The Securities and Exchange Commission (“SEC”) adopted rules (Release No. 33-9741) in March 2015 which allow smaller companies to offer up to $50 million of securities in a one year period. The rules, commonly referred to as “Regulation A+,” update and expand Regulation A and are mandated by Title IV of the Jumpstart Our Business Startups (“JOBS”) Act. Smaller companies can now file these offerings subject to eligibility and reporting requirements, without having to comply with the SEC’s general registration requirements under the Securities Act of 1933. This rule gives investors more investment choices while giving smaller companies access to raise capital. While the rules apply to all issuers that qualify, the real estate investment and development market is one sector that can take advantage of the new funding opportunities for acquisitions and developmental projects.
There are two tiers for offerings and both tiers are subject to basic requirements under the current provisions of Regulation A: Tier 1, for securities offerings of up to $20 million, and Tier 2, for offerings of up to $50 million. Companies conducting Tier 2 offerings would be subject to other requirements including audited financial statements and the filing of annual, semiannual, and current event reports. The Tier 2 rules preempt state blue sky laws.