Regulation A

How do the two tiers of Regulation A differ in the amount that may be raised, and how is the amount measured?

1. A.Twenty million and seventy-five million, measured on the current offering alone with no sub-limits.Wrong. Both a twelve-month look-back and affiliate sub-limits apply.
2. B.Twenty million and seventy-five million, each with an affiliate selling securityholder sub-limit and a twelve-month look-back.Correct. Headline ceiling, insider sub-limit and look-back all apply to each tier.
3. C.Ten million and fifty million, measured over the life of the issuer.Wrong. Neither figure nor the measurement period is correct.
4. D.The tiers share one ceiling and differ only in their ongoing reporting obligations.Wrong. The tiers carry different ceilings as well as different ongoing obligations.

Why: A Tier 1 offering may not exceed twenty million dollars, of which not more than six million may be offered by selling securityholders who are affiliates of the issuer. A Tier 2 offering may not exceed seventy-five million dollars, of which not more than twenty-two and a half million may be offered by affiliate selling securityholders. In each case the measure is the aggregate offering price plus the gross proceeds of all securities sold under other offering statements in the twelve months before the start of and during the current offering. There is also a separate limit in the first year, capping securities of selling securityholders at thirty percent of the aggregate offering price of the offering.

Regulation A is best described as:

1. A.A conditional exemption allowing scaled, small-issue offerings with lighter disclosure requirementsCorrect. This is the core purpose of Regulation A.
2. B.A rule requiring all offerings to be sold exclusively to accredited investorsWrong. Regulation A permits sales to non-accredited investors, subject to its own conditions, unlike some Regulation D offerings.
3. C.A rule that bans all advertising in connection with an offeringWrong. Regulation A offerings can involve broader solicitation than a typical private placement, not an advertising ban.
4. D.A requirement that securities be listed on a national exchange before saleWrong. Regulation A offerings are not required to be exchange-listed.

Why: Regulation A is a conditional exemption for small securities issues, allowing companies to raise capital through a scaled offering process with lighter disclosure requirements than a full registered offering, subject to dollar limits and other conditions.

A sponsor wants to offer program interests to the general public, including investors who are not accredited, and to advertise the offering openly. Which route is consistent with all three of those aims?

1. A.Rule 506(b), because it permits some non-accredited purchasersWrong. It permits non-accredited purchasers but forbids the general advertising the sponsor wants.
2. B.Regulation A, which allows a publicly advertised offering to non-accredited investorsCorrect. It is the only route that gives up neither aim.
3. C.Rule 506(c), because it permits general solicitationWrong. It buys advertising at the price of confining purchasers to verified accredited investors.
4. D.An intrastate offering, which imposes no limit on advertising within the stateWrong. It confines the offering to one state rather than opening it to the general public.

Why: Regulation A permits a public, generally advertised offering on an abbreviated disclosure document and does not confine purchasers to accredited investors, so it accommodates all three aims at once. Rule 506(b) permits a limited number of non-accredited purchasers but not general solicitation, and Rule 506(c) permits general solicitation but requires that every purchaser be accredited and that the issuer take reasonable steps to verify it. An intrastate offering fails on a different axis, since it confines the offering to a single state rather than the general public. What decides the question is that only one of the routes gives up neither general solicitation nor non-accredited purchasers.

A company insider who is an affiliate of the issuer acquires shares in a qualified Regulation A offering, the same offering type that produces freely tradable securities for ordinary investors. Does this affiliate's status change whether her shares are freely tradable?

1. A.No, because Regulation A qualification eliminates any affiliate-based resale restriction entirely, treating every purchaser identically once the offering has qualified.Wrong. This assumes Regulation A's general free-trading feature applies uniformly regardless of the purchaser's own status.
2. B.No, because affiliate status is only relevant to Regulation D offerings, and has no bearing on securities acquired in a Regulation A offering.Wrong. Affiliate/control-person resale considerations are not exclusive to Regulation D.
3. C.Yes, but only because Regulation A prohibits affiliates from purchasing any securities in a Regulation A offering in the first place.Wrong. There is no such blanket prohibition on affiliate purchases in a Regulation A offering.
4. D.Yes -- an affiliate's control-person status is a separate, independent basis for resale limitations that Regulation A qualification does not automatically erase.Correct. Affiliate status operates independently of the offering type used to acquire the shares.

Why: Yes. An affiliate's shares can remain subject to resale limitations tied to her control-person status, independent of whether the securities were sold in a Regulation A offering that generally produces freely tradable securities for ordinary investors. Being an affiliate is a separate basis for resale restriction that Regulation A qualification alone does not eliminate.