To continue our series on the four options for equity crowdfunding, today we’ll be reviewing crowdfunding under Title IV Reg A+.

The SEC has stated that the purpose of Title IV Reg A+ is to facilitate smaller companies’ access to capital. Updating and expanding upon the previous Regulation A, Regulation A+ allows smaller companies to offer and sell up to $50 million of securities within a 12-month period, subject to eligibility, disclosure, and reporting requirements.

Under Title IV Reg A+, startups can now use equity crowdfunding platforms to raise capital from both accredited and non-accredited investors, but the two Tiers of Reg A+ do offer some differences:

Tier 1 

• The company can raise up to $20 million, with no more than $6 million in securities offered by selling security-holders who are affiliates of the issuer
• Both accredited and non-accredited individuals can invest
• The company can publicly advertise
• The company must file a disclosure document and get qualification from the SEC, have its financials reviewed (balance sheets, statements of income, cash flows, stockholders’ equity), and register for Blue Sky laws in all states investors are located
• Non-accredited investors aren’t limited in the amount they can invest

Tier 2

• The company can raise up to $50 million, with no more than $15 million in securities offered by selling security-holders who are affiliates of the issuer
• Both accredited and non-accredited individuals can invest
• The company can publicly advertise
• State registration is not required – Tier 2 pre-empts Blue Sky laws in each state
• The company must file a disclosure document and get qualification from the SEC, must provide financials audited by an independent auditor, and is required to file annual, semi-annual, and current reports
• Non-accredited investors are limited in the amount they can invest: no more than 10% of an investor’s annual income or net worth, whichever is greater

Contrary to a 506 raise, Reg A+ securities are unrestricted, meaning they are tradable under certain rules, such as through alternative trading systems like OTCQX (for established companies with quarterly reporting) and OTCQB (for development-stage companies). While 506 offerings always pre-empt Blue Sky laws, only Tier 2 of Reg A+ does the same. Likewise, there are no disclosure provisions (if the offering is only accessible to accredited investors), no SEC review, and no ongoing reporting associated with 506 offerings – unlike Reg A+ Tiers.

Next, we’ll complete our series by delving into the fourth equity crowdfunding option: Title III. Until then, catch up on our blogs about Reg D 506(b) or Reg D 506(c).

Not a MicroVentures investor? Sign up today.