGC issuers may not rely 

on Section 5(d). 

43See 17 CFR 230.255. 

44See 17 CFR 230.251(c). As noted above, a 

reporting company issuer contemplating concurrent 

registered and Regulation A offerings will need to 

analyze its specific facts and circumstances with 

regard to integration concerns and the solicitation 

restrictions arising from each offering type, as well 

as the application of Regulation FD. 

45The average preparation burden of Form 1–A 

for purposes of the PRA is 750 hours. The average 

preparation burden of a registration statement 

varies depending on registration statement type. For 

example, the average preparation burden for 

purposes of the PRA is: 4,104 hours for Form S– 

4; 783 hours for Form S–11; 1,713 hours for Form 

F–1; and 1,461 hours for Form F–4. In turn, the 

average preparation burden for purposes of the PRA 

is 671 hours for Form S–1. The preparation burden 

may also vary from issuer to issuer. Average 

preparation burdens are included on the cover page 

of each referenced form at https://www.sec.gov/ 

forms. 

46See 17 CFR 239.13, 17 CFR 239.33, and supra 

note 34 and accompanying text. For issuers using 

registration statements on Form S–3 or F–3, the 

average preparation burden is estimated to be lower 

than the average preparation burden of Form 1–A. 

The average preparation burden for purposes of the 

PRA is 475 hours for Form S–3 and 170 hours for 

Form F–3. The preparation burden may also vary 

from issuer to issuer. Average preparation burdens 

are included on the cover page of each referenced 

form at https://www.sec.gov/forms. 

47The MJDS allows eligible Canadian issuers to 

register securities under the Securities Act and to 

register securities and report under the Exchange 

Act by use of documents prepared largely in 

accordance with Canadian requirements. See 

https://www.sec.gov/corpfin/cf-manual/topic-16. 

The preparation burden of such forms estimated for 

purposes of the PRA is relatively low: 4 hours for 

Form F–7; 1 hour for Form F–8; 29 hours for Form 

F–10; and 2 hours for F–80. The preparation burden 

may also vary from issuer to issuer. Average 

preparation burdens are included on the cover page 

of each referenced form at https://www.sec.gov/ 

forms. Based on EDGAR data, approximately 56 

Canadian issuers had a registration statement on 

one of these forms declared effective during 

calendar year 2017. 

48See 17 CFR 240.12g5–1. 

49However, under Section 3(b)(2)(D) of the 

Securities Act, the civil liability provisions of 

Section 12(a)(2) apply to any person offering or 

selling securities under Regulation A. Further, 

antifraud liability provisions in Section 17 of the 

Securities Act apply to any person who commits 

fraud in the offer or sale of securities. See 

Regulation A 2015 Adopting Release, fn. 538. 

50State regulators retain the authority to require 

the filing with them of any documents filed with 

the Commission. See Regulation A 2015 Adopting 

Release, fn. 277. Thus, Tier 2 issuers may incur the 

cost of complying with state notice filing 

requirements. Further, issuers remain subject to 

state registration requirements with respect to Tier 

1 securities and registered securities not listed on 

a national securities exchange. 

(EGCs) or that seek to solicit indications 

of interest from individual or small 

institutional investors.42 Subject to 

certain conditions, Regulation A issuers 

may solicit indications of interest from 

any investor before qualification of an 

offering statement, which may allow 

issuers to gauge investor interest prior to 

deciding whether to incur the full cost 

of the offering. Test-the-waters materials 

used in conjunction with a Regulation A 

offering must contain required legends 

and, should an issuer proceed with an 

offering, must be publicly filed, and a 

Preliminary Offering Circular must be 

available in conjunction with test-thewaters materials used after the public 

filing of the offering statement.43

Further, reporting companies that elect 

to solicit indications of interest in 

conjunction with a prospective 

Regulation A offering in reliance on 

Rule 255 remain subject to Regulation 

FD. In addition, Regulation A contains 

a safe harbor from integration of 

Regulation A offerings with any prior 

offers or sales of securities, as well as 

with any subsequent offers or sales of 

securities registered under the 

Securities Act.44 The flexibility to 

alternate between Regulation A and 

registered offerings may be particularly 

valuable for non-exchange-listed 

issuers, past Regulation A issuers that 

have become reporting companies but 

wish to seek follow-on Regulation A 

financing, and more generally, for other 

issuers that are uncertain about whether 

their future financing strategy will rely 

on Regulation A or registered offerings. 

Third, reporting companies may 

realize legal and compliance cost 

savings from using Regulation A to raise 

capital instead of a registered offering. 

The cost of preparing Form 1–A may be 

lower than the cost of preparing a 

registration statement,45 particularly for 

issuers ineligible for a streamlined 

securities registration on Form S–3 or 

F–3,46 or under the multijurisdictional 

disclosure system (MJDS).47 In addition, 

because Tier 2 securities of smaller 

issuers may be conditionally exempt 

from the number of shareholders of 

record for purposes of Section 12(g), 

using Regulation A for new financing 

may enable issuers to maintain a lower 

number of shareholders of record, 

which may make it easier for issuers to 

deregister under Section 12(g) in the 

future and suspend Exchange Act 

reporting.48 However, for issuers that 

remain subject to Exchange Act 

reporting, the incremental effect of 

using Form 1–A on the overall 

compliance costs may be relatively 

small. Unlike a registered offering, a 

Regulation A offering is not subject to 

liability under Section 11,49 which may 

lower the legal risk and cost associated 

with the offering. Further, blue sky 

preemption for Tier 2 of Regulation A 

may result in legal and compliance cost 

savings for issuers offering securities not 

listed on an exchange.50

These factors may give reporting 

companies that seek financing from 

public markets within the Regulation A 

offering limit (particularly those that are 

not exchange-listed) greater flexibility in 

the process of raising capital, potentially 

allowing such issuers to incrementally 

increase the amount of capital raised, or 

reduce the cost or time associated with 

raising capital. 

Reporting companies that use 

Regulation A will also incur certain 

costs. In particular, issuers that rely on 

the amendments will incur costs to 

prepare Form 1–A and undertake a 

Regulation A offering. It is likely that 

many of the reporting companies using 

Regulation A under the amendments 

would have otherwise conducted a 

registered offering or a private 

placement. Given the optional nature of 

the provision, reporting companies are 

likely to use Regulation A only if they 

expect the benefits to outweigh the 

costs. 

Finally, if Regulation A use by 

reporting companies increases 

(decreases) overall investor interest in 

the Regulation A market, as discussed in 

Section IV.B.3 below, the resulting 

inflow (outflow) of investor capital may 

indirectly affect all Regulation A 

issuers, including issuers that are not 

reporting companies. 

b. Effects on Investors 

Many of the reporting companies 

using Regulation A under the 

amendments may be switching from 

registered offerings to Regulation A, and 

the same investors may be investing in 

their Regulation A securities as would 

have invested in their registered 

securities today, which may limit the 

net aggregate impact of the amendments 

on investors in public offerings. 

Nevertheless, the amendments may 

have an impact on investors if they 

facilitate some offerings that would not 

have been conducted either under a 

registration regime or under the 

Regulation A regime today. The 

amendments may also affect investors if 

provisions specific to reporting 

company Regulation A offerings affect 

investor benefits and costs associated 

with offerings that would have 

otherwise been conducted either under 

a registration regime or under a 

Regulation A regime. We discuss these 

considerations in greater detail below. 

The amendments may yield benefits 

for some investors in certain 

circumstances. Investors that currently 

invest primarily in Regulation A 

securities may realize incremental 


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51For example, reporting companies must file 

quarterly reports and current reports in a broader 

range of circumstances than required for Tier 2 

issuers. In addition, reporting companies are subject 

to Regulation FD. 

52See Regulation A 2015 Adopting Release, at 

21866. 53See 17 CFR 230.251–230.252. 

benefits if they begin investing in 

Regulation A securities of reporting 

companies due to greater availability of 

information about Exchange Act 

reporting companies. Greater 

availability of information may enable 

such investors to make better informed 

investment decisions,51 as well as lead 

to more informationally efficient pricing 

and potentially greater liquidity of 

Regulation A securities of such issuers 

compared to other Regulation A 

issuers.52

In addition, existing investors in 

reporting companies that use Regulation 

A under the amendments may also 

benefit if the amendments enable such 

issuers to increase shareholder value as 

a result of improved access to capital or 

a lower cost of capital. 

Further, the flexibility afforded to 

reporting companies under the 

amendments may make conducting 

public offerings more attractive overall, 

compared to conducting private 

placements, either as a public or as a 

private company. If the amendments 

lead to an increase in public offerings 

(either registered or Regulation A 

offerings), investors in the aggregate 

may benefit from the greater level of 

transparency associated with public 

offerings, increased secondary market 

liquidity, and the increased number of 

investment options, which may enable 

investors to make more informed 

decisions and allocate capital more 

efficiently. 

Overall, the aggregate benefits to 

investors are expected to be more 

limited if the use of Regulation A by 

reporting companies is driven by some 

reporting companies switching from 

registered offerings to Regulation A or 

by past Regulation A issuers that 

become reporting companies continuing 

to raise Regulation A financing instead 

of undertaking registered offerings. 

We recognize that the amendments 

may impose potential costs on some 

investors in Regulation A securities of 

some reporting companies that would 

have otherwise invested in registered 

securities of reporting companies. 

Specifically, certain features of 

Regulation A may make it more 

attractive to some non-exchange-listed 

reporting companies that have high 

information asymmetries or that are 

offering securities with risky and 

complex payoffs, some of which might 

not have pursued a registered offering 

today. In particular, Regulation A 

offering disclosures are not subject to 

Section 11 liability; Tier 2 offerings are 

not subject to state blue sky review or 

state investor and solicitation 

restrictions; and Regulation A offerings 

are generally not subject to the gunjumping provisions of Section 5(c) due 

to the ability to test the waters under 

Rule 255. These differences can impose 

costs on investors to the extent that 

information asymmetries may make it 

more difficult for investors to fully 

appreciate the risks the investments 

present. Some investors may off-set 

these costs, however. For example, some 

investors anticipating such costs may 

demand compensation in the form of 

more attractive offering terms. 

Additionally, some of these provisions 

of the amendments could in fact benefit 

investors by enabling issuers to lower 

compliance costs. 

Potential costs of the amendments to 

investors may be further mitigated by 

the following factors: (1) Exchange Act 

reporting requirements; (2) disclosures 

required in Regulation A offering 

statements, which provide information 

on potential risks of the offering to 

enable informed investment decisions; 

(3) the requirement that Regulation A 

offering statements be qualified by the 

Commission before any sales can be 

made; (4) potential liability under 

Section 12(a)(2) and application of the 

general antifraud provisions of federal 

and state securities laws to Regulation A 

offerings; and (5) Regulation A 

requirements (e.g., issuer eligibility 

criteria, offering limits, investment 

limits for non-accredited investors in 

Tier 2 offerings of non-exchange-listed 

securities; and audited financial 

statement requirements for Tier 2 

offerings).53 In general, the readily 

observable nature of reporting company 

status and offering type enables 

investors concerned about potential 

risks of reporting company Regulation A 

offerings to reallocate to other types of 

offerings. 

c. Effects on Intermediaries 

The amendments may affect 

intermediaries in Regulation A 

offerings. As discussed in Section 

IV.A.2 above, very few intermediaries 

presently participate in Regulation A 

offerings. An increase in the number 

and types of Regulation A issuers may 

increase demand for the services of 

intermediaries in connection with such 

offerings and potentially attract new 

intermediaries to the Regulation A 

market. For example, existing 

intermediaries participating in small 

registered offerings may begin to offer 

Regulation A services to their clients. If 

the amendments increase the number 

and range of issuers using Regulation A 

and thereby increase investor interest in 

the Regulation A market more generally, 

intermediaries may realize higher 

revenue from Regulation A deals, and 

vice versa. 

The availability of Exchange Act 

reports may facilitate intermediary due 

diligence. However, if reporting 

companies that use Regulation A have 

higher information asymmetries, due 

diligence costs and effort of 

intermediaries may not decrease. Due to 

the voluntary nature of matching 

between issuers and intermediaries, we 

expect intermediaries to participate in 

offerings only when they on average 

expect benefits to exceed costs. 

Overall, however, the extent to which 

the use of Regulation A by reporting 

companies is driven by some reporting 

companies switching from registered 

offerings to Regulation A is expected to 

limit the aggregate effects of the 

amendments on intermediaries. Further, 

intermediaries may not experience 

significant effects of the amendments if 

reporting companies using Regulation A 

primarily conduct offerings without 

involving intermediaries. 

2. Amendments to Rule 257 

Below we consider the economic 

effects of the amendments to Rule 257. 

Under the amendments, a Tier 2 

reporting company issuer will be 

deemed to have met its Rule 257(b) 

reporting obligation if it is current in its 

Exchange Act reporting as of the due 

dates for periodic reports on Form 1–K 

and Form 1–SA required under Rule 

257(b). The requirement that a reporting 

company Regulation A issuer be current 

in, rather than merely subject to 

Exchange Act reporting, in order to meet 

its Rule 257(b) obligations, is expected 

to encourage more regular periodic 

disclosures following a reporting 

company’s Regulation A offering. 

Therefore, this requirement should 

benefit investors in all classes of 

securities of reporting company 

Regulation A issuers by enabling better 

informed investment decisions, as well 

as more informationally efficient prices 

for securities of reporting company 

Regulation A issuers traded in 

secondary markets. 

Specifying a time period for which 

Exchange Act reports must have been 

filed will provide certainty to issuers 

regarding how to satisfy the 

requirements of Rule 257(b). The 

amendments use a 12-month lookback 

period consistent with the standard 

applied in Commission rules in other 


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54See General Instruction I.A.3 to Form S–3 and 

General Instruction I.A.2 to Form F–3. 

55 44 U.S.C. 3501 et seq. 

56 44 U.S.C. 3507(d) and 5 CFR 1320.11. 

contexts, including for the 

determination of eligibility to use Form 

S–8 and for satisfaction of the ‘‘current 

public information’’ requirement of Rule 

144. Use of a standard that is familiar 

from these other contexts may facilitate 

compliance by issuers. As an 

alternative, we could have adopted a 

longer (shorter) period for purposes of 

‘‘meeting’’ the Rule 257(b) requirements. 

Such a longer (shorter) period would 

have increased (decreased) the 

incentives for reporting companies to 

provide more regular period disclosures 

following a Regulation A offering while 

also increasing (decreasing) costs 

incurred by those reporting companies 

that have previously failed to file 

Exchange Act reports. As another 

alternative, we could have required 

filers to have filed in a timely manner 

all reports required to be filed during 

the prior 12 months, consistent with 

Form S–3 and F–3 requirements.54 This 

alternative may benefit investors by 

incentivizing reporting companies that 

use Regulation A to provide timely 

periodic disclosures. However, this 

alternative may increase costs and 

decrease the ability of reporting 

companies that have failed to timely file 

Exchange Act reports during the 

lookback period to raise follow-on 

Regulation A Tier 2 financing. Overall, 

relative to the amendments, we do not 

expect the effects of these alternatives to 

be significant given the other incentives 

that reporting companies have to remain 

current in their Exchange Act reports 

(e.g., greater secondary market liquidity, 

not being delisted from an exchange or 

downgraded to a lower OTC market tier, 

future eligibility for a streamlined 

registration process, reduced legal 

liability, and a reputation for 

transparency). 

Prior to the amendments being 

adopted in this release, an issuer that 

was not subject to the reporting 

requirements of Section 13 or 15(d) of 

the Exchange Act that conducted a Tier 

2 Regulation A offering and 

concurrently registered the class of 

securities under the Exchange Act 

would have had its Regulation A 

reporting obligations suspended so long 

as it was subject to Exchange Act 

reporting obligations, regardless of 

whether it had remained current in such 

Exchange Act reporting. Under the 

mandated amendments, such issuers 

technically will be subject to both 

reporting regimes. Thus, some Tier 2 

issuers may incur costs as a result of 

this amendment, particularly if they are 

likely not to remain current in their 

Exchange Act reporting. 

3. Efficiency, Competition, and Capital 

Formation 

The amendments may attract 

additional issuers and a potentially 

wider range of issuers to the Regulation 

A market segment, resulting in 

potentially greater capital formation 

under Regulation A. As we note below, 

many of these issuers may have 

otherwise pursued a registered offering 

today, thus the net effects on capital 

formation may be small. 

Nevertheless, the amendments may 

enable some issuers to optimize their 

financing strategy and reduce external 

financing costs as a result of greater 

flexibility in raising capital. This may 

lead some reporting companies to 

switch from private placements to 

Regulation A. The additional flexibility 

to alternate between Regulation A and 

registered offerings may on the margin 

encourage some private companies to 

pursue public offerings (either pursuant 

to Regulation A or to a registration 

statement) or to become reporting 

companies. Increased reliance on public 

offerings may incrementally increase the 

availability of information about offered 

securities, the investment opportunities 

available to non-accredited investors, 

the efficiency of such investors’ capital 

allocation decisions, and the 

competition among issuers in public 

offerings for investor capital. 

The ability of reporting companies to 

use Regulation A may increase 

competition among issuers for investor 

capital in the Regulation A market. If 

investors in the Regulation A market 

prefer reporting companies due to the 

additional disclosures they provide, it 

may adversely affect the ability of nonreporting companies to raise capital 

under Regulation A. This incremental 

effect may be limited to the extent that 

reporting companies using Regulation A 

may have otherwise raised capital from 

the same investors in a registered 

offering. If investors reveal a preference 

for additional disclosure, non-reporting 

companies seeking Regulation A 

financing may register a class of 

securities under Section 12 or provide 

Exchange Act disclosures voluntarily in 

response to market demand for 

information, although such steps would 

entail additional costs. Alternatively, 

Regulation A use by reporting 

companies may have positive spillovers 

for non-reporting companies in the 

Regulation A market if the inflow of 

reporting companies attracts additional 

interest from investors, intermediaries, 

and information providers to the 

Regulation A market as a whole. 

We recognize that many of the issuers 

likely to rely on the amendments to 

pursue a Regulation A offering may be 

reporting companies that would have 

otherwise pursued a registered offering. 

We further recognize that the investors 

likely to invest in the Regulation A 

securities of reporting companies 

relying on the amendments may be the 

same investors that would have invested 

in registered securities of those issuers 

prior to the amendments. Therefore, the 

net aggregate effects of the amendments 

on efficiency, competition, capital 

formation, and investor protection may 

be small. 

V. Paperwork Reduction Act 

A. Background and Summary 

Certain provisions of Regulation A 

that will be affected by these 

amendments contain ‘‘collection of 

information’’ requirements within the 

meaning of the Paperwork Reduction 

Act of 1995 (the ‘‘PRA’’).55 The 

Commission is submitting the 

amendment to the Office of 

Management and Budget (the ‘‘OMB’’) 

for review in accordance with the 

PRA.56 The title for the affected 

collection of information is Regulation 

A (Form 1–A) (OMB Control No. 3235– 

0286). 

Regulation A provides an exemption 

from registration for offers and sales of 

securities for up to $50 million. 

Regulation A requires issuers to provide 

certain disclosures; this disclosure is a 

collection of information. An agency 

may not conduct or sponsor, and a 

person is not required to respond to, a 

collection of information requirement 

unless it displays a currently valid OMB 

control number. Compliance with the 

information collection is mandatory. 

Responses to the information collection 

are not kept confidential and there is no 

mandatory retention period for the 

information disclosed. 

The hours and costs associated with 

preparing disclosure, filing forms, and 

retaining records constitute reporting 

and cost burdens imposed by the 

collections of information. In deriving 

estimates of these hours and costs, we 

recognize that the burdens likely will 

vary among individual issuers based on 

a number of factors, including the stage 

of development of the business, the 

amount of capital an issuer seeks to 

raise, and the number of years since 

inception of the business. We believe 

that some issuers will experience costs 

in excess of the average and some 


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528 Federal Register / Vol. 84, No. 21 / Thursday, January 31, 2019 / Rules and Regulations 

57See Section IV.A.2 (citing approximately 267 

non-exchange listed reporting companies with 

registered securities offerings in 2017 of up to $50 

million that may be eligible for Regulation A under 

the amendments). 

58By comparison, we estimate the burden per 

response for preparing Form S–1 to be 671 hours. 

Such estimate reflects the effect on disclosure 

preparation time of the ability of certain issuers to 

forward incorporate by reference into the 

prospectus contained in a registration statement on 

Form S–1. See Form S–1, at 1. 

59We recognize that the costs of retaining outside 

professionals may vary depending on the nature of 

the professional services, but for purposes of this 

PRA analysis, we estimate that such costs would be 

an average of $400 per hour. This is the rate we 

typically estimate for outside services used in 

connection with public company reporting. 

issuers may experience less than the 

average costs. 

B. Estimated Number of Regulation A 

Offerings 

Data regarding current market 

practices may help identify the potential 

number of offerings that will be 

conducted in reliance on the final rules. 

We estimate that there are currently 

approximately 112 Regulation A 

offering statements filed by issuers per 

year. While it is not possible to predict 

with certainty the number of offering 

statements that will be filed by issuers 

relating to offerings made in reliance on 

amended Regulation A, for purposes of 

this PRA analysis, we estimate that the 

number will be 179 offering statements 

per year. We base this estimate on: (i) 

The current approximate number of 

annual Form 1–A filings under the 

existing rules, plus (ii) 25 percent of the 

estimated number of registered offerings 

of securities by reporting companies 

that were not exchange listed that 

would have been eligible to be 

conducted under Regulation A.57

For purposes of this PRA analysis, we 

assume that each offering statement for 

a unique Regulation A offering that is 

filed represents a unique issuer, such 

that approximately 179 issuers are 

estimated to conduct Regulation A 

offerings each year under the final rules. 

B. PRA Reporting and Cost Burden 

Estimates 

Regulation A requires issuers to file a 

Form 1–A: Offering Statement with the 

Commission. Regulation A has one 

administrative burden hour associated 

with it, and Form 1–A is currently 

estimated to take approximately 750 

burden hours per response. We do not 

estimate that the one administrative 

burden hour associated with Regulation 

A will change as a result of the final 

rules. We believe the burden hours 

associated with Form 1–A will change 

as a result of the amendments. Because 

an Exchange Act reporting company is 

likely to have already prepared much of 

the information required to respond to 

Form 1–A for its Exchange Act reporting 

purposes, we estimate that the burden to 

prepare and file Form 1–A, as amended, 

for a reporting company will be 

approximately 700 hours.58 This will 

decrease the burden on average across 

all issuers in comparison to existing 

rules, to approximately 731.28 hours. 

We estimate that the issuer will 

internally carry 75 percent of the burden 

of preparation and that outside 

professionals retained by the issuer at 

an average cost of $400 per hour 59 will 

carry 25 percent. However, because we 

estimate that 67 additional offering 

statements will be filed per year as a 

result of the amendments, we estimate 

that the overall burden hours to prepare 

and file Form 1–A will increase. 

We estimate that compliance with the 

requirements of Form 1–A will require 

130,900 burden hours (179 offering 

statements × 731.28 hours/offering 

statement) in aggregate each year, which 

corresponds to 98,175 aggregated hours 

carried by the issuer internally (179 

offering statements × 731.28 hours/ 

offering statement × 0.75) and 

aggregated costs of $13,089,912 (179 

offering statements × 731.28 hours/ 

offering statement × 0.25 × $400) for the 

services of outside professionals. As 

stated above, we estimate that the 

amendments to Regulation A will not 

change the one administrative burden 

hour associated with the review of 

Regulation A and will require 179 

burden hours (179 offering statements × 

one hour/offering statement) in 

aggregate each year, which corresponds 

to 134.25 aggregated hours carried by 

the issuer internally (179 offering 

statements × 0.75) and aggregated costs 

of $17,900 (179 offering statements × 

0.25 × $400) for the services of outside 

professionals. When combined with the 

estimates for Form 1–A, the 

administrative burden hour results in an 

estimated total compliance burden of 

732.28 hours per offering statement and 

an estimated annual compliance burden 

of 131,078.12 hours (179 offering 

statements × 732.28 hours/offering 

statement) and aggregated costs of 

$13,107,812 (179 offering statements × 

732.28 hours/offering statement × 0.25 × 

$400). 

C. Request for Comment 

We request comments in order to 

evaluate: (1) Whether the collection of 

information is necessary for the proper 

performance of the functions of the 

agency, including whether the 

information would have practical 

utility; (2) the accuracy of our estimate 

of the burden of the collection of 

information; (3) whether there are ways 

to enhance the quality, utility, and 

clarity of the information to be 

collected; and (4) whether there are 

ways to minimize the burden of the 

collection of information on those who 

are to respond, including through the 

use of automated collection techniques 

or other forms of information 

technology. 

Any member of the public may direct 

to us any comments concerning the 

accuracy of these burden estimates and 

any suggestions for reducing the 

burdens. Persons who desire to submit 

comments on the collection of 

information requirements should direct 

their comments to the Office of 

Management and Budget, Attention: 

Desk Officer for the Securities and 

Exchange Commission, Office of 

Information and Regulatory Affairs, 

Washington, DC 20503, and send a copy 

of the comments to Brent J. Fields, 

Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090, with 

reference to File No. S7–29–18. 

Requests for materials submitted to the 

OMB by us with regard to these 

collections of information should be in 

writing, refer to File No. S7–29–18 and 

be submitted to the Securities and 

Exchange Commission, Office of FOIA 

Services, 100 F Street NE, Washington, 

DC 20549–0213. Interested persons are 

encouraged to send comments to the 

OMB by March 4, 2019. 

VI. Statutory Authority 

The amendments contained in this 

release are adopted under the authority 

set forth in sections 3(b), 19(a), and 28 

of the Securities Act and section 508 of 

the Economic Growth Act. 

List of Subjects in 17 CFR Parts 230 and 

239 

Reporting and recordkeeping 

requirements, Securities. 

Text of Amendment 

In accordance with the foregoing, title 

17 chapter II of the Code of Federal 

Regulations is amended as follows: 

PART 230—GENERAL RULES AND 

REGULATIONS, SECURITIES ACT OF 

1933 

■ 1. The authority citation for part 230 

continues to read in part as follows: 

Authority: 15 U.S.C. 77b, 77b note, 77c, 

77d, 77f, 77g, 77h, 77j, 77r, 77s, 77z–3, 77sss, 

78c, 78d, 78j, 78l, 78m, 78n, 78o, 78o–7 note, 

78t, 78w, 78ll(d), 78mm, 80a–8, 80a–24, 80a– 

28, 80a–29, 80a–30, and 80a–37, and Pub. L. 


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Federal Register / Vol. 84, No. 21 / Thursday, January 31, 2019 / Rules and Regulations 529 

112–106, sec. 201(a), sec. 401, 126 Stat. 313 

(2012), unless otherwise noted. 

* * * * * 

■ 2. Section 230.251 is amended by 

removing and reserving paragraph (b)(2) 

and revising paragraph (b)(6) to read as 

follows: 

§ 230.251 Scope of exemption. 

* * * * * 

(b) * * * 

(6) Is not, and has not been, subject to 

any order of the Commission entered 

pursuant to Section 12(j) (15 U.S.C. 

78l(j)) of the Securities Exchange Act of 

1934 (the ‘‘Exchange Act’’) (15 U.S.C. 

78a et seq.) within five years before the 

filing of the offering statement; 

* * * * * 

■ 3. Section 230.257 is amended by 

adding paragraph (b)(6), removing and 

reserving paragraph (d)(1), and revising 

paragraph (e) to read as follows: 

§ 230.257 Periodic and current reporting; 

exit report. 

* * * * * 

(b) * * * 

(6) Exchange Act reporting 

requirements. The duty to file reports 

under this rule shall be deemed to have 

been met if the issuer is subject to the 

reporting requirements of Section 13 or 

15(d) of the Exchange Act (15 U.S.C. 

78m or 15 U.S.C. 78o) and, as of each 

Form 1–K and Form 1–SA due date, has 

filed all reports required to be filed by 

Section 13 or 15(d) of the Exchange Act 

(15 U.S.C. 78m or 15 U.S.C. 78o) during 

the 12 months (or such shorter period 

that the registrant was required to file 

such reports) preceding such due date. 

* * * * * 

(e) Termination of duty to file reports. 

If the duty to file reports is deemed to 

have been met pursuant to paragraph 

(b)(6) of this section and such status 

ends because the issuer terminates or 

suspends its duty to file reports under 

the Exchange Act, the issuer’s obligation 

to file reports under paragraph (b) of 

this section shall: 

(1) Automatically terminate if the 

issuer is eligible to suspend its duty to 

file reports under paragraphs (d)(2) and 

(3) of this section; or 

(2) Recommence with the report 

covering the most recent financial 

period after that included in any 

effective registration statement or filed 

Exchange Act report. 

PART 239—FORMS PRESCRIBED 

UNDER THE SECURITIES ACT OF 1933 

■ 4. The authority citation for part 239 

continues to read in part as follows: 

Authority: 15 U.S.C. 77c, 77f, 77g, 77h, 77j, 

77s, 77z–2, 77z–3, 77sss, 78c, 78l, 78m, 78n, 

78o(d), 78o–7 note, 78u–5, 78w(a), 78ll, 

78mm, 80a–2(a), 80a–3, 80a–8, 80a–9, 80a– 

10, 80a–13, 80a–24, 80a–26, 80a–29, 80a–30, 

and 80a–37; and sec. 107, Pub. L. 112–106, 

126 Stat. 312, unless otherwise noted. 

* * * * * 

■ 5. Amend Form 1–A (referenced in 

§ 239.90) by revising Item 2 of Part I to 

read as follows: 

Note: The text of Form 1–A does not, and 

this amendment will not, appear in the Code 

of Federal Regulations. 

FORM 1–A 

REGULATION A OFFERING 

STATEMENT UNDER THE 

SECURITIES ACT OF 1933 

* * * * * 

PART I—NOTIFICATION 

* * * * * 

ITEM 2. Issuer Eligibility 

b Check this box to certify that all of 

the following statements are true for 

the issuer(s): 

• Organized under the laws of the 

United States or Canada, or any 

State, Province, Territory or 

possession thereof, or the District of 

Columbia. 

• Principal place of business is in the 

United States or Canada. 

• Not a development stage company 

that either (a) has no specific 

business plan or purpose, or (b) has 

indicated that its business plan is to 

merge with an unidentified 

company or companies. 

• Not an investment company 

registered or required to be 

registered under the Investment 

Company Act of 1940. 

• Not issuing fractional undivided 

interests in oil or gas rights, or a 

similar interest in other mineral 

rights. 

• Not issuing asset-backed securities 

as defined in Item 1101(c) of 

Regulation AB. 

• Not, and has not been, subject to 

any order of the Commission 

entered pursuant to Section 12(j) of 

the Exchange Act (15 U.S.C. 78l(j)) 

within five years before the filing of 

this offering statement. 

• Has filed with the Commission all 

the reports it was required to file, if 

any, pursuant to Rule 257 during 

the two years immediately before 

the filing of the offering statement 

(or for such shorter period that the 

issuer was required to file such 

reports). 

* * * * * 

By the Commission. 

Dated: December 19, 2018. 

Brent J. Fields, 

Secretary. 

[FR Doc. 2018–27980 Filed 1–30–19; 8:45 am] 

BILLING CODE 8011–01–P 

DEPARTMENT OF DEFENSE 

Office of the Secretary 

32 CFR Part 270 

[Docket ID: DOD–2018–OS–0050] 

RIN 0790–AK38 

Compensation of Certain Former 

Operatives Incarcerated by the 

Democratic Republic of Vietnam 

AGENCY: Under Secretary of Defense for 

Personnel and Readiness, DoD. 

ACTION: Final rule. 

SUMMARY: This final rule removes the 

Department of Defense (DoD) regulation 

concerning compensation of certain 

former operatives incarcerated by the 

Democratic Republic of Vietnam. The 

content of this part is obsolete as the 

claim period expired and the Vietnam 

Commandos Compensation Commission 

was disbanded. Therefore, this part is 

unnecessary, and can be removed. 

DATES: This rule is effective on January 

31, 2019. 

FOR FURTHER INFORMATION CONTACT: Don 

Syendsen, 703–695–9371. 

SUPPLEMENTARY INFORMATION: This part 

was originally published 15 May 1997 

under the National Defense 

Authorization Act of FY 1997 and 

established the Vietnam Commandos 

Compensation Commission within the 

Office of the Secretary of Defense. The 

rule authorized a claims process for 

compensation of Vietnamese operatives 

who served in certain U.S.-led 

operations, were captured, and 

incarcerated in the Democratic Republic 

of Vietnam. The claim period expired 15 

May 2000; payments were completed by 

July 2001; and, the commission was 

disbanded. 

This rule is not significant under 

Executive Order (E.O.) 12866, 

‘‘Regulatory Planning and Review,’’ 

therefore, the requirements of E.O. 

13771, ‘‘Reducing Regulation and 

Controlling Regulatory Costs,’’ do not 

apply. 

List of Subjects in 32 CFR Part 270 

Claims, Military personnel, Prisoners 

of war, Vietnam. 


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