Before we wander too far into the next part of the regulation labyrinth, let’s clarify one thing. Regulation A vs. Regulation A+. What’s the difference? Is there one?
Regulation A is a set of SEC rules created in 1936. They were updated to Regulation A+, which took effect June 19, 2015. However, the term “Reg A” is still used by many people interchangeably with “Reg A+”.
So—what is Reg A+? We already covered Reg D—what’s different about this one?
LegalHero elucidates: “The big difference between Regulation D and Regulation A+ is that Regulation A+ has much looser restrictions on raising money from non-accredited investors.”
Before the changeover to Regulation A+ (which was part of the JOBS Act of 2012), very few companies used Regulation A to raise money. In fact, in 2014, it was used only seven times, nationwide. This was partly because Regulation A limited raises to $5 million. With Regulation A+, raises are now capped at $50 million—quite a nice little bump!
What separates Reg A+ from Reg D is that it is structured like a “mini-IPO” or an “IPO-lite”. As with an IPO (initial public offering), Reg A+ allows companies to offer shares to the general public, rather than only accredited investors (the wealthiest 2% of Americans). As with a public offering, companies must file with the SEC and get approval, but the fees are smaller and the ongoing disclosure less involved than with a full IPO, making it more feasible for small and still-growing companies.
Reg A+ is exciting because it makes the process of investing in new companies more democratic. Rather than limit investment opportunities to only the rich, it opens investment possibilities to everyone. It is still a new regulation, so entrepreneurs and investors alike are still figuring out how best to utilize it, but we at Blak Box (and many others) believe it will prove to be a game-changer for a long time to come.
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