Deviating from its standard rulemaking procedures, the SEC issued final rules on December 19, 2018 to expand the eligibility requirements under Regulation A to include Exchange Act Reporting companies. This action was required by Congress as part of the “Economic Growth Act” that became law in May 2018. The SEC determined that it had little discretion when amending Regulation A in response to the Congressional directive, and went ahead and issued a final rule rather than a proposed rule for comment.
This change could prove to be significant for small, Exchange Act reporting companies that may not be eligible to register an offering on Form S-3. Additionally, companies may decide that they would like to take advantage of the expanded communications options available under Regulation A compared to a registered offering. We are also looking into the fact that it may also be possible to use a Regulation A exchange offer to reduce ongoing reporting requirements. We have qualified nearly 40 Regulation A offerings; please contact us for details with respect to any of these options.
The rule change was published in the Federal Register on January 31, 2019, which is the effective date of the rule change.