Reg A+ Webinar: Q&A Part I

The content on this webinar and associated blogs are provided for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind.

During our last Regulation A+ webinar with Sara Hanks and Darren Marble, we received dozens of questions about the topic.

As promised, we have answered each one of these questions and we are publishing the results here. To make things simple, we are diving it in Part I (Sara Hanks answers) and Part II (Darren Marble answers).

If you haven’t watched the webinar or want a recap, you can access the full version here.

Reg A+ Webinar – Q&A Part I

  • Is there a specific exemption that can be used in Canada along with Reg A to sell in Canada?

You need to check with Canadian counsel. Canada does not generally have federal securities laws as we do in the U.S., and you have to find an exemption from the Canadian equivalent of registration in each Canadian province you want to sell in. Some provinces have crowdfunding-type exemptions (not Ontario) and most have some type of exemption for sales to accredited investors.

  • If a company decides not to list on an exchange, can they have a bulletin board on their own website where their own shareholders can buy and sell their shares to others?

Under limited circumstances, yes. Any kind of “matching platform” will need to follow existing no-action letters that specify the circumstances in which a company operating some kind of introduction service for buyers and sellers will be deemed not to be a broker-dealer. You need to make sure the service does not amount to acting as a broker or an “alternative trading system” (ATS). In very general terms, the more sophisticated and automated a matching platform gets, the more it is likely to be deemed to be an ATS.

  • I am quarterbacking a Reg CF offering, they have a product that used to exist and want to bring it back. What are the top two questions I should be asking?

Do you still have the intellectual property rights to the product? And if a different/earlier company sold the product before, is that company a “predecessor” under the accounting rules?

  • Do you need to complete the offering before filing Form 211 for a listing?

In general, we have found that the market maker for a company that is going to be listed or quoted on OTC (a minority of Reg As) want to be able to confirm that all the existing shareholders were acquired in legit offerings before it files the 211, which would mean you would need the Reg A offering to be closed, but it may depend on the market maker.

  • I understand that there is a Blue Sky nuance if you do not use a BD, is this correct?

Yes. If you don’t use a broker, there are some states that won’t let you offer (Nebraska) or require the issuer to file as an “issuer-dealer.” More details here.

  • Sara and Darren have mentioned real estate, etc. in terms of companies best suited for Reg A offering, are there any Blockchain/DLT based startups that have successfully gone through the process yet?

Not yet; perhaps coming soon.

  • Can you comment, in general, on the Blockstack filing?

I’ll wait till I see the correspondence between the lawyers and the SEC (published when the offering qualifies) before I comment on the implications of this offering.

The second part of the Q&A will be published next week. If you want to read more from Sara Hanks, you can visit the CrowdCheck Blog. We highly recommend it. You can also contact Sara and her team here.

Reg A+ Webinar: The Highlights

In our last webinar, we’ve talked about a very complex topic in the startup industry: The Regulation A+.

For those of you who have never heard of it (no shame in learning, folks), Regulation A+, or Reg A, is a section of the JOBS Act that allows private companies to raise up to $ 50 Million while offering shares to the general public.

This can have a profound impact on how startups work. Unfortunately, there’s still a great deal of confusion surrounding the topic.

That’s why we brought in Sara Hanks, a top attorney with over 30 years experience in the corporate and securities field and Founder of CrowdCheck, and Darren Marble, Co-Founder and CEO of Issuance, with extensive experience in the capital raising process.

Here are some highlights of the discussion:

Sara Hanks: Regulation A+ is a popular name for a series of amendments to existing laws there were made in 2015. The Regulation A was an exemption for full regulation with the SEC, that permits a company to make a public offering, without the restrictions on the security being sold, but not to go through the full SEC process. So it’s an exemption for a public offering.

And that’s important because it’s public, the securities that are sold are not restricted, they can be free traded, if you can find a place for them to trade, you can trade them immediately, after the qualification of the offering. The companies who can use Reg A are U.S. or Canadian companies.

Darren Marble: The most interesting question to me is what companies are ideal candidates to use the Reg A Securities exemption as a capital raising tool. And just because you might be eligible to do a Reg A offer doesn’t mean you should. You know, if there’s a cliff that’s 50 feet above the ocean and you’re on that cliff, and you can see the ocean, doesn’t mean you should dive in. You probably need to be a professional diver.

I say that you don’t choose Reg A, Reg A chooses you. And what I mean by that is I think the Reg A exemption discriminates in that aspect. They will save a very particular type of issuer and it will punish or harm another type of issuer.

We also talked about:
– Marketing strategies that need to be considered for a Reg A+
– Who qualifies for it?
– What are the benefits?
– What does the Due Diligence look like?
– What liability is there for the issuer?
– What liability is there for any who promotes the offering?

To watch the full webinar, click here.

You can also watch the full version of our previous webinars:

Digital Securities Webinar

Marketing Your Raise Webinar