On November 17, the staff of the Division of Corporation Finance of the Securities and Exchange Commission issued four new Compliance and Disclosure Interpretations (C&DIs), three of which relate to offerings under Regulation A and one of which relates to offerings under Regulation D under the US Securities Act of 1933 (the “Securities Act”).
- C&DI 182.12 discusses the form requirements for an issuer to qualify an additional class of securities by post-qualification amendment to a previously-qualified Regulation A offering statement on Form 1-A. The SEC staff noted in the C&DI that, in order to satisfy the requirements of Item 4 to Part I of Form 1-A (“Summary Information Regarding the Offering and Other Current or Proposed Offerings), the issuer only needs to provide such information about the additional class of securities. The SEC staff also reminded issuers to update Item 6 of Part I of Form 1-A (“Unregistered Securities Issued or Sold Within One Year”) to include any class of securities previously issued or sold in a Regulation A offering over the past year.
- In C&DI 182.13, the SEC staff responded to the question of how an issuer calculates whether the change in price in an offering exceeds 20% of the maximum aggregate offering price in order to determine whether the issuer needs to file a post-qualification amendment (or whether such change may be made instead through an offering circular supplement). The note to Rule 253(b) under Regulation A under the Securities Act provides that, if the change in price is no more than 20% of the maximum aggregate offering price, then the issuer is not required to file a post-qualification amendment. The SEC staff clarified that the 20% change is measured from the low end of the range (if the offering price decreases) or from the high end of the range (if the offering price increases). The SEC staff also noted that an issuer may not, in any event, rely upon the note to Rule 253(b) to make an offering in excess of the Tier 1 or Tier 2 limits under Rule 251(a) or if the change in the price of the offering would result in a Tier 1 offering becoming a Tier 2 offering.
- In C&DI 182.14, the SEC staff’s interpretation indicated that an issuer making an offering under Regulation A may omit financial information for historical periods in a Form 1-A offering statement if the issuer reasonably believes that such financial information will not be required at the time of qualification of the Form, consistent with the treatment of emerging growth company registration statements under the Fixing America’s Surface Transportation Act (a summary of which is available in the Corporate & Financial Weekly Digest edition of December 11, 2015). The SEC staff clarified that an issuer would be obligated to amend its offering statement prior to qualification to include all financial information required to be included at the time of qualification and to redistribute solicitation materials in accordance with Rule 255(d) under Regulation A if any previously omitted financial information is included in an amended offering statement.
- C&DI 256.34 addresses the question of whether an offering by an issuer that involves general solicitation of investors in reliance on Rule 506(c) under Regulation D commenced less than six months after the most recent sale by the same issuer in a private offering in reliance on Rule 506(b) under Regulation D will, together with such Rule 506(b) offering, constitute a single offering under Regulation D. The SEC staff expressed the view that, under these circumstances, so long as the private placement met all of the applicable requirements of Rule 506(b) prior to the general solicitation, such 506(b) offers and sales would not be integrated with subsequent 506(c) offers and sales. As indicated in the SEC staff’s interpretation, this position is consistent with Rule 152 under the Securities Act, which provides that a private placement will not lose its exempt status as a result of a subsequent public offering.