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

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.