On December 7, 2016, the North American Securities Administrators Association (“NASAA”) proposed a model rule, a model statutory amendment and a Solicitation of Interest Form permitting testing the waters in Tier 1 Regulation A offerings under the NASAA’s coordinated review program. States are currently preempted from requiring registration for Tier 2 Regulation A offerings, including those using testing the waters, but are not preempted from requiring such registration for Tier 1 Regulation A offerings. The proposed model rule allows an issuer that intends to register a Tier 1 Regulation A offering to solicit indications of interest from prospective investors if the following conditions are satisfied:

  • the issuer is organized under the laws of a state or territory of the United States, the District of Columbia or a province of Canada;
  • the issuer files a solicitation of interest form and any advertising materials with the administrator at least 15 calendar days prior to the initial solicitation of interest;
  • neither the issuer nor any person acting on its behalf may solicit or accept any money or subscriptions;
  • neither the issuer nor any person acting on its behalf may make any sales until at least seven calendar days after delivering a final offering circular; and
  • certain legends must appear in any solicitation of interest materials.

Certain offerings are disqualified under the proposed model rule, including those involving bad actors, development stage companies, blank check companies, companies involved in petroleum or other mining or extractive industries and pooled investment vehicles. The proposed Solicitation of Interest Form, which contains basic information about the issuer and the offering, would be required to be filed with regulators prior to testing the waters and also must be provided to prospective investors. Comments on the NASAA’s proposal are due by January 6, 2017.

The NASAA’s proposal is available at: http://nasaa.cdn.s3.amazonaws.com/wp-content/uploads/2016/12/Testing-the-Waters-Request-for-Public-Comment-December-2016.pdf.