CHAPTER 2Pre‐2012: The History of Regulation A and the Death of Small‐Company IPOs

Regulation A—Not Too Popular Before 2012

Before learning about the details of Regulation A and the new Regulation A+, it is helpful to understand where we stood in 2012 before the passage of the Jumpstart Our Business Startups (JOBS) Act of 2012. That law updated this and other rules relating to the ability of smaller companies to access capital for growth.

As we will outline ahead, Regulation A offers a method for companies to complete a public offering that generally raises less money and involves a more streamlined process than in a traditional IPO. In 2012, however, very few companies were utilizing Regulation A. The SEC noted this in its commentary to its proposal for new rules regarding Regulation A under the JOBS Act. There they acknowledged that, in the year 2012, only eight Regulation A offerings seeking to raise a total of $34 million were approved, or, the term of art we will learn, qualified, by the SEC.

At the time, as will be discussed, the most a company could raise under Reg A was $5 million. The SEC compared these numbers to private securities offerings under SEC Regulation D in the same year seeking to raise no more than $5 million to see which was utilized more. That comparison is laid out following this brief overview of Regulation D.

Reg D, which enjoys continuing strong popularity, operates as a safe harbor under the Securities Act of 1933. In that seminal Depression‐era ...

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