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Regulation A+

In 2015, the SEC adopted new rules that update and expand Regulation A to help companies raise capital in the public markets. With these new rules, dubbed Regulation A+, the SEC seeks to promote capital formation, while preserving the disclosure requirements and other investor protection measures. They address many of the shortcomings of the previously available Regulation A that made it unattractive to issuers. Highlights of the new rules include:

  • The rule established two tiers of offerings, Tier 1 and Tier 2 to provide more flexibility to issuers to choose the right size offering.
  • The offering limit is raised from $5 million to $20 million (Tier 1) and $50 million (Tier 2). This will permit smaller and emerging companies to have an opportunity to raise substantial capital.
  • Regulation A+ securities purchased by non-affiliates are free trading from day one, enabling an ongoing secondary market to develop for investors and helping lower capital costs for issuers.
  • The new rules modernize the disclosure process by requiring disclosure to be made on EDGAR, assuring investors have access to company information. Tier 2 offerings are also required to make ongoing, semi-annual reports available on EDGAR.
  • Tier 2 offerings will not be subject to state review.

The new Regulation A+ rules became effective on June 19, 2015. Read more about Regulation A+ eligibility and requirements in the final rules on the SEC’s website.


Why is Regulation A+ Important for Companies?

With these new rules, the SEC recognizes that there is no one path to the public markets for companies. A traditional IPO to a stock exchange can be a costly and burdensome experience – Regulation A+ helps facilitate an incremental pathway based on where a company is in its business cycle.

The provisions for Tier 2 offerings will make public offerings more efficient. For the first time, the SEC has decoupled state Blue Sky preemption from an exchange listing. Non-accredited investors are allowed to participate in a federally-exempt offering, with thoughtfully designed provisions to limit their risk.

The new rules wisely require companies to provide more detailed information about their businesses and ongoing disclosure to federal regulators to be eligible for a public offering. These new rules ensure that investors have the information available to understand the risks so markets can price them accordingly.


Regulation A+ On-Ramp to OTCQX and OTCQB

OTC Markets Group’s OTCQX Best Market and OTCQB Venture Market provide a platform for Regulation A+ companies to offer their investors an information and trading experience comparable to that of a U.S. stock exchange through a streamlined disclosure process. OTCQX offers informed and efficient trading in established, investor-focused U.S. and international companies, while OTCQB offers transparent trading in entrepreneurial and development stage companies.

From an investor’s perspective, the process of electronically trading OTCQX and OTCQB companies is nearly identical to that of trading a NYSE or NASDAQ security. OTC Link® ATS, an SEC-registered Alternative Trading System, directly links a diverse network of 110 leading U.S. broker-dealers that provide liquidity and execution services. Its real-time price transparency and connectivity offers broker-dealers control of trades and choice of counterparties so that they can efficiently provide best execution, attract order flow, and comply with FINRA and SEC regulations.


Market Options for Regulation A+ Companies


The OTCQX Best Market

The OTCQX Best Market is for established, growth and global companies that meet high financial and operating standards, and are committed to building visibility with the investment community. Companies on OTCQX are distinguished by the diligence with which they provide information, demonstrate compliance with U.S. securities laws, and clearly convey their qualifications to investors.

Learn about how companies can use Regulation A reporting to help qualify for OTCQX: OTCQX RULES RELEASE NO.9

View a guide for the OTCQX application process for companies that choose an offering under Tier 2 of Regulation A+


The OTCQB Venture Market 

The OTCQB Venture Market is for entrepreneurial and development stage companies that are current in their reporting. To improve transparency on OTCQB, companies are required to undergo an annual verification and management certification process. Companies must meet a minimum bid price test of $0.01 and may not be in bankruptcy.

Learn about how companies may use Regulation A reporting to meet OTCQB standards: OTCQB RULES RELEASE NO. 2

View a guide for the OTCQB application process for companies that choose an offering under Tier 2 of Regulation A+

About Tier 1 and Tier 2 Offering

Regulation A+ has established two tiers of offerings:

  • Tier 1 Offerings:
    • Consists of public offerings up to $20 million in a 12-month period, with no more than $6 million in offers by selling security-holders that are affiliates of the issuer
    • Subject to federal and state registration and qualification requirements issuers may take advantage of a coordinated review program developed by the North American Securities Administrators Association (NASAA)
  • Tier 2 Offerings:
    • For public offerings up to $50 million in a 12-month period, with no more than $15 million in offers by selling security-holders that are affiliates of the issuer
    • Will not be subject to state review 
    • Offerings are subject to additional disclosure and ongoing reporting requirements, including: a requirement to file audited financial statements in the offering document, annual audited financial statements, and semiannual and current event reports
    • Non-accredited investors can purchase no more than 10% of the greater of the investor’s annual income or net worth

Additional Regulation A+ Articles 

A New Way to List Mini-IPOs Shares - Inc. (July 28, 2015)

How Do You Create a Robust Secondary Market for SMEs? Watch this Video to Find Out - Crowdfund Insider (May 5, 2015)

OTC Markets Will List Reg A+ Companies upon June Launch - Growth Capitalist - subscription required (April 28, 2015)

"To help Tier II companies gain trading traction OTC Markets Group is jumping in with rules that will allow emerging growth companies to trade on the OTCQB market without significant additional reporting requirements."

Mark Your Calendars – Regulation A+ Goes Live on June 19, 2015 - TABB Forum (April 23, 2015)

Reg A+ Adoption Opens the Floodgates to Emerging Growth Capital - Growth Capitalist - subscription required (April 8, 2015)

"Cromwell Coulson noted Reg A+ heralds the abandonment of a fundamental premise of publicly registered offerings in the U.S. – mainly, that it must be executed and immediately listed on a public stock exchange. Coulson told Growth Capital Investor, “We now have decoupling of securities offerings with blue sky preemption from the requirement of a listing on a national securities exchange.”

What Reg A Plus Means for Capital Markets: An Interview with OTC Markets' R. Cromwell Coulson - equities.com (April 8, 2015)

OTC Markets CEO Cromwell Coulson Shares Insight on Reg A+, Venture Exchanges - Crowdfund Insider (April 6, 2015)


Contact us to learn more:

Email: issuers@otcmarkets.com
Phone: +1.212.896.4420
Website: www.otcmarkets.com




OTC Markets Crowdfunding Overview


Dan Zinn, OTC Markets General Counsel, provides an overview on Reg A+ and its implications in regards to crowdfunding and secondary trading. 

Capital Raising 2.0 Panel: Alternative Strategies to Capital Raising


Capital Raising 2.0 Fireside Chat with Cromwell Coulson & Barry Silbert


Regulation A+ Roundtable: OTC Markets, McCarter & English, CohnReznick & FundAmerica


The roundtable addressed practical issues and applications of Reg A+ and provided guidance on how private companies can leverage Reg A+ to finance and grow their businesses. 

Regulation A+: Practical Tips and Guidance for Launching a Mini-IPO


The panel hosted by Mintz Levin  discusses the legal and business considerations in launching a Tier II Regulation A+ offering and how investors can achieve liquidity through the OTCQX & OTCQB markets.

An Overview of Regulation A+ 


OTC Markets Group and TriPoint Global Equities discuss the SEC’s final ruling on Regulation A+ and the rules and processes for the OTCQX & OTCQB markets.

Check Out Our Reg A+ Blog Posts

News and Updates