Regulation A+: Word for Word - The Complete 2025 Guide to Mini-IPO Exemptions

Introduction

Regulation A+ represents one of the most powerful yet underutilized exemptions in the securities regulatory framework. Often called a "mini-IPO," Regulation A+ allows companies to raise up to $75 million in a 12-month period through offerings that can be marketed to the general public, with securities that are freely tradable upon issuance. Since the JOBS Act amendments in 2015 dramatically expanded the regulation's utility, Regulation A+ has facilitated over $5 billion in capital raises, providing a middle ground between traditional private placements and full SEC registration.

This comprehensive guide provides a word-for-word breakdown of Regulation A+'s key provisions, practical guidance on navigating the qualification process, and strategic insights on when Regulation A+ offers advantages over alternative exemptions. Whether you're considering your first Regulation A+ offering or evaluating whether this exemption fits your capital raising strategy, this guide will serve as your authoritative reference.

What is Regulation A+ and Why Does It Matter?

Regulation A+ provides an exemption from registration for public offerings of securities up to $75 million in a 12-month period. Unlike Regulation D, which limits offerings to accredited investors (or small numbers of sophisticated non-accredited investors) and requires restricted securities, Regulation A+ permits offerings to the general public with securities that are freely tradable immediately upon issuance. This combination of public marketing, broad investor eligibility, and liquid securities makes Regulation A+ uniquely attractive for companies seeking to build retail investor bases.

The regulation was originally adopted in 1936 but saw limited use due to low offering limits and burdensome state registration requirements. The JOBS Act of 2012 directed the SEC to revise Regulation A to increase its utility, resulting in the 2015 amendments that created "Regulation A+." These amendments increased offering limits from $5 million to $50 million (later increased to $75 million in 2020), created two tiers with different requirements and benefits, and preempted state registration requirements for certain offerings. These changes transformed Regulation A+ from an obscure exemption into a viable alternative to traditional IPOs for growth-stage companies.

The Two-Tier Structure: Tier 1 vs. Tier 2

Regulation A+ establishes two tiers with different offering limits, disclosure requirements, and regulatory treatment. Understanding the differences between these tiers is essential for structuring an offering that balances compliance burden with strategic benefits.

Tier 1: Lower Limits, Lower Compliance Burden

Tier 1 permits offerings up to $20 million in a 12-month period, with up to $6 million of that amount coming from secondary sales by existing security holders. Tier 1 offerings require only reviewed (not audited) financial statements, significantly reducing accounting costs for smaller issuers. Tier 1 offerings have no ongoing reporting obligations after the offering closes, making them attractive for companies that want to raise capital without committing to continuous disclosure.

The primary disadvantage of Tier 1 is that offerings remain subject to state blue sky registration and qualification requirements. Each state where securities are offered or sold can require registration, review offering materials, impose additional disclosure requirements, and collect filing fees. This state-by-state review process can add months to the offering timeline and tens of thousands of dollars in legal and filing fees, particularly for offerings targeting investors in numerous states.

Tier 2: Higher Limits, Federal Preemption, Ongoing Reporting

Tier 2 permits offerings up to $75 million in a 12-month period, with up to $22.5 million coming from secondary sales. Tier 2 offerings require audited financial statements prepared in accordance with U.S. GAAP or IFRS, increasing accounting costs but providing investors with higher-quality financial information. Tier 2 offerings impose ongoing reporting obligations similar to those of publicly traded companies, including annual reports on Form 1-K, semi-annual reports on Form 1-SA, and current reports on Form 1-U for material events.

The primary advantage of Tier 2 is federal preemption of state registration requirements for securities that are listed on a national securities exchange or quoted on a national quotation system. This preemption eliminates the need for state-by-state review, dramatically simplifying multi-state offerings and reducing legal costs. Additionally, Tier 2 securities can be listed on national exchanges like NYSE American or Nasdaq Capital Market, providing immediate liquidity for investors.

Tier 2 imposes investment limits on non-accredited investors, who can invest no more than 10% of the greater of their annual income or net worth (excluding primary residence) in a 12-month period. Accredited investors face no investment limits. Issuers must obtain written representations from non-accredited investors regarding their income, net worth, and investment amount to ensure compliance with these limits.

The Qualification Process: From Filing to Launch

Unlike Regulation D offerings, which can commence immediately upon first sale with only a Form D notice filing, Regulation A+ offerings require SEC qualification before any offers or sales can occur. The qualification process resembles a scaled-down version of a traditional IPO registration, involving submission of an offering statement, SEC review and comment, amendment and response, and final qualification.

Offering Statement on Form 1-A

Issuers must file an offering statement on Form 1-A with the SEC before making any offers or sales. Form 1-A consists of three parts: notification, offering circular, and exhibits. The notification provides basic information about the issuer, the offering, and the persons involved. The offering circular contains detailed disclosure about the issuer's business, properties, management, financial condition, and the terms of the securities being offered. Exhibits include material contracts, consent of auditors, and other supporting documents.

The disclosure requirements for Form 1-A are less extensive than those for a Form S-1 registration statement used in traditional IPOs, but they are significantly more detailed than the limited disclosure required for Regulation D offerings. Issuers must provide two years of audited financial statements (for Tier 2) or reviewed financial statements (for Tier 1), management's discussion and analysis of financial condition and results of operations, description of business and properties, information about directors and executive officers, and disclosure of related party transactions and conflicts of interest.

Testing the Waters

One of the most valuable features of Regulation A+ is the ability to "test the waters" before filing an offering statement or after filing but before qualification. Testing the waters permits issuers to gauge investor interest through written or oral communications before committing to the full offering process. This capability allows issuers to validate demand, refine messaging, and build a pipeline of interested investors before incurring the substantial legal and accounting costs of preparing an offering statement.

Testing the waters communications must include specified legends and, if written, must be filed with the SEC. Issuers can use testing the waters to conduct market research, present to potential investors, distribute preliminary offering materials, and collect indications of interest. However, no binding commitments or payments can be accepted until after the offering statement is qualified.

SEC Review and Comment Process

After an offering statement is filed, the SEC staff reviews the filing and typically issues comments requesting additional disclosure, clarification, or correction of deficiencies. The comment process for Regulation A+ offerings is generally less extensive than for traditional IPOs, but issuers should expect at least one round of comments and possibly two or three rounds for complex offerings or first-time issuers.

The SEC's review focuses on ensuring that the offering circular provides adequate disclosure for investors to make informed decisions. Common areas of SEC comment include financial statement presentation and footnotes, risk factor disclosure, management's discussion and analysis, related party transactions, use of proceeds, and description of securities. Issuers must respond to SEC comments by amending the offering statement to address the staff's concerns or providing written responses explaining why changes are not necessary.

The SEC does not approve or disapprove Regulation A+ offerings, nor does it pass on the merits of the offering or the accuracy of the disclosure. The SEC's role is limited to ensuring that the offering statement provides adequate disclosure. Once the SEC staff determines that all comments have been adequately addressed, the offering statement is qualified and the issuer can commence offers and sales.

Timeline and Costs

The typical timeline from initial filing to qualification is 3-6 months, depending on the complexity of the offering, the quality of the initial filing, and the responsiveness of the issuer to SEC comments. Issuers should budget 4-5 months for a straightforward offering and 6-9 months for more complex situations.

The costs of a Regulation A+ offering are substantial but significantly lower than a traditional IPO. Legal fees typically range from $150,000 to $300,000, accounting fees for audited financials range from $50,000 to $150,000, SEC filing fees are approximately $1,200 per million dollars raised, and marketing and investor relations costs can range from $100,000 to $500,000 or more depending on the scope of the marketing campaign. Total costs typically range from $400,000 to $1 million or more, making Regulation A+ most economical for offerings of at least $10-15 million.

Ongoing Reporting Obligations for Tier 2 Offerings

Tier 2 issuers must comply with ongoing reporting obligations similar to those of Exchange Act reporting companies. These obligations include annual reports on Form 1-K due within 120 days of fiscal year end, semi-annual reports on Form 1-SA due within 90 days of the end of the first six months of the fiscal year, and current reports on Form 1-U due within four business days of certain material events.

Form 1-K requires audited financial statements, management's discussion and analysis, disclosure of changes in directors and executive officers, and updated information about the business and risk factors. Form 1-SA requires unaudited financial statements and management's discussion and analysis for the six-month period. Form 1-U is required for material events including entry into material agreements, termination of material agreements, creation of material direct financial obligations, triggering events that accelerate obligations, costs associated with exit or disposal activities, material impairments, sales of equity securities, material modifications to rights of security holders, changes in control, departure or appointment of directors or principal officers, amendments to articles of incorporation or bylaws, and temporary suspension of trading under employee benefit plans.

The ongoing reporting burden creates compliance costs of approximately $50,000 to $150,000 per year for legal, accounting, and filing fees. Issuers must establish internal controls and disclosure procedures to ensure timely and accurate reporting. However, these ongoing reports provide transparency to investors and can facilitate secondary trading of securities on exchanges or quotation systems.

Exit Reporting and Suspension of Reporting

Tier 2 issuers can exit the reporting regime and suspend their reporting obligations if they meet certain conditions. An issuer can suspend reporting if it has fewer than 300 holders of record of the class of securities that was the subject of the Regulation A+ offering, or if it has fewer than 1,200 holders of record and its total assets have not exceeded $10 million on the last day of each of the issuer's three most recent fiscal years.

To suspend reporting, the issuer must file a Form 1-Z with the SEC. Once Form 1-Z is filed, the issuer's reporting obligations are suspended, though the issuer must file a final annual report for the fiscal year in which the Form 1-Z is filed. Suspension of reporting can reduce ongoing compliance costs, but it may also reduce investor confidence and liquidity in the securities.

Investment Limits for Non-Accredited Investors in Tier 2

Tier 2 offerings impose investment limits on non-accredited investors to protect retail investors from over-concentration in speculative investments. Non-accredited investors can invest no more than 10% of the greater of their annual income or net worth (excluding the value of their primary residence) in a Tier 2 offering during any 12-month period.

Issuers must obtain written representations from each non-accredited investor confirming their income or net worth and the amount they have invested in Tier 2 offerings during the preceding 12 months. The issuer is entitled to rely on these representations unless it has reason to question their accuracy. Accredited investors, as defined in Rule 501 of Regulation D, are not subject to investment limits and can invest unlimited amounts in Tier 2 offerings.

The investment limit calculation requires investors to aggregate all investments in Tier 2 offerings across all issuers during the 12-month period. An investor who has already invested 8% of their income in one Tier 2 offering can invest no more than 2% in another Tier 2 offering during that same 12-month period. This aggregation requirement places the burden on investors to track their investments across multiple offerings, though issuers must collect representations regarding prior investments.

When to Choose Regulation A+ Over Alternative Exemptions

Regulation A+ occupies a unique position in the capital raising landscape, offering advantages over both private placements and traditional IPOs in certain circumstances. The following framework can guide issuers in determining whether Regulation A+ is the optimal choice:

Choose Regulation A+ over Regulation D when:

• You want to market your offering to the general public through advertising and social media
• You want to build a retail investor base rather than relying solely on accredited investors
• You want your securities to be freely tradable immediately upon issuance rather than restricted
• You are raising more than $10 million and can absorb the higher upfront costs
• You are comfortable with ongoing reporting obligations (for Tier 2)

Choose Regulation A+ over traditional IPO when:

• You are raising less than $75 million and don't need the larger capital capacity of a registered offering
• You want to avoid the extensive disclosure and ongoing reporting requirements of Exchange Act registration
• You want a faster, less expensive path to public capital markets
• You are willing to accept less analyst coverage and institutional investor participation
• You want to test the waters and gauge investor interest before committing to the full process

Choose Regulation D over Regulation A+ when:

• You are raising less than $10 million and want to minimize upfront costs
• You have an established network of accredited investors and don't need public marketing
• You want to avoid ongoing reporting obligations
• You want to close the offering quickly (weeks rather than months)
• You want to include confidential business information that you don't want to disclose publicly

Common Mistakes and How to Avoid Them

Mistake #1: Underestimating the time and cost of the qualification process

Many issuers assume Regulation A+ will be quick and inexpensive, similar to Regulation D. In reality, the qualification process typically takes 4-6 months and costs $400,000 to $1 million or more. To avoid this mistake, develop a realistic timeline and budget before committing to Regulation A+, and ensure you have sufficient capital to fund the offering process.

Mistake #2: Failing to properly test the waters before filing

Testing the waters is one of Regulation A+'s most valuable features, yet many issuers skip this step and proceed directly to filing. To avoid this mistake, conduct thorough testing the waters activities to validate investor demand, refine your messaging, and build a pipeline of interested investors before incurring the costs of preparing an offering statement.

Mistake #3: Choosing Tier 1 to avoid audited financials without considering state registration burden

Some issuers choose Tier 1 to avoid the cost of audited financial statements, not realizing that state registration requirements can be far more expensive and time-consuming than obtaining audited financials. To avoid this mistake, carefully evaluate the states where you plan to offer securities and assess the total cost and timeline of state registration before choosing Tier 1.

Mistake #4: Inadequate disclosure of risks and uncertainties

The SEC staff pays close attention to risk factor disclosure in Regulation A+ offerings. Generic or boilerplate risk factors will draw comments. To avoid this mistake, provide specific, detailed risk factors that address the unique risks of your business, industry, and the securities being offered.

Mistake #5: Failing to establish systems for ongoing reporting (Tier 2)

Many issuers focus on getting through the qualification process without adequately preparing for ongoing reporting obligations. To avoid this mistake, establish internal controls, disclosure procedures, and relationships with legal and accounting professionals before the offering is qualified, so you are prepared to meet reporting deadlines from day one.

How CrowdEngine Supports Regulation A+ Offerings

CrowdEngine's white-label capital raising platform provides comprehensive support for Regulation A+ offerings, from testing the waters through ongoing investor relations and reporting. The platform includes testing the waters campaign management tools, investor portal for collecting indications of interest, automated investment limit calculations for non-accredited investors, investor onboarding and verification workflows, payment processing and escrow management, ongoing investor relations and communications, and reporting tools to support Form 1-K, 1-SA, and 1-U preparation.

For issuers considering Regulation A+, CrowdEngine can help you evaluate whether this exemption is right for your capital raising goals, connect you with experienced securities counsel and auditors, and provide the technology infrastructure to execute a successful offering and maintain ongoing investor relations.

Frequently Asked Questions

What is the difference between Tier 1 and Tier 2 Regulation A+?

Tier 1 permits offerings up to $20 million with reviewed (not audited) financial statements and no ongoing reporting, but requires state registration. Tier 2 permits offerings up to $75 million with audited financials and ongoing reporting obligations, but preempts state registration for listed securities.

How long does it take to qualify a Regulation A+ offering?

The typical timeline is 4-6 months from initial filing to qualification, depending on the complexity of the offering and the number of SEC comment rounds. Testing the waters can begin before filing, potentially shortening the overall timeline to first close.

Can I sell securities before my offering statement is qualified?

No. You can test the waters and solicit indications of interest before qualification, but you cannot accept binding commitments or payments until after the offering statement is qualified by the SEC.

Do I need audited financial statements for a Regulation A+ offering?

Tier 2 offerings require audited financial statements. Tier 1 offerings require only reviewed financial statements, which are less expensive but provide less assurance to investors.

Are Regulation A+ securities restricted or freely tradable?

Regulation A+ securities are freely tradable immediately upon issuance, unlike Regulation D securities which are restricted and subject to resale limitations under Rule 144.

Can non-accredited investors invest in Regulation A+ offerings?

Yes. Both Tier 1 and Tier 2 permit non-accredited investors. Tier 2 imposes investment limits of 10% of income or net worth for non-accredited investors, while Tier 1 has no investment limits.

Do I have to file ongoing reports after a Regulation A+ offering closes?

Tier 2 offerings require ongoing reports (Form 1-K annually, Form 1-SA semi-annually, Form 1-U for material events). Tier 1 offerings have no ongoing reporting obligations.

Can I list Regulation A+ securities on a national exchange?

Yes. Tier 2 securities can be listed on national exchanges like NYSE American or Nasdaq Capital Market, subject to meeting the exchange's listing requirements. Listing provides federal preemption of state registration requirements and enhances liquidity.

What are the costs of a Regulation A+ offering?

Total costs typically range from $400,000 to $1 million or more, including legal fees ($150,000-$300,000), accounting fees ($50,000-$150,000), SEC filing fees, and marketing costs. Ongoing compliance costs for Tier 2 are approximately $50,000-$150,000 per year.

Can I use Regulation A+ to raise capital for a real estate project?

Yes, but with limitations. Regulation A+ is available for operating companies, including real estate operating companies. However, it cannot be used for offerings by investment companies (including many real estate funds) or for offerings of asset-backed securities.

How does testing the waters work in Regulation A+?

Testing the waters permits issuers to gauge investor interest through written or oral communications before filing an offering statement or after filing but before qualification. Written testing the waters materials must include specified legends and be filed with the SEC. No binding commitments or payments can be accepted during testing the waters.

Can I conduct a Regulation A+ offering if I previously raised capital under Regulation D?

Yes, but you must consider integration issues. If the offerings are close in time and involve similar securities, they may be integrated for purposes of determining the total amount raised. Consult with securities counsel to ensure proper structuring and timing.

Ready to explore Regulation A+ for your capital raise? CrowdEngine's platform and advisory services can help you evaluate whether Regulation A+ is right for your business and execute a successful offering. Request a demo to learn more.

Related Resources:

• Reg D vs. Reg A vs. Reg CF: The Complete 2025 Guide [blocked]
• Regulation D: Word for Word [blocked]
• Building a Compliant Investment Portal in 2025 [blocked]