TheCorporateCounsel.net

Speaking of SEC scrutiny, yesterday the SEC announced that it has charged 10 microcap companies with failing to comply with Regulation A. As Liz recently blogged, Reg A offerings have increased in popularity after the JOBS Act but remain a lesser-used capital-raising alternative, possibly due to continued perception of high offering costs, no doubt driven by the number of hoops that companies still need to jump through under Reg A+. For any companies that have recently completed a Reg A offering or intend to in the future, these recent charges serve as an important reminder that the SEC is looking out for companies that circumvent the requirements or make fundamental changes after the offering statement has been qualified by the SEC:

According to the SEC’s orders, between December 2019 and May 2022, each of the 10 microcap companies obtained qualification from the SEC for their securities offerings using Regulation A, but they subsequently made one or more significant changes to their offerings without meeting the requirements of the exemption. The SEC’s orders found that such changes included improperly increasing the number of shares offered, improperly increasing or decreasing the price of shares offered, failing to file updated financial statements at least annually for ongoing offerings, engaging in prohibited at the market offerings, or engaging in prohibited delayed offerings. As a result, each of the microcap companies offered and sold securities in violation of the offering registration provisions.

Each of the 10 companies agreed to cease and desist from violations of Section 5 of the Securities Act and to pay civil penalties ranging from $5,000 to $90,000.

– Meredith Ervine