United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 14, 2016 Decided June 14, 2016

No. 15-1149

MONICA J. LINDEEN, MONTANA STATE AUDITOR,

EX OFFICIO MONTANA COMMISSIONER OF SECURITIES AND 

INSURANCE,

PETITIONER

v.

SECURITIES AND EXCHANGE COMMISSION,

RESPONDENT

Consolidated with 15-1150

On Petitions for Review of a Final Rule 

of the Securities & Exchange Commission

Robert E. Toone Jr., Assistant Attorney General, Office 

of the Attorney General for the Commonwealth of 

Massachusetts, argued the cause for the petitioner. Maura 

Healy, Attorney General, and Jesse Laslovich and Nicholas J. 

Mazanec, Special Assistant Montana Attorneys General, 

Office of the Montana State Auditor, were with him on brief. 

Seth G. Schofield, Assistant Attorney General, Office of the 

Attorney General for the Commonwealth of Massachusetts, 

entered an appearance.
2

Anne-Valerie S. Mirko was on brief for the amicus curiae 

North American Securities Administrators Association, Inc. in 

support of the petitioner.

John Vail was on brief for the amici curiae Current and 

Former Members of Congress in support of the petitioner.

Jeffrey A. Berger, Senior Litigation Counsel, Securities 

and Exchange Commission, argued the cause for the 

respondent. Michael A. Conley, Deputy General Counsel, 

Jacob H. Stillman, Solicitor, Randall W. Quinn, Assistant 

General Counsel and Benjamin M. Vetter, Senior Counsel,

were with him on brief.

William M. Cunningham, pro se, was on brief for the

amicus curiae William M. Cunningham in support of the 

respondent.

Ford C. Ladd was on brief for the amicus curiae National 

Small Business United Association in support of the 

respondent.

Before: HENDERSON, Circuit Judge, and GINSBURG and 

SENTELLE, Senior Circuit Judges.

Opinion for the Court filed by Circuit Judge HENDERSON. 

KAREN LECRAFT HENDERSON, Circuit Judge: Pursuant 

to congressional mandate, the Securities and Exchange 

Commission (SEC or Commission) created a new class of 

securities offerings freed from federal-registration 

requirements so long as the issuers of these securities comply

with certain investor safeguards. See Amendments for Small 

and Additional Issues Exemptions Under the Securities Act 
3

(Regulation A[-Plus]),1 80 Fed. Reg. 21,806 (Apr. 20, 2015)

(to be codified at 17 C.F.R. pts. 200, 230, 232, 239, 240, 249, 

& 260). The SEC also provided that anyone buying a certain 

subset of the securities will be considered a “qualified 

purchaser.” Id. at 21,809, 21,858. In doing so, the SEC 

preempted all state registration and qualification requirements 

for the subset based on the Securities Act provision that 

exempts from state registration and qualification requirements

securities offered or sold to “qualified purchasers.” See 15 

U.S.C. § 77r(b)(4)(D).

The petitioners, William F. Gavin and Monica J. Lindeen 

(collectively, petitioners), are the chief securities regulators 

for Massachusetts and Montana, respectively. They argue 

that, because the SEC declined to adopt a qualified-purchaser 

definition limited to investors with sufficient wealth, revenue 

or financial sophistication to protect their interests without 

state protection, Regulation A-Plus fails both parts of the 

United States Supreme Court’s statutory construction 

standards enunciated in Chevron, U.S.A., Inc. v. Natural 

Resources Defense Council, Inc., 467 U.S. 837, 842–43 

(1984). They also argue that it should be vacated as arbitrary 

and capricious because the Commission failed to explain 

adequately how it protects investors. For the following 

reasons, we deny the consolidated petitions for review.

 1 The SEC promulgated “Regulation A” in 1936. The rule 

challenged here modernized Regulation A and is referred to as 

“Regulation A-Plus.” 
4

I. STATUTORY & REGULATORY BACKGROUND

Securities regulation has existed, in one form or another, 

since the mid-1800s.

2

 Before the Great Depression, securities 

were regulated almost exclusively by the states and, 

beginning with Kansas in 1911, many states imposed 

comprehensive securities regulation regimes.

3

 Known as 

“blue-sky” laws,

4 state systems often required not only presale registration of securities but also pre-sale “qualification” 

or “merit” review of security sales. Generally, state

substantive review prohibited securities sales the state deemed

unfair, unjust or inequitable. See, e.g., Act of Mar. 6, 1933, 

ch. 47, § 4, 1933 Mont. Laws 72, 76.

After the 1929 stock market crash, the Congress began 

regulating securities at the federal level. Rather than 

following the state substantive-review model, the Congress

chose instead to mandate pre-sale disclosure of material 

information to investors. It did so by enacting, first, the 

Securities Act of 1933 (Securities Act), 15 U.S.C. §§ 77a–

77aa, which regulates the sale of securities in the primary 

market and, second, the Securities Exchange Act of 1934 

 2 See, e.g., Act of May 21, 1852, ch. 303, 1852 Mass. Acts 208

(requiring railroad companies chartered in Massachusetts to file 

certificates “stating that all of the stock named in [their] charter has 

been subscribed for by responsible parties, and that twenty 

per cent[] of the par value of each and every share of the stock 

thereof has been actually paid into the treasury of the company”).

3 See also, e.g., Act of Mar. 13, 1913, ch. 85, 1913 Mont. Laws 

367; Act of May 27, 1921, ch. 499, 1921 Mass. Acts 622.

4 See Hall v. Geiger-Jones Co., 242 U.S. 539, 550 (1917) 

(“The name that is given to the law indicates the evil at which it is 

aimed; that is, . . . speculative schemes which have no more basis 

than so many feet of ‘blue sky’ . . . .”).
5

(Exchange Act), 15 U.S.C. §§ 78a–78pp, which created the 

Commission and established rules governing the resale or 

exchange of securities in the secondary market. Both the 

Securities Act and the Exchange Act have evolved 

considerably since they were first enacted. This case arises

against the backdrop of amendments to the Securities Act.

Under section 5 of the Securities Act, a company must

file a registration statement and a prospectus with the SEC

before it offers its securities for sale. See 15 U.S.C. §§ 77c–

77h. Because the section 5 registration process is often 

prohibitively expensive for small companies, the Congress 

enacted section 3(b) of the Securities Act, which allows the 

Commission, through rulemaking, to exempt from federalregistration requirements certain small-dollar offerings, so 

long as the Commission finds that federal registration is not 

required to protect both investors and the public interest. Id. 

§ 77c(b)(1). In 1936, the SEC exercised its section 3(b) 

authority to promulgate “Regulation A.” See SEC Release

No. 33-632 (Jan. 21, 1936).

Originally, Regulation A allowed a company to file a less 

expensive “offering statement,” rather than the pricey section 

5 registration statement, before offering securities for sale. 17 

C.F.R. §§ 230.252–.253. To further protect investors, 

Regulation A forbade any securities sale until SEC staff 

“qualified” the issuing company’s offering statement; 

moreover, Regulation A obligated the issuing company to 

deliver an offering circular to investors before consummating 

any sale. After the sale, investors had the protection of

federal antifraud statutes, see, e.g., 15 U.S.C. § 77q; id. 

§ 78j(b); 17 C.F.R. § 240.10b-5, as well as the Securities 

Act’s civil liability provisions for false or misleading 

statements, see, e.g., 15 U.S.C. § 77c(b)(2)(D); id. § 77l(a)(2). 
6

Although section 3(b) exempted Regulation A offerings 

from federal-registration requirements, the offerings generally 

remained subject to state registration and merit-review 

restrictions, which increased compliance costs for the issuing 

company. This was especially true for a company desiring to 

issue securities in multiple states with varying substantive 

criteria. 

A. NATIONAL SECURITIES MARKETS IMPROVEMENT ACT 

OF 1996 (NSMIA), PUB. L. NO. 104-290, 110 STAT. 3416

Aware of the problems caused by concurrent state and 

federal regulation, the Congress enacted the National 

Securities Markets Improvement Act of 1996 (NSMIA), Pub. 

L. No. 104-290, 110 Stat. 3416. Designed to alleviate the

“redundant, costly, and ineffective” dual federal/state 

regulatory system, H.R. CONF. REP. NO. 104–864, at 39, 

reprinted in 1996 U.S.C.C.A.N. 3920, 3920, the NSMIA 

designated the federal government to oversee nation-wide 

securities offerings while allowing the states to retain control 

over small, regional or intrastate offerings.5

 The NSMIA did 

so by amending section 18 of the Securities Act to preempt, 

on a widespread basis, state registration and qualification 

regimes for some offerings while leaving intact the states’ 

authority to investigate fraud and to assess fees. See 15 

U.S.C. § 77r(c)(1), (c)(3). 

 5 See, e.g., H.R. REP. NO. 104-622, at 16 (1996), reprinted in

1996 U.S.C.C.A.N. 3877, 3878 (NSMIA intended to “eliminate the 

costs and burdens of duplicative and unnecessary regulation” by 

“designating the Federal government as the exclusive regulator of 

national offerings of securities” while allowing states to “retain 

authority to regulate small, regional, or intrastate securities 

offerings”).
7

The NSMIA achieved this goal by creating a list of 

“covered” (i.e., preempted) securities. Id. § 77r(a)(1)(A). 

Covered securities include, inter alia, securities listed on the 

New York Stock Exchange or the NASDAQ National Market 

System and those issued by a registered investment company. 

Id. § 77r(b)(1)–(2). The NSMIA also intended the SEC to 

play a role in determining its preemptive scope. Specifically, 

it included in its list of covered securities any security sold “to 

qualified purchasers, as defined by the Commission by rule.”

Id. § 77r(b)(3). It also granted the Commission authority to 

“define the term ‘qualified purchaser’ differently with respect 

to different categories of securities, consistent with the public 

interest and the protection of investors.” Id. In the view of 

both the House6 and Senate7 committees that advanced the 

NSMIA, “qualified purchasers” would not need state 

regulatory protection in light of their financial worth and 

sophistication. 

In 2001, the SEC proposed a rule that would have defined

“qualified purchaser” universally (i.e., for any securities 

purchase) to mean “accredited investor” as defined by SEC 

Rule 501(a) of Regulation D. See Defining the Term 

“Qualified Purchaser” Under the Securities Act of 1933, 66 

 6 See H.R. REP. NO. 104-622, at 31 (“[T]he Committee intends 

that the Commission’s definition [of qualified purchasers] be rooted 

in the belief that ‘qualified’ purchasers are sophisticated investors, 

capable of protecting themselves in a manner that renders 

regulation by State authorities unnecessary.”).

7 See S. REP. 104-293, at 15 (1996) (“The bill also codifies 

another exemption existing in most states—the preemption from 

state ‘blue sky’ registration for offers and sales to qualified 

purchasers. Based on their level of wealth and sophistication, 

investors who come within the definition of ‘qualified purchasers’ 

do not require the protections of registration.”).
8

Fed. Reg. 66,839 (Dec. 27, 2001). SEC Rule 501(a), in turn, 

provides a list of persons and entities deemed “accredited 

investors,” all of which possess greater-than-average levels of 

financial wherewithal. 17 C.F.R. § 230.501(a). They include, 

for instance, business entities, banks, trusts and nonprofit 

organizations with total assets that exceed $5 million, as well 

as any natural person with a net worth exceeding $1 million. 

See id. The SEC never finalized the rule using the Rule 

501(a) definition. 

B. JUMPSTART OUR BUSINESS STARTUPS ACT (JOBS ACT),

PUB. L. NO. 112-106, 126 STAT. 306

Following the most recent economic recession, in 2012 

the Congress passed the Jumpstart Our Business Startups Act 

(JOBS Act), Pub. L. No. 112-106, 126 Stat. 306 (2012). The 

JOBS Act was intended to spur job creation and economic 

growth by increasing small-business access to capital markets. 

By enacting Title IV of the JOBS Act (Title IV), the Congress 

meant to resuscitate the SEC’s historically underutilized 

Regulation A. It did so in three ways. 

First, Title IV added section 3(b)(2) to the Securities Act, 

which directed the SEC to revamp Regulation A. See 15 

U.S.C. § 77c(b)(2). Specifically, section 3(b)(2) required the 

SEC to promulgate a rule adding a new class of securities to 

section 3’s list of those exempt from federal-registration 

requirements. See id. It also sketched out the rough 

parameters for this new class. See id. § 77c(b)(2)(A)–(G). 

For instance, it mandated that the aggregate offering amount 

of section 3(b)(2) securities was not to exceed $50 million and 

the sale of the securities was not to be restricted, see id. 

§ 77c(b)(2)(A), (C); it also provided the SEC with authority to

create other requirements the Commission deemed necessary 
9

to advance the public interest and to protect investors. See id.

§ 77c(b)(2)(G).

Second, Title IV provided that some of the securities 

issued under the SEC’s forthcoming section 3(b)(2) rule were 

to be exempt from state registration and qualification 

requirements. See 15 U.S.C. § 77r(b)(4)(D). Title IV did so 

by expanding the section 18 “covered securities” list to 

include securities issued pursuant to section 3(b)(2) so long as 

the securities were offered or sold either (1) on a national 

securities exchange or (2) “to a qualified purchaser, as defined 

by the Commission pursuant to [section 18(b)(3)] with respect 

to that purchase or sale.” Id. An earlier iteration of Title IV

would have also preempted state requirements for any section 

3(b)(2) security offered or sold through a broker or dealer, see

H.R. REP. NO. 112-206, 2 (2011), but, after some 

congressmembers expressed concern about the wide 

preemptive effect this provision would have,8 it was removed

before the bill became law. 

Third, Title IV ordered the Comptroller General to 

conduct, within three months of the JOBS Act’s enactment, a 

study to determine the effect of state blue-sky laws on 

Regulation A offerings. The Comptroller General complied 

and, in July 2012, reported that the limited use of Regulation 

A was caused, in part, by the cost of complying with state 

laws. 

 8 See, e.g., 157 CONG. REC. H7231 (daily ed. Nov. 2, 2011) 

(statement of Rep. Gary Peters) (“Regulation A securities can be 

high-risk offerings that may also be susceptible to fraud, making 

protections provided by the State regulators an essential 

[feature].”); H.R. REP. NO. 112-206, 13 (2011) (minority view) 

(“Regulation A securities are sometimes high-risk offerings that 

may be susceptible to fraud, making the protections provided by 

state review essential.”).
10

C. SECTION 3(B)(2) RULE

On January 23, 2014, the SEC complied with the section 

3(b)(2) mandate and proposed a rule designed to overhaul 

Regulation A. See Proposed Rule Amendments for Small and 

Additional Issues Exemptions Under Section 3(b) of the 

Securities Act, 79 Fed. Reg. 3,926 (Jan. 23, 2014). The SEC

rule proposed the creation of two Regulation A offering

“tiers.” Id. at 3,927. Tier-1 was to apply to offerings up to $5 

million and, for the most part, to employ the same federal 

controls Regulation A had used since its original

promulgation in 1936.

9

 Tier-2, in contrast, would apply to 

offerings up to $50 million and include additional investor 

safeguards. Some of the proposed safeguards were directed at 

Tier-2 issuers—for instance, the SEC proposed requiring

issuers to provide audited financial disclosures with offering 

circulars and to file, on a continuing basis, annual and semiannual financial reports with the SEC. Other proposed 

safeguards were directed at Tier-2 purchasers—specifically, 

the SEC proposed capping Tier-2 purchases at 10 per cent of 

the investor’s annual income or net worth, whichever is 

greater. 

The proposed rule acknowledged the Comptroller 

General’s conclusion that the cost of state blue-sky law 

compliance may have contributed to Regulation A’s disuse. 

Many commenters also expressed concern about the cost of 

state law compliance and some proposed ways to alleviate the 

burden. For example, the North American Securities 

Administrators Association (NASAA), appearing as amicus

here, proposed a coordinated state review process to

harmonize different state substantive requirements. Most

 9 The final rule increased the Tier-1 offering limit to $20 

million. 
11

commenters, however, “strongly supported some form of state 

securities law preemption” and the SEC received a variety of

suggestions regarding potential “qualified purchaser” 

definitions.

10 Id. at 3,969. As a result, the SEC announced 

that it intended to promulgate a qualified-purchaser definition

to “protect offerees and investors in Regulation A securities, 

while streamlining compliance and reducing transaction 

costs.” Id. 

On March 25, 2015, the SEC released Regulation A-Plus. 

After reviewing extensive public commentary on various

qualified-purchaser definitions, the SEC defined the term as

“any person to whom securities are offered or sold pursuant to 

a Tier[-]2 offering of this Regulation A.” 80 Fed. Reg. at 

21,899 (emphasis added) (codified at 17 C.F.R. § 230.256). 

As a result, Regulation A-Plus preempted all state registration 

and qualification requirements for Tier-2 securities either 

(1) purchased by an “accredited investor” or (2) purchased by 

anyone else so long as the non-accredited investor refrained 

from purchasing securities valued at more than 10 per cent of 

his net worth or annual income.11 See id. at 21,895–96, 

21,899.

 10 See, e.g., 79 Fed. Reg. at 3,969 (suggesting, inter alia, that 

SEC define “qualified purchaser” as “[a]ny purchaser in a 

Regulation A offering”; “[a]ny purchaser meeting a specified net 

worth standard, set at or lower than the current ‘accredited investor’ 

definition in Rule 501 of Regulation D”; “[a]ny purchaser meeting 

a net worth or income test based on thresholds below accredited 

investor thresholds, combined with an investment cap”; and “[a]ny 

purchaser who purchased through a registered broker-dealer”).

11 Tier-1 offerings, in contrast, remain subject to state 

registration and qualification requirements. 
12

As required by section 2(b), see 15 U.S.C. § 77b(b),

Regulation A-Plus analyzed whether its qualified-purchaser 

definition protects investors and “promote[s] efficiency, 

competition, and capital formation.” 80 Fed. Reg. at 21,864. 

It did so in light of the JOBS Act goal of “expand[ing] the 

capital raising options available to smaller and emerging 

companies.” Id. at 21,865. After acknowledging that 

eliminating state-level review might reduce investor 

protection, see id. at 27,886–87, the SEC explained that 

“[s]everal factors could mitigate” the risk, including the 

“substantial protections” built into Tier-2 offerings—i.e., the 

10 per cent purchase cap and the more rigorous financial 

disclosure requirements for issuers, id. at 21,887.

On May 22, 2015, the petitioners filed timely petitions 

for review of the SEC’s qualified-purchaser definition. Our

jurisdiction arises under section 9 of the Securities Act, see 15 

U.S.C. § 77i, and section 702 of the Administrative Procedure 

Act (APA), see 5 U.S.C. § 702.

II. ANALYSIS

The petitioners argue that the term qualified purchaser 

cannot mean “any person” to whom Tier-2 securities are 

offered or sold but instead must limit the universe of 

purchasers to those with enough financial wealth or 

sophistication to invest without state-law safeguards. Pet’rs’ 

Br. 1, 3 (emphasis added). They insist that the SEC’s rule 

fails both at Chevron Step 1 and at Step 2. They also argue 

that Regulation A-Plus must be vacated as arbitrary and 

capricious. We address their arguments in turn.

A. CHEVRON STEP ONE

In the petitioners’ view, the SEC’s qualified-purchaser 

definition, which does not restrict Tier-2 sales to wealthy 
13

and/or sophisticated investors, contravenes the plain meaning 

of the Securities Act. To succeed, they must demonstrate that 

the Securities Act “unambiguously foreclosed” the SEC’s

qualified-purchaser definition. Vill. of Barrington, Ill. v. 

Surface Transp. Bd., 636 F.3d 650, 659 (D.C. Cir. 2011)

(quotation marks omitted). They have not done so. 

To discern the Congress’s intent, we generally examine 

the statutory text, structure, purpose and its legislative history. 

See Bell Atl. Tel. Co. v. FCC, 131 F.3d 1044, 1047 (D.C. Cir. 

1997). That said, “[t]he starting point for our interpretation of 

a statute is always its language,” Cmty. for Creative NonViolence v. Reid, 490 U.S. 730, 739 (1989), and, here, the 

language of section 18 confirms that the Congress has not 

“directly spoken to the precise question at issue”—namely, 

the meaning of qualified purchaser in relation to state 

preemption. Chevron, 467 U.S. at 842. Instead, the Congress 

explicitly authorized the Commission to define the term, see 

15 U.S.C. § 77r(b)(3) (“qualified purchaser[]” is to be 

“defined by the Commission by rule”), and to adopt different 

definitions for different types of securities, see id. The

explicit grant of definitional authority manifests that the 

Congress intended the SEC to enjoy broad discretion to 

decide who may purchase which securities without the 

encumbrance of state registration and qualification 

requirements. Exercising this grant, the SEC concluded that 

all purchasers of Tier-2 securities are qualified so long as nonaccredited purchasers limit their purchase to 10 per cent of 

their annual income or net worth. Nothing in the text of the 

Securities Act “unambiguously foreclose[s]” the SEC from 

adopting this definition. Vill. of Barrington, Ill., 636 F.3d at 

659.

The petitioners nonetheless insist that the SEC’s 

definition fails at Chevron step 1 because: (1) the commonly 
14

understood definition of “qualified,” which modifies 

“purchaser,” means that the Commission must in some way 

reduce the universe of “purchasers” from “any purchaser”; 

(2) the SEC’s definition is not “consistent with the public 

interest and the protection of investors,” 15 U.S.C. 

§ 77r(b)(3); (3) Regulation A-Plus renders the word 

“qualified” superfluous and otherwise conflicts with the 

structure of the Securities Act; (4) federal securities law has 

always linked the term “qualified” with a purchaser’s wealth 

or sophistication; and (5) the NSMIA’s legislative history 

demonstrates that the Congress wanted the SEC to limit a 

“qualified purchaser” to one with a certain level of wealth or 

sophistication. None of the petitioners’ arguments is

persuasive. 

The petitioners’ common-use argument is 

straightforward: in their view, the dictionary definition of 

“qualified” manifests that “qualified purchasers” cannot mean

“all” Tier-2 purchasers. But when the “Congress explicitly 

authorize[s]” an agency to “define [a] term,” it “necessarily 

suggests that Congress did not intend the word to be applied 

in its plain meaning sense.” Women Involved in Farm Econ. 

v. USDA, 876 F.2d 994, 1000 (D.C. Cir. 1989) (emphasis in 

original).

12 And when the Congress enacted the NSMIA and 

the JOBS Act, it not only gave the Commission authority to 

 12 See also Rush Univ. Med. Ctr. v. Burwell, 763 F.3d 754, 760 

(7th Cir. 2014) (challenger “insists that the ‘plain language’ of a 

law still controls the meaning of a term even when Congress 

expressly delegates authority to define the supposedly ‘plain’ term 

to an agency. We cannot accept this argument. The plain language 

of the statute delegates definitional authority to the Secretary; to 

excise that portion would give the statute a new and unintended 

meaning. It would also undermine Congress’s ability to delegate 

the power to define terms and thrust the courts into a role that 

Congress meant to reserve for the agency.”).
15

determine which purchasers are qualified but it also permitted 

the Commission to define the term differently for different 

types of securities offerings. See 15 U.S.C. § 77r(b)(3). The 

petitioners identify no statutory provision that bars the SEC 

from concluding that all Tier-2 purchasers are “qualified” in 

view of the other investor protections built into Tier-2. 

Next, the petitioners argue that, because the Securities 

Act requires that any definition of qualified purchaser must 

advance “the public interest and the protection of investors,” 

id., the SEC had to promulgate a definition tied to investor 

wealth or experience. But the Congress explicitly granted the 

SEC discretion to determine how best to protect the public 

and investors, see id., and the SEC, in exercising its 

discretion, concluded that Tier-2 investors are sufficiently 

protected by Tier-2’s purchase cap and reporting 

requirements. See 80 Fed. Reg. at 21,877. Although the 

petitioners lament that Tier-2 purchasers “may now lose up to 

10 percent of their net worth in Regulation A[-Plus]

offerings,” Pet’rs’ Br. 41,13 their challenge to the SEC’s 

definition does not amount to an unambiguous statutory 

mandate that the SEC protect investors as the petitioners 

might prefer. 

The petitioners also argue that the SEC definition 

conflicts with the Securities Act’s structure because it 

(1) renders the term “qualified” superfluous, (2) nullifies the 

requirement that the definition serve the public interest and 

 13 The petitioners point out that the SEC does not require Tier2 offerors to verify that non-accredited purchasers have capped 

their respective investments at 10 per cent of their income or net 

worth. Nothing in the Securities Act, however, requires the SEC to 

ensure investor protection by requiring offerors to police their 

investors’ purchases. 
16

investor protection and (3) amounts to unlawful agency 

preemption of state law, which is a power possessed by the 

Congress alone. But the SEC did not nullify the term 

“qualified”; rather, it concluded that all Tier-2 purchasers are 

qualified. See 80 Fed. Reg. at 21,899. And the SEC’s 

definition does not ignore its obligation to promulgate a 

definition consistent with the best interests of the public and 

investors; rather, as discussed, see supra § I.C, the SEC 

explained why it thought its definition achieved this goal. 

Finally, it was the Congress, not the SEC, that decided to 

preempt state registration and qualification requirements 

when a security is “offered or sold to a qualified purchaser,” 

15 U.S.C. § 77r(b)(4)(D)(ii); by instructing the Commission 

to determine the circumstances under which a “purchaser” is 

“qualified,” the Congress plainly intended the SEC to 

delineate the scope of state-law preemption. 

Undeterred, the petitioners argue that federal securities 

law has always construed the term “qualified investor” or 

“qualified purchaser” to mean a limited group with the ability

to protect their interests. While it is true that some securities 

provisions associate the term “qualified” with a purchaser’s 

ability to undertake financial risk,14 the petitioners’ argument 

 14 See, e.g., 15 U.S.C. § 78c(a)(54)(A), (B) (for exception to 

broker-dealer Exchange Act registration requirement, “qualified 

investor” is defined as investment companies, banks, small business 

investment companies, state-sponsored employee benefit plans, 

institutional trusts, market intermediaries, and natural persons, 

corporations or partnerships that own and invest on a discretionary 

basis more than $25 million (or, in some circumstances, $10 

million)); 17 C.F.R. § 230.144A(a)(1) (for SEC Rule 144A, 

“qualified institutional buyer” is defined as large sophisticated 

institutional investors that own and invest on discretionary basis at 

least $100 million in securities and banks and other specified 

financial institutions with net worth of at least $25 million).
17

proves only that when the Congress wishes to define 

“qualified” by reference to wealth or sophistication, it knows 

how to do so. Here, the Congress’s decision to leave the 

definition to the SEC’s discretion demonstrates that the 

Congress wanted to give the SEC wide latitude. At a 

minimum, the petitioners’ argument falls short of establishing

unambiguous congressional intent that a “qualified purchaser” 

meet a certain level of wealth or sophistication. 

Finally, the petitioners argue that the NSMIA’s 

legislative history makes plain that the Congress intended 

“qualified purchaser” to apply only to wealthy or 

sophisticated investors. As noted, both the Senate15 and 

House16 committees that advanced the NSMIA believed that 

qualified purchasers could fend for themselves without statelaw protection. But “even the most formidable argument 

concerning the statute’s purposes [cannot] overcome the 

clarity [found] in the statute’s text,” Kloeckner v. Solis, 133

S. Ct. 596, 607 n.4 (2012), and “only rarely have we relied on 

legislative history to constrict the otherwise broad application 

of a statute indicated by its text,” Consumer Elecs. Ass’n v. 

FCC, 347 F.3d 291, 298 (D.C. Cir. 2003); see also id. 

(“[W]hile such history can be used to clarify congressional 

 15 See S. REP. 104-293, at 15 (“Based on their level of wealth 

and sophistication, investors who come within the definition of 

‘qualified purchasers’ do not require the protections of 

registration.”).

16 See H.R. REP. 104-622, at 31 (“[T]he Commission is given 

flexible authority to establish various definitions of qualified 

purchasers” but, “[i]n all cases, . . . the Committee intends that the 

Commission’s definition be rooted in the belief that ‘qualified’ 

purchasers are sophisticated investors, capable of protecting 

themselves in a manner that renders regulation by State authorities 

unnecessary”).
18

intent even when a statute is superficially unambiguous, the 

bar is high.” (quotation marks omitted)). To accept the 

petitioners’ legislative-history argument would be to 

“abandon altogether the text of the statute as a guide in the 

interpretative process.” Shannon v. United States, 512 U.S. 

573, 583 (1994). 

Because Regulation A-Plus does not conflict with the 

Congress’s unambiguous intent, it does not falter at Chevron 

Step 1 and, accordingly, we proceed to Chevron step 2. 

B. CHEVRON STEP TWO

The petitioners also argue that the SEC’s qualifiedpurchaser definition is unreasonable and therefore fails at 

Chevron Step 2. Typically, at Chevron Step 2, we defer to the 

Commission so long as its definition is “based on a 

permissible construction of the statute.” Chevron, 467 U.S. at 

842–43. But “[b]ecause Congress has authorized the 

Commission . . . to prescribe legislative rules, we owe the 

Commission’s judgment more than mere deference or 

weight.” United States v. O’Hagan, 521 U.S. 642, 673 (1997)

(quotation marks omitted). Indeed, where, as here, “there is 

an express delegation of authority to the agency to elucidate a 

specific provision of the statute by regulation,” we give the 

regulation “controlling weight unless [it is] arbitrary, 

capricious, or manifestly contrary to the statute.” Chevron, 

467 U.S. at 843–44; see also United States v. Mead Corp., 

533 U.S. 218, 227 (2001) (“When Congress has explicitly left 

a gap for an agency to fill, . . . any ensuing regulation is 

binding in the courts unless procedurally defective, arbitrary 

or capricious in substance, or manifestly contrary to the 

statute.” (quotation marks omitted)). 

The petitioners insist that the SEC’s qualified-purchaser 

definition “is actually ‘manifestly contrary to the statute’ ” 
19

because it imposes no restrictions based on investor wealth, 

income or sophistication. Pet’rs’ Br. 57 (quoting Chevron, 

467 U.S. at 843). Their Chevron Step 2 arguments mirror 

their Chevron Step 1 arguments and, for all of the reasons set 

out in our Chevron Step 1 discussion, we believe the SEC 

acted reasonably and within its broad definitional authority 

when it decided that all Tier-2 investors are considered 

“qualified purchasers.”

The petitioners advance three additional Chevron Step 2 

arguments but none has merit. First, they insist that we must

apply a presumption against preemption, according the SEC 

no deference because, in their view, the Congress’s 

preemptive purpose was not “clear and manifest.” Medtronic, 

Inc. v. Lohr, 518 U.S. 470, 485 (1996) (quotation marks 

omitted). We have, however, “rejected the argument that 

wherever a federal agency’s exercise of authority will 

preempt state power, Chevron deference is inappropriate.” 

Albany Eng’g Corp. v. FERC, 548 F.3d 1071, 1074 (D.C. Cir. 

2008) (quotation marks omitted). In any event, the 

Congress’s decision to exempt “qualified purchasers” from 

state requirements was “clear and manifest,” Medtronic, Inc., 

518 U.S. at 485, as was its decision to authorize the SEC, in

its discretion, to determine the scope of state preemption by 

defining when a “purchaser” is “qualified.”

The petitioners’ second argument is that the SEC failed to 

provide a reasoned explanation for its definition. Although an 

agency enjoys Chevron Step 2 deference “only if [it] has 

offered a reasoned explanation for why it chose that 

interpretation,” Vill. of Barrington, Ill., 636 F.3d at 660, the 

SEC did in fact explain how its “final rules for Regulation A 

will provide for a meaningful addition to the existing capital 

formation options of smaller companies while maintaining 

important investor protections.” 80 Fed. Reg. at 21,813. The 
20

Commission explained that its definition protects investors 

because Tier-2 offerings require that offerors provide audited 

financial statements to purchasers and to the SEC on a 

recurring basis; it also explained that non-accredited Tier-2 

purchasers are not permitted to risk more than 10 per cent of 

their annual income or net worth. Id. at 21,858, 21,861. The 

SEC further explained how its definition helps to revitalize 

Regulation A, which was the Congress’s primary purpose in 

enacting the JOBS Act. Id. at 21,858–59. For these reasons, 

we find that the SEC has “cogently explain[ed] why it has 

exercised its discretion in a given manner” and its 

“explanation [is] . . . sufficient to enable us to conclude that 

[its action] was the product of reasoned decisionmaking.” 

U.S. Telecomm. Ass’n v. FCC, 227 F.3d 450, 460 (D.C. Cir. 

2000) (quotation marks omitted).

The petitioners’ third argument is that the SEC failed to 

explain why its qualified-purchaser definition changed from 

the qualified-purchaser definition it proposed (but never 

finalized) in 2001. We disagree. It bears noting at the outset 

that “[a]n initial agency interpretation is not instantly carved 

in stone,” Anna Jacques Hosp. v. Burwell, 797 F.3d 1155,

1170 (D.C. Cir. 2015) (quoting Chevron, 467 U.S. at 863). 

Moreover, “a proposed regulation does not represent an 

agency’s considered interpretation of its statute and . . . an

agency is entitled to consider alternative interpretations before 

settling on the view it considers most sound,” CFTC v. Schor, 

478 U.S. 833, 845 (1986). Moreover, the Commission 

explained that its 2001 proposed definition “contemplated that 

state securities review and qualification requirements would 

be preempted” for all securities although its “rules to 

implement Title IV of the JOBS Act provide for preemption 

in the more limited circumstances in which the requirements 

of [s]ection 3(b)(2) and the rules adopted thereunder are 

satisfied.” 80 Fed. Reg. at 21,859. Given the “new and 
21

different context” outlined in Title IV, id. at 21,860, the SEC 

explained that, notwithstanding it may have been appropriate 

“to focus on attributes of the purchaser when crafting a 

‘qualified purchaser’ definition that would have applied in a 

broad set of possible transactions,” its Tier-2 qualifiedpurchaser definition “serves a different purpose because it 

applies only in Regulation A offerings,” id. at 21,559–60, 

which, as already discussed, include additional investor 

safeguards. See supra § I.C.

Because the Commission’s qualified-purchaser definition 

is not “arbitrary, capricious, or manifestly contrary to the 

statute,” Chevron, 467 U.S. at 844, it does not fail Chevron 

Step 2.

C. APA REVIEW

Finally, the petitioners challenge Regulation A-Plus as 

arbitrary and capricious, in violation of the APA, 5 U.S.C. 

§ 706(2)(A). A “rule is arbitrary and capricious” if an 

“agency fail[s] to consider . . . a factor the agency must 

consider under its organic statute,” Pub. Citizen v. Fed. Motor 

Carrier Safety Admin., 374 F.3d 1209, 1216 (D.C. Cir. 2004);

section 2(b) of the Securities Act requires that, if the 

Commission “consider[s] or determine[s] whether an action is 

necessary or appropriate in the public interest,” it must also 

“consider, in addition to the protection of investors, whether 

the action will promote efficiency, competition, and capital 

formation.” 15 U.S.C. § 77b(b). This inquiry contemplates 

that the Commission will “determine as best it can the 

economic implications of the rule.” Chamber of Commerce v. 

SEC, 412 F.3d 133, 143 (D.C. Cir. 2005). In the petitioners’ 

view, the Commission failed to discharge this duty when it 

“offered only a single paragraph to explain why existing state 
22

law and the new rule might lessen the adverse effects of ‘blue 

sky’ preemption.” Pet’rs’ Br. 65.

We disagree. By providing a reasoned analysis of how 

its qualified-purchaser definition strikes the “appropriate 

balance between mitigating cost and time demands on issuers 

and providing investor protections,” 80 Fed. Reg. at 21,888

(emphasis added), the Commission has complied with its 

statutory obligation. It considered the benefits of blue-sky 

review, concluding that it “may aid in detecting fraud and 

facilitating issuer compliance” by providing another level of 

investor protection. Id. at 21,886–87. It also considered the 

costs imposed on issuers by blue-sky review, relying on the 

Comptroller General’s conclusion that state registration and 

qualification requirements stymied Regulation A’s use in 

recent years. See id. at 21,868. After discussing the Tier-2 

protections afforded to investors in the absence of state law 

review—e.g., federal and state antifraud enforcement 

authority, enhanced and continuing issuer disclosure 

requirements and the 10 per cent purchase cap—the SEC 

concluded that the Tier-2 requirements “reduce[d] the need 

for, and the expected benefits of, state review.” Id. at 21,887. 

Given the JOBS Act mandate to revitalize Regulation A, the 

SEC concluded that the potential decrease in investor 

protection was balanced by the reduced costs for Tier-2 

issuers and purchasers. See id. 

In the petitioners’ view, the rule should nonetheless be 

vacated because the SEC failed to show that Tier-2’s 

safeguards “will actually mitigate the identified costs of 

preemption.” Pet’rs’ Br. 67 (emphasis added). For its part, 

amicus NASAA faults the SEC for relying on “little to no 

evidence” regarding the costs of state-law compliance and 

state-law preemption. NASAA Br. 26–27. But, as noted, 

Regulation A was rarely used, which means that the 
23

Commission did not have the data necessary to quantify 

precisely the risks of preemption for investors and the costs of 

state-law compliance for issuers. We do not require the 

Commission “to measure the immeasurable” and we do not 

require it to “conduct a rigorous, quantitative economic 

analysis unless the statute explicitly directs it to do so.” Nat’l 

Ass’n of Mfrs. v. SEC, 748 F.3d 359, 369 (D.C. Cir. 2014)

(quotation marks omitted), overruled on other grounds by Am. 

Meat Inst. v. USDA, 760 F.3d 18 (D.C. Cir. 2014) (en banc). 

Here, we find that the SEC’s “discussion of unquantifiable 

benefits fulfills its statutory obligation to consider and 

evaluate potential costs and benefits,” Inv. Co. Inst. v. CFTC, 

720 F.3d 370, 379 (D.C. Cir. 2013); because the SEC 

articulated “a satisfactory explanation for its action[,] 

including a rational connection between the facts found and 

the choice[] made,” Business Roundtable v. SEC, 647 F.3d

1144, 1148 (D.C. Cir. 2011) (quotation marks omitted), we 

uphold Regulation A-Plus. 

For the foregoing reasons, the consolidated petitions for 

review are denied. 

So ordered.