Insights
[Client Alert] SEC Approves NASDAQ Limitation on Regulation A+ Listings
In 2015, the SEC amended its rarely used Regulation A with the goal of easing the regulatory burden on smaller companies and making it easier for them to raise capital. As amended, Regulation A provides for offerings of securities that are exempt from registration but that can be made using general solicitation and advertising (unlike most private placements). Issuers offering securities under Regulation A must file an offering statement on Form 1-A with the SEC, including an offering circular for distribution to investors. Companies offering securities under Regulation A may apply to list those securities with a national securities exchange.
The amendments to Regulation A were met with much enthusiasm, and there was a flurry of Regulation A offerings beginning in 2016. A handful of Regulation A issuers successfully listed on Nasdaq or the NYSE, but the stocks performed poorly. In April 2019, Nasdaq filed a proposed rule change with the SEC to adopt a new initial listing requirement for any company applying to list on the exchange in connection with a Regulation A offering. The SEC approved the new rule on June 28, 2019.
Under the new rule, any company listing on Nasdaq in connection with a Regulation A offering must, at the time of approval of its initial listing application, have a minimum operating history of two years. Nasdaq believes this will help assure that Regulation A issuers “will be more likely ready for the rigors of being a public company, including satisfying the [SEC’s and Nasdaq’s] corporate governance requirements.”
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Donald R. Reynolds, Jonathan A. Greene, and Lorna A. Knick are members of the Capital Markets practice group of Wyrick Robbins, which represents clients across a broad range of industries in connection with their significant financing transactions. The Capital Markets group publishes Client Alerts periodically as a service to clients and friends. The purpose of this Client Alert is to provide general information, and it is not intended to provide, and should not be relied upon as, legal advice.