Do You Need to Register with the SEC to Sell Shares Under Regulation A+?

Question from Badclas86, Do You Need to Register with the SEC to Sell Shares Under Regulation A+?

Answer from AI:

When considering selling shares of your company under Regulation A+ in the United States, it’s crucial to understand the legal requirements and whether you need to register as an investment advisor with the Securities and Exchange Commission (SEC). Regulation A+ is a part of the Jumpstart Our Business Startups (JOBS) Act, which aims to make it easier for smaller companies to raise capital. However, navigating the regulatory landscape can be complex.

Understanding Regulation A+

Regulation A+ allows companies to offer and sell securities to the public with more relaxed requirements than traditional public offerings. It’s divided into two tiers:

1. Tier 1: For offerings of securities up to $20 million in a 12-month period.
2. Tier 2: For offerings of securities up to $75 million in a 12-month period.

Both tiers have specific disclosure, reporting, and compliance requirements, but Tier 2 has more rigorous standards, including the need for audited financial statements.

Registration Requirements for Selling Shares

When selling shares under Regulation A+, the company itself must file an offering statement with the SEC, which includes a disclosure document provided to investors. This process is distinct from registering as an investment advisor.

Investment advisors are individuals or firms that are paid for providing advice about securities investments. If your activities involve advising others on investing in securities, rather than solely offering your company’s shares under Regulation A+, you might need to register as an investment advisor.

Do You Need to Register as an Investment Advisor?

If your role is limited to offering and selling shares of your own company under Regulation A+, and you do not provide broader investment advice for compensation, you typically would not need to register as an investment advisor. However, the specifics can vary based on your activities, the structure of your offerings, and other factors.

Key Considerations:

• Activities: Focus on whether your activities constitute providing investment advice for compensation beyond the scope of selling your company’s shares.
• Compensation: Receiving compensation for investment advice is a key factor in determining whether registration is required.
• State Laws: Some states may have additional requirements or exemptions for investment advisors, so it’s important to consider both federal and state regulations.

Next Steps and Resources

If you’re planning to sell shares under Regulation A+, it’s essential to:

1. Prepare and file an offering statement with the SEC.
2. Understand the requirements for your specific tier (Tier 1 or Tier 2).
3. Consider consulting with a legal professional to determine if your activities might require registration as an investment advisor.

For more detailed information on Regulation A+ and the offering process, you can visit the SEC’s Regulation A+ page. Additionally, the Investment Adviser Registration Depository (IARD) provides resources for understanding investment advisor registration requirements.

Remember: This information is for general understanding and not a substitute for legal advice. Consulting with a legal professional can provide guidance tailored to your specific situation and help ensure compliance with all relevant laws and regulations.