Additional Tier 2 Requirements
In addition to these basic requirements, companies conducting Tier 2 offerings would be subject to other requirements, including:
- A requirement to provide audited financial statements.
- A requirement to file annual, semiannual and current event reports.
- A limitation on the amount of securities non-accredited investors can purchase in a Tier 2 offering of no more than 10 percent of the greater of the investor’s annual income or net worth.
The staff would also conduct a study and submit a report to the Commission on the impact of both the Tier 1 and Tier 2 offerings on capital formation and investor protection no later than five years following the adoption of the amendments to Regulation A.
The Commission is exploring ways to further collaborate with state regulators, including a program for a representative of NASAA or a state securities regulator to work with the staff in the SEC’s Division of Corporation Finance in implementing these rules.
The exemption would be limited to companies organized in and with their principal place of business in the United States or Canada. The exemption would not be available to companies that:
- Are already SEC reporting companies and certain investment companies.
- Have no specific business plan or purpose or have indicated their business plan is to engage in a merger or acquisition with an unidentified company.
- Are seeking to offer and sell asset-backed securities or fractional undivided interests in oil, gas or other mineral rights.
- Have been subject to any order of the Commission under Exchange Act Section 12(j) entered within the past five years.
- Have not filed ongoing reports required by the rules during the preceding two years.
- Are disqualified under the “bad actor” disqualification rules.
The rules exempt securities in a Tier 2 offering from the mandatory registration requirements of Exchange Act Section 12(g) if the issuer meets all of the following conditions:
- Engages services from a transfer agent registered with the Commission.
- Remains subject to a Tier 2 reporting obligation.
- Is current in its annual and semiannual reporting at fiscal year-end.
- Has a public float of less than $75 million as of the last business day of its most recently completed semiannual period, or, in the absence of a public float, had annual revenues of less than $50 million as of its most recently completed fiscal year.
An issuer that exceeds the dollar and Section 12(g) registration thresholds would have a two-year transition period before it must register its class of securities, provided it timely files all of its ongoing reports required under Regulation A.