Updating continuous offerings under Regulation A

We’ve had this question come up a couple of times in recent deals, so it’s worth flagging. Under Regulation A, you can have offering statements in effect (and thus offerings open) for more than a year (they can even last three years under certain circumstances). However, if your continuous offering is going to last more than a year, at least once a year you have to file a post-qualification amendment (PQA) to “refresh” the offering statement. This is required by Rule 252(f)(2)(i), which says:

Post-qualification amendments must be filed in the following circumstances for ongoing offerings:

(i) At least every 12 months after the qualification date to include the financial statements that would be required by Form 1-A as of such date. . .

Note that word “must” there.

More than once recently, we’ve had issuers or their counsel try to make the case that they don’t need to file a PQA because they are up to date on Regulation A’s ongoing reporting requirements (annual 1-K and semi-annual 1-SA) and therefore all that information is available to investors on EDGAR, should they choose to look for it. This isn’t actually the case:

  • One of the reasons to have a PQA is so that the SEC Staff has a chance to review an open offering that is extending beyond a year. Sure, they have the ability to review 1-Ks and 1-SAs, but filing the PQA alerts the Staff that there is an ongoing offering.
  • If you have a qualified Reg A offering, you have offering circular delivery requirements. Just delivering the old OC is not sufficient under these circumstances; you need to include all the filings, which can get complicated when communicating on social media.
  • “Must” means “must.”

You cannot continue to make sales under an offering statement for which a PQA should have been filed but was not.

As a side note, there are rules as to whether you can continue offers and sales during the PQA review period. Take a look at Securities Act C&DI 139.28, which we understand applies equally to Reg A.

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