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Regulation A+ and the Overlooked FINRA Filing Requirement


To much fanfare, on March 25, 2015 the SEC announced the final rules for Regulation A+ under Title IV of the JOBS Act. The proposed rules, which take effect on June 19, 2015, allow smaller issuers to raise money from the general public in a pre-IPO public offering. This will allow issuers who would like to solicit from the general public, but are not yet ready for a full blown IPO, to limit some of the costly ongoing disclosure and reporting requirements that go along with an IPO. However, issuers, broker-dealers, and online crowdfunding platforms considering participating in a Reg A+ offering must carefully consider if they are adequately aware of and prepared for the regulatory scrutiny such an offering would require.

After the SEC’s announcement on March 25th, there was a big focus on one key difference between Tier I and Tier II offerings under Regulation A+. Namely, Tier II offerings will not be subject to state review, while Tier I offerings will continue to be subject to state review primarily through NASAA’s coordinated review program. However, as public offerings, the fact that both Tier I and Tier II offerings will be subject to FINRA review as well has been overlooked by many.

Pursuant to FINRA Rule 5110(b)(1), no FINRA member or associated person may participate in a public offering unless the offering has been filed with and reviewed by FINRA. In addition, FINRA Rule 5110(b)(9)(G) specifically makes a point of including securities offered pursuant to SEC Regulation A as a public offering that must be filed with the department. This means that, unless an issuer plans on going this alone and relying on the safe harbor provision of SEC Rule 3a4-1, the offering must be filed with FINRA and will be subject to their rigorous comment review process, which includes a thorough assessment of the underwriting terms and arrangements. This means that Tier I and Tier II offerings will be subject to review by FINRA and Tier I offerings, which theoretically could have benefited most from the passage of Regulation A+, will be subject to the additional burden of state review under NASAA’s coordinated review program.

For FINRA members hoping to participate in Regulation A+ offerings come June 19th, the need to file for FINRA review is something that must be seriously considered before choosing to participate in such an offering. In addition, for those hoping to charge significantly higher than usual placement agent fees and/or warrant coverage, it should not come as a surprise that they may run into a road block with FINRA’s Corporate Financing Department. Before participating in a Regulation A+ offering, FINRA members should consult with their counsel to fully understand the implications that go along with FINRA’s filing requirement and also ensure that they are approved to participate in this type of offering.


This post is not a substitute for professional legal advice nor is it a solicitation to offer legal advice. No attorney-client privilege is created herein. Seek the advice of a licensed attorney in the appropriate jurisdiction before taking any action that may affect your rights.


This post was written by aryehfriedman on June 9, 2015

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