Regulation A has been a bit of a hot topic at the SEC of late. At the Small Business Advisory Committee’s May 6 meeting, two hours were devoted to discussing Regulation A to better understand how companies have utilized Regulation A, why it’s a less popular option, and whether rule changes could help facilitate its use and improve secondary liquidity. As John recently shared, the Committee is meeting again on July 22, and the agenda contemplates continuing this discussion.

In the meantime, Corp Fin’s Office of Small Business Policy recently responded to a no-action request relating to ongoing reporting obligations under Regulation A. Here’s a Reg. A reminder from this Goodwin blog:

Regulation A was adopted by the SEC to provide an exemption from registration for smaller value securities offerings. Regulation A has two offering tiers: Tier 1, for offerings of up to $20 million in a 12-month period; and Tier 2, for offerings of up to $75 million in a 12-month period. Once a Tier 2 offering has been qualified, the issuer is required to file with the SEC an annual report on Form 1-K for the fiscal year in which the offering statement became qualified and for any fiscal year thereafter, unless the issuer’s obligation to file such annual report is suspended under Rule 257(d) of Regulation A.

The company seeking no-action relief, BirchBioMed, filed an offering circular under Regulation A that was qualified by the SEC in October 2024. The company had commenced an offering, received completed subscription agreements and received funds in escrow; however, by June 20, all funds had been released from escrow and returned to investors.

Upon qualification of the offering statement, the company was required to file ongoing reports under Rule 257(b). Rule 257(d) permits the suspension of the filing obligation if (i) the issuer has fewer than 300 shareholders of record and (ii) has filed all reports required to be filed since it became a Regulation A reporting company; however, suspension of reporting obligations is not available during the fiscal year in which a Tier 2 offering statement is qualified. The company met these conditions, but for the fact that the offering circular was qualified in the current fiscal year.

The Goodwin blog points to the company’s public policy arguments — saying that the public policy considerations underlying the reporting requirements of Regulation A are not present because BirchBioMed, Inc. has no shareholders to whom the required ongoing reporting obligations are intended to benefit, and there is no secondary market that has or could develop as a result of the Regulation A offering. The SEC staff seemed to agree and granted no-action relief.

– Meredith Ervine