Regulation A+ (US Mini-IPO Exemption)

Regulation A+ is the popular name for the amended Regulation A under the Securities Act of 1933, as overhauled by Title IV of the Jumpstart Our Business Startups (JOBS) Act of 2012 and implemented by the SEC through final rules effective June 19, 2015. It creates a conditional exemption from full Securities Act registration that permits companies to raise capital from both accredited and non-accredited (retail) investors through a simplified offering process, subject to SEC review of the offering document and annual offering limits.

Background: From Regulation A to Regulation A+

The original Regulation A, enacted under the Securities Act of 1933, permitted small companies to raise up to $5 million annually in simplified public offerings. By the time the JOBS Act was enacted, Regulation A was essentially a dead letter: the $5 million limit was too small to justify the compliance costs, and the combination of state securities (blue sky) registration requirements and federal requirements made the practical burden nearly as heavy as a full registered offering.

Title IV of the JOBS Act directed the SEC to revise Regulation A with higher offering limits and preemption of state blue sky requirements for Tier 2 offerings. The SEC’s implementing rules created what the industry quickly called “Regulation A+” — the plus reflecting the substantially expanded capability relative to the original regime.

Two Tiers

Regulation A+ is structured in two tiers.

Tier 1 permits offerings of up to $20 million per 12-month period, including up to $6 million by selling shareholders. Tier 1 offerings are not exempt from state securities registration or qualification, meaning issuers must comply with securities laws in every state where they offer securities. Tier 1 does not require ongoing reporting after the offering is completed.

Tier 2 permits offerings of up to $75 million per 12-month period, including up to $22.5 million by selling shareholders. Tier 2 offerings are preempted from state blue sky requirements — the SEC offering qualification supersedes state requirements, significantly reducing compliance complexity for national offerings. Tier 2 requires audited financial statements and imposes ongoing reporting obligations: annual reports on Form 1-K, semi-annual reports on Form 1-SA, and current reports on Form 1-U for material events.

For retail investors in Tier 2 offerings, investment is limited to no more than 10% of the greater of the investor’s annual income or net worth for any 12-month period, providing a consumer protection mechanism absent in most other exemptions.

The SEC Review Process

Unlike Regulation D, which permits offerings to proceed without any SEC pre-review, Regulation A+ requires the issuer to submit an offering circular (similar to a prospectus but with reduced disclosure requirements) to the SEC for review and qualification. The SEC’s Division of Corporation Finance reviews Regulation A+ offering circulars through its comment and response process, similar to a scaled-down version of the IPO registration review.

The review process takes approximately 2-4 months, during which SEC staff may issue comment letters requiring the issuer to clarify or supplement disclosures. Only after the SEC qualifies the offering circular may the issuer accept money from investors.

This review process is more burdensome than Regulation D’s no-review approach, but it provides the benefit of SEC qualification — a form of regulatory endorsement that may increase investor confidence and, for tokenized securities, can provide clearer legal certainty that the offering is being conducted within a recognized legal framework.

Regulation A+ and Tokenized Securities

Several tokenized asset issuers have used Regulation A+ as their offering structure. The advantages are significant: retail investors can participate without meeting accredited investor thresholds, the SEC qualification provides a clear legal basis for the offering, and Tier 2 preempts state blue sky review for national offerings.

Notably, Regulation A+ securities are not subject to the same resale restrictions as Regulation D restricted securities. Securities sold in a Regulation A+ offering can generally be resold freely by non-affiliates, which makes them more suitable for tokenized securities where liquid secondary market trading is part of the value proposition.

The practical challenges for tokenized securities under Regulation A+ include the need to address secondary market trading — if tokens are to trade on a platform, that platform must itself be registered or exempt from registration as a securities exchange or broker-dealer. This creates the need for infrastructure that does not yet exist at scale in the US.

Comparison with Regulation D and Regulation S

The three main federal exemptions used for token offerings serve different purposes and investor bases. Regulation D is the fastest and most flexible for reaching accredited investors in the US, with no SEC pre-review, but it excludes retail investors and creates resale restrictions. Regulation S provides an exemption for offshore offerings to non-US investors, permitting global token distribution outside the US regulatory perimeter. Regulation A+ is the most accessible to US retail investors but requires the most upfront compliance work including SEC review.

For tokenized securities intended for broad US retail distribution, Regulation A+ is the most appropriate exemption framework currently available. Its $75 million annual limit and ongoing reporting requirements position it as the small-cap end of the public markets spectrum — the mini-IPO analogy is apt — rather than a tool for the institutional tokenization market, which typically relies on Regulation D or Regulation S structures.