Friday, December 09, 2016

NASAA proposes testing Regulation A Tier 1 waters

By Jay Fishman, J.D.

The North American Securities Administrators Association, Inc. (NASAA) has requested interested persons to comment on a proposed model statute, proposed model rule and proposed solicitation of interest form that would permit issuers to test the waters in Regulation A Tier 1 offerings. NASAA said that following the SEC’s 2015 adoption of Regulation A + which creates two tiers for making Regulation A offerings, issuers have desired to solicit over the Internet investor interest in participating in a Tier 1 offering. NASAA has proposed the model statute, rule and form to facilitate testing the waters while ensuring appropriate regulatory oversight to prevent fraud. Comments are due by January 6, 2017.

Model rule. The proposed model rule would allow a qualified issuer intending to register a federal Regulation A offering, to solicit prospective investor interest in the offering, provided: (1) the issuer is organized under U.S. or Canadian law; (2) the issuer sends the particular state securities administrator a solicitation of interest form, along with any advertising materials at least 15 calendar days before the initial solicitation of interest; (3) neither the issuer nor any affiliate may solicit or accept any money or subscriptions; (4) neither the issuer nor any affiliate may sell the securities until at least seven calendar days after delivering a final offering circular; and (5) specified legends must appear in any solicitation of interest materials.

Model statute. NASAA’s proposed model statutory language may assist states seeking additional, specific statutory amendment authority.

Solicitation of interest form. The proposed solicitation of interest form contains basic information about the issuer and offering. An issuer would have to file the form with the appropriate state securities regulators, and provide the form to prospective investors.