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New Regulation A – Critical Commentary to the SEC

RICHMOND, VA – On December 18, 2013, the United States Securities and Exchange Commission (“SEC”) proposed landmark rules, pursuant to the mandate of Title IV of the Jumpstart Our Business Start-Ups Act (the “JOBS Act”), to revitalize Regulation A promulgated under Section 3(b) of the Securities Act of 1933, as amended (the “Securities Act”). These rules create a create a two-“Tier” system for Regulation A offerings. Tier 1 will continue to be available for offerings under $5 million, while a Tier 2 Regulation A offering will be for offerings of up to $50 million. Tier 1 offerings will continue to have similar requirements as existing Regulation A, while an issuer conducting a Tier 2 offering will be subject to heightened disclosure requirements in its offering documents and will be required to make ongoing reporting.

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What Does Reg A+ Mean for Broker Dealers?

RICHMOND, VA – The proposed revisions to Regulation A under Title IV of the JOBs Act, commonly referred to as “Reg A+”, present the potential for a watershed event in America’s securities markets – creating an “intermediate” class of public securities between private placements under Regulation D and those registered securities typically listed on national exchanges.

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Regulation A: Old Reg, New Opportunity

For the last 30 years, Regulation D has dominated the exempt securities offerings landscape. This dominance was only enhanced with the passage of the National Securities Markets Improvement Act of 1996 (NSMIA) which exempted from state securities regulation (or “Blue Sky”) securities sold in offerings made pursuant to Rule 506 of Regula-tion D. In the aftermath of the recent economic and financial crisis two leading factors have emerged to hobble the usage of Rule 506 for most issuers in the raising of capital: (i) the lack of li-quidity of Rule 506 securities, and (ii) changes to the definition of “accredited investor” in the Dodd Frank Wall Street Reform and Consumer Protec-tion Act (“Dodd-Frank”) signed into law by President Obama in July 2010.

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