SEC Proposes New Financial Statement Requirements Under Regulation A+

The SEC recently proposed and solicited public comments on Regulation A+, which would amend and update Regulation A, an exemption for unregistered public offerings of securities in amounts up to $5 million, by creating a new two-tiered system. Under the rules—which were issued December 18 pursuant to a JOBS Act mandate—Tier 1 would apply to offerings of up to $5 million, while Tier 2 would apply to offerings of up to $50 million, both over a 12-month period.

For Tier 1 offerings, the issuer would have to provide a balance sheet as of the end of each of the last two fiscal years rather than as of the end of the most recently completed fiscal year only. The proposal would also require financial statements for significant acquired businesses in accordance with Rule 8-04 of Regulation S-X. Rule 8-04 measures significance at a higher level than the significance test currently applicable to Regulation A offerings. Finally, the proposal would require financial