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NASAA Launches Multi-State Review Program for Small-Business Offerings

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The North American Securities Administrators Association announced Monday that it has launched a coordinated multi-state review program to ease regulatory compliance costs on small businesses attempting to raise capital under Regulation A.

Reg A is intended to facilitate small offerings with less regulatory scrutiny. The rule allows offerings of up to $5 million without registering with the Securities and Exchange Commission. State registration is still required.

“Our modernized system is designed to review Regulation A filings in a timely and efficient manner in order to reduce regulatory hurdles and compliance costs for filers without sacrificing investor safeguards,” said Andrea Seidt, NASAA president and Ohio securities commissioner, in a statement.

Under the Jumpstart Our Business Startups (JOBS) Act, the limit for Regulation A offerings will be raised to $50 million once the Securities and Exchange Commission makes a rule implementing the change.

“The states are ready to put our new review system to work under existing Regulation A,” according to Seidt.

State regulators are concerned about the SEC’s plan.

The Commission, Seidt wrote in a recent ThinkAdvisor blog, “wants to transform Regulation A offerings into covered securities, which by law are not subject to state review. It has done so by proposing to define who as a ‘qualified purchaser’ anyone who is offered a security issued under Regulation A. In essence the Commission wants to erase the word ‘qualified’ from the law.”

Seidt wrote that the SEC must “remove potential harms to issuers and investors, especially those of modest means” from its plan.

Seidt says the SEC’s proposed rule, contrary to congressional intent, would broadly pre-empt state authority to review Reg A offerings before they are sold to the public.

“While filers will not be able to take advantage of the increased $50 million offering amount until SEC rules are finalized, the states are ready to put our new review system to work under existing Regulation A to help small businesses access the capital they need to help provide jobs and grow our economy,” Seidt said. “It would be a shame if the SEC denied small businesses the opportunity to take advantage of a streamlined and efficient state process to raise capital at the higher threshold.”

Under the new multi-state review program, NASAA says that Regulation A filings can be made in one place and distributed electronically to all states.

Lead examiners will serve as the primary point of contact for a filer and each state will be given 10 business days for review. Lead examiners alone will interact with issuers to resolve any deficiencies, Seidt said.

She added that if there are no deficiencies in the application, no comments will be necessary and the registration will be cleared by the lead examiners within 21 business days after it is filed.

Interested applicants can find more information about the program on the NASAA website.

Check out Why the SEC Must Revise Its Proposed Reg A Rule on ThinkAdvisor.


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