Today, the Securities and Exchange Commission (SEC) voted to approve rules regarding Regulation A+ under Title IV of the JOBS Act. The changes made to Tier 1 and Tier 2 of Regulation A+ will continue to be monitored by the SEC in conjunction with the North American Securities Administrators Association (NASAA) over the next 5 years to determine if they are effectively operating to help small businesses while still maintaining satisfactory levels of protection for investors. The final written regulations are set to be released soon (though you can see a draft copy here). The rules will become effective 60 days after publication in the Federal Register, a process that typically takes 5-15 days. Thus, we can expect Regulation A+ to become effective around mid-June 2015. Patch of Land will be monitoring final regulations and implementation of Regulation A+ and will update our investors if it presents a good opportunity.
In a nutshell, these are some of the important aspects of the new rules:
Regulation A+ Results
- Everyone is Eligible to Invest -- Investing is no longer limited to accredited investors. However, Tier II investors will be subject to investment limitations described below.
- Investment Limits -- Tier 1: No limit; Tier 2: For each Regulation A+ offering, unaccredited investors will be allowed to invest up to 10% of their net income, or 10% of their net worth (whichever is greater).
- Self-Certifiable Net Income & Net Worth -- Investors can self-certify their net income or net worth, meaning that issuers won’t have to go through the onerous documentation and proof of verification process required by Rule 506©.
- General Solicitation and Advertising -- no prohibition
- Transferability -- Reg A+ securities will be freely transferable, meaning that secondary markets are likely to spring up. Issuers may choose to set their own contractual limits to transferability.
Tier 1 Amendments
The SEC's amendments to Tier 1 increased the offering level from $5 million to $20 million in a 12 month period, but still does not have pre-emption of state laws. This means that issuers will still be faced with considerable delay by state regulators via a coordinated review program. This retrospective review will determine if there's a need to adjust the offering level of Tier 1 in the future.
Tier 2 Amendments
Regulation A+ Tier 2 allows for offerings up to $50 million in a 12 months period and will preempt state law. Additionally, issuers may use a short form offering statement. However, Tier 2 offerings will still require annual audits, semi-annual updates and material events reporting.
The Future of Crowdfunding
Likely, Regulation A+ will have the biggest impact on large equity offerings.The SEC’s approval today is a good step in the right direction for crowdfunding. Patch of Land is excited and optimistic to see more steps in the same direction in the future.
Watch the Archived Webinar for This Open Meeting
What do you think about the SEC's decision? Do you feel it was too much, or not enough of a change? Does this decision phase out Title III? Leave a comment and let us know what you think!
Richard Dodson commented November 16, 2015
SEC Approves Final Rules for Regulation A+
So, as a former Non Accredited investor....... Can I now fund my account with "Patch of Land"... and start investing?
Cathi Kent commented February 12, 2016
Marco, are you saying that Patch of Land does not plan to offer investing opportunities for Tier 2 investors? If that is so, I am very disappointed in the company.
In this new-ish investment arena, Patch of Land is a company that I would trust, because of your commitment to compliance and your transparency. I've had a registered account here since the very beginning, have been excited watching Patch of Land grow, and was looking forward to investing when I have funds available to use for that purpose. However, I will never have income of 200K/yr or a net worth of one million to become 'accredited'.
Don't you think that is acting a bit elitist? (if I am reading your answer correctly)
Does this mean I may as well just close my Patch of Land account? (I hope not...)