under Regulation A, regardless of how many shareholders it has or
whether such shareholders were accredited investors. Alternatively, if
Regulation A issuers that conducted Tier 2 offerings were current in
their ongoing reporting were exempt from registration under Section
12(g), or their obligations to register were suspended, issuers would
have the ability to remain in the Regulation A reporting regime on a
long-term basis, irrespective of growth in their shareholder base.
---------------------------------------------------------------------------

    \162\ See, generally, Report of the Special Study of Securities
Markets of the Securities and Exchange Commission, House Document
No. 95, House Committee on Interstate and Foreign Commerce, 88th
Cong., 1st Sess. (1963), at 60-62.
---------------------------------------------------------------------------

    One commenter suggested we provide a conditional exemption from
mandatory Exchange Act reporting under Section 12(g) for emerging
growth companies that have conducted a Regulation A offering and comply
with its ongoing reporting requirements; otherwise, emerging growth
companies that may cross the Section 12(g) asset and record holder
thresholds following a Regulation A offering would be disincentivized
from relying on the exemption.\163\ In the commenter's view, the
exemption from Section 12(g) could be temporary and lapse once the
issuer obtains a non-affiliate market capitalization of $250
million.\164\
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    \163\ Letter from Michael L. Zuppone, Paul Hastings LLP, Nov.
26, 2013 (``Paul Hastings Letter'').
    \164\ The commenter suggested $250 million of non-affiliate
market capitalization to accord with the threshold the Commission
set for defining the mandate of its Advisory Committee on Small and
Emerging Companies. See fn. 94 above.
---------------------------------------------------------------------------

    We believe, however, that the Section 12(g) record holder threshold
continues to provide an important baseline, above which issuers should
be subject to the more expansive disclosure and compliance obligations
of the Exchange Act. We are not proposing to exempt Regulation A
securities from the requirements of Section 12(g) or to provide that
issuers that are current in their Regulation A ongoing reporting under
Tier 2 would be exempt from Section 12(g) or have their obligations to
register under Section 12(g) suspended. We do, however, solicit comment
as to whether a Section 12(g) exemption or suspension should be
provided.
Request for Comment
    33. Should Regulation A securities be exempt from Section 12(g),
either conditionally or otherwise? Would an exemption from Section
12(g) encourage Regulation A issuers to continue ongoing reporting
under the proposed rules for Tier 2 offerings, where such issuers might
otherwise cease reporting? \165\
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    \165\ See discussion in Section IV.B.2.f. below.
---------------------------------------------------------------------------

    34. Does Section 12(g) continue to serve as a valuable proxy for
market interest in the equity securities of an issuer issued pursuant
to Regulation A, such that an issuer that crosses its asset and record
holder thresholds should become subject to mandatory Exchange Act
reporting? Why or why not?
7. Liability Under Section 12(a)(2)
    The liability provisions of Section 12(a)(2) of the Securities Act
apply to any public offering of securities by use of an oral
communication or prospectus that includes a material misleading
statement or material misstatement of fact.\166\ Section 3(b)(2)(D) of
the Securities Act provides that ``[t]he civil liability provision in
section 12(a)(2) [of the Securities Act] shall apply to any person
offering or selling [Regulation A] securities.'' Therefore, consistent
with current Regulation A,\167\ sellers of Regulation A securities
would have liability under Section 12(a)(2) to investors for any offer
or sale by means of an offering circular or an oral communication that
includes a material misleading statement or material misstatement of
fact.\168\
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    \166\ 15 U.S.C. 77l(a)(2).
    \167\ See SEC Rel. No. 33-6924, at fn. 57.
    \168\ Regulation A prohibits sales until the Form 1-A has been
qualified. See Rule 251(d)(2), 17 CFR 230.251(d)(2); cf. Securities
Offering Reform, SEC Rel. No. 33-8591, at 173 et seq. (discussing
Section 12(a)(2) liability in the context of information conveyed at
the time of sale).
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C. Offering Statement

    Section 3(b)(2)(G)(i) gives the Commission discretion to require an
offering statement in such form and with such content as it determines
necessary in the public interest and for the protection of investors.
The provision permits electronic filing of offering statements, and
provides a non-exhaustive list of potential content that may be
required in the offering statement, including audited financial
statements, a description of the issuer's business operations,
financial condition, corporate governance principles, use of

investor funds, and other appropriate matters.
1. Electronic Filing; Delivery Requirements
    Currently, Regulation A offering statements are filed with the
Commission in paper form.\169\ The paper filing process does not align
with the Commission's electronic filing requirements for issuers in
registered offerings \170\ or notices in connection with offerings
under Regulation D.\171\ The Commission has required electronic filing
of registration statements since 1996,\172\ and of Form D filings since
2009.\173\ Requiring offering statements to be filed electronically
rather than on paper may reduce potential logistical problems and
delays that can occur with the receipt, processing and dissemination of
paper filings by the Commission for issuers seeking to raise capital
under Regulation A. Electronic filing would facilitate a more efficient
review process for such filings by Commission staff by allowing the
offering and related materials, once submitted or filed, to be rapidly
processed and disseminated internally. In addition, paper submissions--
while publicly available in a technical sense--are not widely or
immediately accessible. Electronic filing of offering statements could
facilitate investor and market access to the information contained in
offering statements in a more efficient way than paper filings do.
---------------------------------------------------------------------------

    \169\ 17 CFR 232.101(c)(6). There are no filing fees associated
with filing a Form 1-A with the Commission. See Section 6(b) of the
Securities Act, 15 U.S.C. 77f(b) (permitting the recovery of costs
of services to the government only with respect to registered
offerings).
    \170\ Offerings registered under the Securities Act are required
to be filed electronically on the Commission's Electronic Data
Gathering, Analysis, and Retrieval System (EDGAR) system. See Rule
101(a)(1)(i) of Regulation S-T (17 CFR 232.101(a)(1)(i)).
    \171\ Issuers relying on Regulation D are required to
electronically file a notice of sales on Form D with the Commission.
See Rule 101(a)(1)(xiii) of Regulation S-T (17 CFR
232.101(a)(1)(xiii)); see also Rule 503 of Regulation D (17 CFR
230.503). Form D is also required for offerings under Section
4(a)(5) of the Securities Act.
    \172\ See SEC Rel. No. 33-6977 (Feb. 23, 1993) [58 FR 14628].
Foreign private issuers have been required to file their
registration statements electronically since 2002. SEC Rel. No. 33-
8099 (May 16, 2002).
    \173\ See SEC Rel. No. 33-8891 (Feb. 6, 2008) [73 FR 10592].
---------------------------------------------------------------------------

    In Section 3(b)(2)(G)(i), Congress gave the Commission discretion
to require issuers to file their offering statements electronically.
Commenters are generally supportive of electronic filing.\174\
Consistent with these comments and the language of Section
3(b)(2)(G)(i), we propose to require Regulation A offering statements
to be filed with the Commission electronically on the EDGAR
system.\175\
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    \174\ ABA Letter; WR Hambrecht + Co.; Kaplan Voekler Letter 2;
see also Letter from George W. Beard, Managing Member, Beacon
Investment Partners LLC (DE), Oct. 5, 2012 (``Beacon Investment
Letter''). See also Final Report of the 30th Annual SEC Government-
Business Forum on Small Business Capital Formation, Recommendation
16, at 31 (Nov. 17, 2011) (available at: http://www.sec.gov/info/smallbus/gbfor30.pdf).
    \175\ In conjunction with this proposed change, the portion of
Item 101(c)(6) of Regulation S-T (17 CFR 232.101(c)(6)) dealing with
filings related to Regulation A offerings would be rescinded.
---------------------------------------------------------------------------

    As proposed, amended Form 1-A would consist of three parts:
     an eXtensible Markup Language (XML) based fillable form,
which would capture key information about the issuer and its offering
using an easy to fill out online form, similar to Form D,\176\ with
drop-down menus, indicator boxes or buttons, and text boxes, while also
assisting issuers in determining their ability to rely on the
exemption. The XML-based fillable form would enable the convenient
provision of information to the Commission, and support the assembly
and transmission of such information to EDGAR, without requiring the
issuer to purchase or maintain additional software or technology; \177\
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    \176\ 17 CFR 239.500.
    \177\ Part I (Notification) of Form 1-A. As discussed more fully
in Section II.C.3.a. below, the cover page and Part I of current
Form 1-A would be converted into, and form the basis of, the XML-
based fillable form.
---------------------------------------------------------------------------

     a text file attachment containing the body of the
disclosure document and financial statements, formatted in HyperText
Markup Language (HTML) or American Standard Code for Information
Interchange (ASCII) to be compatible with the EDGAR filing system;
\178\ and
---------------------------------------------------------------------------

    \178\ Part II (Offering Circular) of Form 1-A. See discussion in
Section II.C.3.b. below.
---------------------------------------------------------------------------

     text file attachments, containing the exhibits index and
the exhibits to the offering statement, formatted in HTML or ASCII to
be compatible with the EDGAR filing system.\179\
---------------------------------------------------------------------------

    \179\ Part III (Exhibits) of Form 1-A. See discussion in Section
II.C.3.c. below.
---------------------------------------------------------------------------

    We further propose to require all other documents required to be
submitted or filed with the Commission in conjunction with a Regulation
A offering, such as ongoing reports, to be submitted or filed
electronically on EDGAR.\180\
---------------------------------------------------------------------------

    \180\ See discussion regarding proposed ongoing reporting
requirements at Section II.E. below. Consistent with current
Regulation A, there would be no filing fees associated with
Regulation A, as proposed to be amended.
---------------------------------------------------------------------------

    We believe this proposed approach to electronic filing would be
both practical and useful for issuers of Regulation A securities,
investors in such securities, other market participants, and the
Commission staff who work with issuers throughout the qualification
process. Issuers would maintain better control over their filing
process, reduce the printing costs associated with filing seven copies
of the offering statement and any amendments with the Commission,
obtain immediate confirmation of acceptance of an offering statement,
and ultimately save time in the qualification process. Investors would
gain real-time access to the information contained in Regulation A
filings.\181\ The efficiency of the Regulation A market should improve
with the increased accessibility of information about Regulation A
issuers and offerings. Additionally, as with registered offerings,
EDGAR would allow the Commission to store, process, and disseminate
filings in a more efficient manner, which may, in turn, improve the
efficiency of the staff review and qualification processes.
---------------------------------------------------------------------------

    \181\ Investors would not, however, have immediate access to
non-public submissions of draft offering statements. See discussion
in Section II.C.2. below.
---------------------------------------------------------------------------

    As proposed, electronic filing would also facilitate the capture of
important financial and other information about Regulation A issuers
and offerings that would enable the Commission and market participants
to monitor and analyze any market that develops in Regulation A
securities, including, for example, issuer size, issuer location, key
financial metrics, summary information about securities offered and
offering amounts, the jurisdictions in which offerings take place, and
expenses associated with the offering.\182\
---------------------------------------------------------------------------

    \182\ The specific disclosure requirements included in the XML-
based fillable form are discussed more fully in Section II.C.3.a.
below.
---------------------------------------------------------------------------

    We appreciate, however, that requiring EDGAR filing would impose
costs on issuers that currently are not required to enter the EDGAR
filing system or format their disclosure documents in ways that the
EDGAR system can accept. For that reason, we are soliciting comment on
whether electronic filing should be mandated for Regulation A
offerings.
    If electronic filing on EDGAR is required, one commenter suggested
that the Commission propose for Regulation A offering circulars an
analog to the ``access equals delivery'' model for prospectuses under
Securities Act Rule 172.\183\ Currently, Regulation A prohibits sales
pursuant to a qualified offering statement unless a preliminary
offering circular or final offering circular is furnished to an
investor at least 48

hours before the mailing of the confirmation of sale, and the final
offering circular is delivered to the investor with the confirmation of
sales (unless delivered at any earlier time).\184\ By comparison, under
Rule 172, a final prospectus in a registered offering is deemed to
precede or accompany a security for sale for purposes of Section
5(b)(2) of the Securities Act as long as the final prospectus meeting
the requirements of Section 10(a) of the Securities Act is filed with
the Commission on EDGAR.\185\ Additionally, Rule 172(a), which provides
an exemption from Section 5(b)(1) of the Securities Act, permits
issuers to send written confirmations and notices of allocations after
effectiveness of a registration statement without being accompanied or
preceded by a final prospectus, so long as the registration statement
is effective and the final prospectus is filed with the
Commission.\186\
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    \183\ Kaplan Voekler Letter 2.
    \184\ Rule 251(d)(2).
    \185\ 17 CFR 230.172(b); see also Securities Offering Reform,
SEC Rel. No. 33-8591, at 245 (discussing Rule 172). This provision
also applies where the issuer will make a good faith and reasonable
effort to file the final prospectus with the Commission as part of
the registration statement within the required Rule 424 time period.
17 CFR 230.172(c)(3). Currently, there is no analog in Regulation A
to filings permitted in the registered context under Rule 424,
although one commenter has suggested we consider one. See Kaplan
Voekler Letter 2; see also discussion in Section II.C.3. below and
text accompanying fn. 235.
    \186\ 17 CFR 230.172(a); see also Securities Offering Reform,
SEC Rel. No. 33-8591, at 251 (discussing Rule 172(a)).
---------------------------------------------------------------------------

    We are proposing an access equals delivery model for Regulation A
final offering circulars. The expanded use of the Internet and
continuing technological developments suggest that we should consider
alternative methods of final offering circular delivery for Regulation
A, particularly given that the regulation has not been substantively
updated since 1992. Where, upon qualification of an offering statement,
sales of Regulation A securities occur on the basis of offers made
using a preliminary offering circular, issuers and intermediaries could
presume that investors have access to the Internet, and would be
permitted to satisfy their delivery requirements for the final offering
circular if it is filed and available on EDGAR.\187\ We further propose
to require issuers to include a notice in any preliminary offering
circular they use that would inform potential investors that the issuer
may satisfy its delivery obligations for the final offering circular
electronically. As with registered offerings, we propose to permit
dealers, during the aftermarket delivery period, to be deemed to
satisfy their final offering circular delivery requirements if it is
filed and available on EDGAR.\188\
---------------------------------------------------------------------------

    \187\ Cf. Securities Offering Reform, SEC Rel. No. 33-8591, at
244.
    \188\ See proposed Rule 251(d)(2)(ii) for the dealer aftermarket
delivery requirements.
---------------------------------------------------------------------------

    Further, consistent with prior Commission releases on the use of
electronic media for delivery purposes, ``electronic-only'' offerings
of Regulation A securities would not be prohibited under the proposed
rules for Regulation A.\189\ In such offerings, however, an issuer and
its participating intermediaries would have to obtain the consent of
investors to the electronic delivery of:
---------------------------------------------------------------------------

    \189\ An electronic-only offering is an offering in which
investors are permitted to participate only if they agree to accept
the electronic delivery of all documents and other information in
connection with the offering. See SEC Rel. No. 34-37182 (May 9,
1996) [61 FR 24644] (Use of Electronic Media by Broker-Dealers,
Transfer Agents and Investment Advisers for Delivery of Information)
and SEC Rel. No. 34-42728 (Apr. 28, 2000) [65 FR 25843] (Use of
Electronic Media).
---------------------------------------------------------------------------

     the preliminary offering circular and other information,
but not the final offering circular, in instances where, upon
qualification, the issuer plans to sell Regulation A securities based
on offers made using a preliminary offering circular; and
     all documents and information, including the final
offering circular, when the issuer sells Regulation A securities based
on offers conducted during the post-qualification period using a final
offering circular.
    We further propose to maintain the existing requirements of Rule
251(d)(2)(ii), which requires dealers to deliver a copy of the current
offering circular to purchasers for sales that take place within 90
calendar days after qualification,\190\ but to otherwise update and
amend Rule 251(d)(2)(i), which currently requires that a preliminary or
final offering circular be furnished to prospective purchasers at least
48 hours before the mailing of the confirmation of sale. When
originally adopted in 1973, Regulation A's offering circular delivery
requirements aligned with the prospectus delivery requirements for
registered offerings.\191\ In the intervening time, prospectus delivery
requirements have changed,\192\ with no corresponding updates to
Regulation A. Notably, the Commission formalized its 48-hour
preliminary prospectus delivery requirement in 1982 by amending
Exchange Act Rule 15c2-8 to require only broker-dealers participating
in a registered offering of securities by a non-reporting issuer to
deliver a preliminary (and not final) prospectus at least 48 hours in
advance of the mailing of the confirmation of sale.\193\
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    \190\ See proposed Rule 251(d)(2)(ii). As proposed, this
provision clarifies the date on which dealer delivery obligations
commence in the context of continuous or delayed offerings pursuant
to proposed Rule 251(d)(3).
    \191\ See SEC Rel. No. 33-5277 (July 26, 1972) (noting that
there should be no distinction in the delivery requirements of
Regulation A offerings and registered offerings, and therefore
proposing (and eventually adopting) rules requiring delivery of the
offering circular 48 hours in advance of mailing of a confirmation
of sale.); SEC Rel. No. 33-6075 (June 1, 1979) [44 FR 33362], at
33363-64 (permitting for the first time the use of a preliminary
offering circular in Regulation A offerings, and imposing the same
delivery requirements for such preliminary offering circulars as
were then in effect for registered offerings).
    \192\ See SEC Rel. No. 33-6383 (March 3, 1982) [47 FR 11380]
(Integrated Disclosure Release, which, among other things, added
Exchange Act Rule 15c2-8, 17 CFR 240.15c2-8, which requires broker-
dealers participating in a registered offering of securities of a
non-reporting issuer to deliver a copy of the preliminary prospectus
to any prospective purchaser at least 48 hours before the mailing of
the confirmation of sale.); see also Securities Offering Reform, SEC
Rel. No. 33-8591, at 173 et seq. and 241 et seq. (discussing
information conveyed at time of sale for purposes of Section
12(a)(2) liability and prospectus delivery requirement reforms).
    \193\ SEC Rel. No. 33-6383, at 11400. The advance delivery
requirements do not, however, apply in the context of registered
offerings by issuers subject to a reporting obligation under Section
13 or 15(d) of the Exchange Act. Before the addition of Rule 15c2-
8(b), the Commission required assurances that the managing
underwriter had taken reasonable steps to send investors a
preliminary prospectus at least 48 hours in advance of mailing
confirmations of sale before accelerating effectiveness of a
registration statement. See SEC Rel. No. 33-4968 (May 1, 1969) [34
FR 7235]. Cf. 17 CFR 230.460 (Distribution of Preliminary Prospectus
in Registered Offerings).
---------------------------------------------------------------------------

    We believe the delivery of the preliminary offering circular to
potential investors before they make an investment decision remains an
important investor protection that should be preserved in Regulation A,
particularly in light of the proposed expanded use of ``testing the
waters'' solicitation materials to include the period of time after
non-public submission or filing of the offering statement discussed
further in Section II.D. below.\194\ We also recognize the need to
update and amend Regulation A's offering circular delivery requirements
to accord with the requirements of broker-dealers in the context of
registered offerings. We therefore propose to amend Rule 251(d)(2)(i)
to require issuers and participating broker-dealers to deliver only a
preliminary offering circular to prospective purchasers \195\ at least
48

hours in advance of sale when a preliminary offering circular is used
during the prequalification period to offer such securities to
potential investors.\196\ Unlike Exchange Act Rule 15c2-8, this
delivery requirement would apply to both issuers and participating
broker-dealers.\197\ We believe this is an important investor
protection that should apply to issuers in advance of sale, and is
consistent with current Regulation A.\198\ Consistent with current Rule
251(d)(1)(iii), we propose to continue to require a final offering
circular to accompany or precede any written communications that
constitute an offer in the post-qualification period.\199\
---------------------------------------------------------------------------

    \194\ Cf. Securities Offering Reform, SEC Rel. No. 33-8591, at
245 (noting that access equals delivery is not appropriate for
preliminary prospectus delivery obligations in IPOs because it is
important for potential investors to be sent the preliminary
prospectus).
    \195\ Prospective purchasers would include any person that has
indicated an interest in purchasing the Regulation A securities
before qualification, including, but not limited to, those investors
that respond to an issuer's solicitation materials. See proposed
Rule 251(d)(2)(i).
    \196\ In accordance with time of sale provisions discussed in
Securities Offering Reform, see SEC Rel. No. 33-8591, at p. 173 et
seq., we propose to base the 48-hour period in advance of ``sale''
rather than the ``mailing of the confirmation of sale.'' See also
Section II.D. below for a discussion of the delivery requirements
for solicitation materials used after publicly filing the offering
statement.
    \197\ Cf. Exchange Act Rule 3a4-1, 17 CFR 240.3a4-1 (Associated
persons of an issuer deemed not to be brokers). Issuers would be
able to rely on reasonable assurances of delivery from participating
broker-dealers to satisfy their delivery obligations.
    \198\ Cf. 17 CFR 230.460 (Distribution of Preliminary Prospectus
in Registered Offerings). Additionally, with continued improvements
in information and communication technologies, we believe direct
public offerings (i.e., offerings conducted by an issuer without the
involvement of an underwriter) may become a more attractive option
for certain issuers. For that reason, it is important that the
advance preliminary offering circular delivery requirements for
participating broker-dealers apply equally to issuers.
    \199\ See proposed Rule 251(d)(1)(iii). Consistent with Rule
172(a) in the context of registered offerings, issuers and
intermediaries sending written confirmations and notices of
allocation in the post-qualification period would be allowed to rely
on the EDGAR filing of the final offering circular to satisfy any
delivery requirements under Rule 251(d)(1)(iii). For a discussion of
Rule 172(a), see Securities Offering Reform, SEC Rel. No. 33-8591,
at 251.
---------------------------------------------------------------------------

    In addition to the revised delivery requirements discussed above,
we propose to add a provision analogous to Rule 173.\200\ Currently,
Regulation A requires the delivery of a final offering circular to the
purchaser with the confirmation of sale, unless it has been delivered
already.\201\ The proposed provision would allow issuers and
participating broker-dealers that satisfy the 48-hour requirement by
furnishing a preliminary offering circular to, not later than two
business days after completion of the sale, provide the purchaser with
a copy of the final offering circular or a notice stating that the sale
occurred pursuant to a qualified offering statement. As proposed, the
notice must include the URL \202\ where the final offering circular, or
the offering statement of which such final offering circular is part,
may be obtained on EDGAR and contact information sufficient to notify a
purchaser where a request for a final offering circular can be sent and
received in response.
---------------------------------------------------------------------------

    \200\ 17 CFR 230.173.
    \201\ 17 CFR 230.251(d)(2)(i)(C).
    \202\ In the case of an electronic-only offering, the notice
must include an active hyperlink to the final offering circular or
to the offering statement of which such final offering circular is
part.
---------------------------------------------------------------------------

    We propose to allow an issuer to withdraw an offering statement,
with the Commission's consent, if none of the securities that are the
subject of such offering statement have been sold and such offering
statement is not the subject of a Commission order temporarily
suspending a Regulation A exemption.\203\ Under the proposed rules, the
Commission also would be able to declare an offering statement
abandoned if the offering statement has been on file with the
Commission for nine months without amendment and has not become
qualified.\204\ These withdrawal and abandonment procedures are similar
to the ones that apply to reporting companies.
---------------------------------------------------------------------------

    \203\ See proposed Rule 259(a).
    \204\ See proposed Rule 259(b).
---------------------------------------------------------------------------

Request for Comment
    35. Should the rules require the electronic filing of Regulation A
offering and related documents on EDGAR, as proposed? Why or why not?
Please address expected costs of electronic filings and benefits to
both issuers and investors of having these documents available in
electronic format. Alternatively, for Tier 1 offerings, what would be
the benefits, if any, of maintaining Regulation A's current paper
filing system for offering statements and related documents? Should we
maintain paper filing for issuers conducting Tier 1 Regulation A
offerings? Why or why not?
    36. As proposed, should we require issuers to file the body of the
disclosure document, financial statements, and text file attachments,
containing the exhibits index and the exhibits to the offering
statement, electronically in a HTML or ASCII format that is compatible
with the EDGAR filing system? Or should we permit the filing of
offering and related materials in Portable Document Format (PDF) or in
some other format that is readily accessible to smaller issuers to
constitute an official filing with the Commission under Regulation S-T?
\205\
---------------------------------------------------------------------------

    \205\ See 17 CFR 232.104 (Unofficial PDF copies included in an
electronic submission).
---------------------------------------------------------------------------

    37. Should we adopt, as proposed, an access equals delivery model
for final offering circular delivery requirements, in which case
investors would be presumed to have access to the Internet, and issuers
and intermediaries could satisfy their delivery requirements if the
final offering circular were filed with the Commission on EDGAR? \206\
Or should we maintain our existing requirement that issuers deliver to
purchasers a final offering circular with the mailing of the
confirmation of sale to such purchasers (if not delivered previously)?
Why or why not?
---------------------------------------------------------------------------

    \206\ Kaplan Voekler Letter 2.
---------------------------------------------------------------------------

    38. Should we update, as proposed, the delivery requirements in
Rule 251(d)(2)(i) to maintain advance delivery requirements of
preliminary offering circulars, while eliminating the requirement that
issuers and broker-dealers participating in the distribution of
Regulation A securities pursuant to an offering statement deliver a
final offering circular to investors at least 48 hours before sale? Why
or why not? Would updating this provision, as proposed, be inconsistent
with the rationale behind similar updates to prospectus delivery
requirements for registered offerings? Why or why not?
    39. While not currently proposed, should we adopt a provision
similar to Exchange Act Rule 15c2-8(b), which would only require the
advance delivery of a preliminary offering circular in the context of
offerings by issuers not already subject to an ongoing reporting
obligation under Regulation A? Similarly, should we adopt an analog to
Rule 174(b),\207\ which applies to registered offerings, so that a
dealer would not have an aftermarket delivery obligation to purchasers
of Regulation A securities to the extent the issuer of such securities
is subject to an ongoing reporting obligation under Regulation A
immediately before the time of filing the offering statement? Or, in
such circumstances, should we only require dealer aftermarket delivery
for a 25 calendar-day period? Why or why not?
---------------------------------------------------------------------------

    \207\ 17 CFR 230.174(b).
---------------------------------------------------------------------------

    40. In conjunction with the proposed access equals delivery model
for final offering circular delivery requirements, should we adopt, as
proposed, a provision analogous to Rule 173? If so, should compliance
with that requirement be made a condition of Regulation A? Why or why
not? Does the rationale behind Rule 173 apply to Regulation A
offerings? \208\
---------------------------------------------------------------------------

    \208\ See Securities Offering Reform, SEC Rel. No. 33-8591, at
p. 173 et seq.

---------------------------------------------------------------------------

2. Non-Public Submission of Draft Offering Statements
    Unlike Title I of the JOBS Act,\209\ Title IV does not provide for
confidential submissions of offering statements under Regulation A.
Commenters, however, supported providing issuers with the option of
confidential submission of offering statements under Regulation A.\210\
We propose to allow the non-public submission of draft offering
statements by issuers of Regulation A securities. We note, however,
that such submissions would not be subject to the statutorily-mandated
confidentiality of draft IPO registration statements confidentially
submitted by ``emerging growth companies'' \211\ under Title I of the
JOBS Act.\212\
---------------------------------------------------------------------------

    \209\ Title I of the JOBS Act permits emerging growth companies
to confidentially submit draft registration statements to the
Commission for nonpublic review, provided the initial confidential
submission and all amendments thereto are publicly filed not later
than 21 calendar days before the issuer conducts its roadshow. See
Section 106(a) of Title I, which added subsections 5(d) and 6(e) to
the Securities Act.
    \210\ Letter from Jonathan C. Guest, McCarter & English, LLP,
July 10, 2012 (``McCarter & English Letter''); ABA Letter; WR
Hambrecht + Co. Letter.
    \211\ Under Section 2(a)(19) of the Securities Act, an
``emerging growth company'' is defined as, among other things, an
issuer that had total annual gross revenues of less than $1 billion
during its most recently completed fiscal year. 15 U.S.C.
77b(a)(19).
    \212\ Under Section 6(e)(2) of the Securities Act, confidential
submissions of draft registration statements by emerging growth
companies are protected from compelled disclosure under the Freedom
of Information Act (FOIA) (5 U.S.C. 552). There is no similar
provision under Section 3(b) of the Securities Act. Issuers
requesting confidential treatment of draft offering statement
submissions under Regulation A could submit such documents under
cover of the Commission's Rule 83. See 17 CFR 200.83.
---------------------------------------------------------------------------

    Under Regulation A's proposed non-public submission of draft
offering statement provisions, issuers whose securities have not been
previously sold pursuant to a qualified offering statement under
Regulation A or an effective registration statement under the
Securities Act would be permitted to submit to the Commission a draft
offering statement for non-public review. As with the confidential
submission of draft registration statements, all non-public submissions
of draft offering statements would be submitted via EDGAR. The initial
non-public submission, all non-public amendments thereto, and
correspondence with Commission staff regarding such submissions would
be required to be publicly filed as exhibits to the offering statement
not less than 21 calendar days before qualification of the offering
statement.\213\ Unlike emerging growth companies, which must publicly
file any confidential submissions not later than 21 calendar days
before a road show, the timing requirements for filing by issuers
seeking qualification under Regulation A would not depend on whether or
not the issuer conducts a road show.\214\
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    \213\ The timing is consistent with the guidance provided to
emerging growth companies under Title I of the JOBS Act, where such
issuers do not ``test the waters'' under Section 5(d) or otherwise
conduct a traditional road show. See JOBS Act Frequently Asked
Questions on Confidential Submission Process for Emerging Growth
Companies, Question 9 (April 10, 2012), available at: http://www.sec.gov/divisions/corpfin/guidance/cfjumpstartfaq.htm.
    \214\ Regulation A's proposed testing the waters provisions
would encompass a variety of activities, including activities that
could constitute a traditional road show. See Section II.D. below
for a discussion on the timing and requirements for the use of
testing the waters solicitation materials under Rule 254 as proposed
to be amended.
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Request for Comment
    41. As proposed, should the rules permit the non-public submission
of draft offering statements under Regulation A? Would there be any
adverse impact on public investors of permitting the non-public
submission of offering statements?
    42. Is the proposed requirement of public filing at least 21
calendar days before qualification appropriate? Should public filing be
required sooner or later than proposed?
    43. Should the availability of non-public submission of Regulation
A offering statements be limited, as proposed, to issuers whose
securities have not been previously sold pursuant to a qualified
offering statement under Regulation A or an effective registration
statement under the Securities Act, in a manner similar to the
limitation under Title I of the JOBS Act on the use of confidential
submissions to issuers that have not previously sold common equity
securities pursuant to an effective registration statement? Or should
issuers be permitted to use the non-public submission provisions more
than once?
    44. As proposed, should issuers that non-publicly submit an
offering statement under Regulation A be required to request
confidential treatment under the cover of the Commission's Rule 83? Or
should we adopt a new rule relating to confidential treatment of draft
offering statements in Regulation A?
3. Form and Content
    Section 3(b)(2)(G)(i) of the Securities Act \215\ identifies
certain requirements that the Commission may include, among others, in
the requirements for offerings relying on the exemption. The
requirements largely follow the existing offering statement
requirements of Form 1-A.\216\ For example, financial statements,\217\
a description of the issuer's business operations,\218\ financial
condition,\219\ and use of investor funds \220\ are all currently
required disclosures in Form 1-A. Additionally, Form 1-A requires
issuers to disclose, among other things, their contact information, the
price or method for calculating the price of the securities being
offered, information about the issuer's property, results of
operations, directors, officers, significant employees and certain
beneficial owners, material agreements and contracts, past securities
sales, material factors that make an investment in the issuer
speculative or risky, dilution, the plan of distribution for the
offering, executive and director compensation, and conflicts of
interest and related party transactions. As with Regulation A
generally, however, Form 1-A has not been substantively revised by the
Commission since 1992.
---------------------------------------------------------------------------

    \215\ See JOBS Act Section 401(a)(2).
    \216\ The primary exception is the suggestion that issuers be
required to submit audited financial statements. Currently, the
financial statements required under Regulation A are required to be
audited only if the issuer has them available.
    \217\ See Form 1-A, Part II, Part F/S.
    \218\ Id., Part II, e.g., Model B, Item 6. (Description of
Business).
    \219\ Id., e.g., Part F/S.
    \220\ Id., e.g., Item 5. (Use of Proceeds to Issuer).
---------------------------------------------------------------------------

    Currently, Form 1-A consists of three parts: Part I (Notification),
Part II (Offering Circular), and Part III (Exhibits). Part I of Form 1-
A calls for certain basic information about the issuer and proposed
offering that is necessary to determine the availability of the
exemption.\221\ For example, the existence of any ``bad actor''
disqualifications under Rule 262 and the presence of proposed affiliate
sales in the absence of issuer net income from operations in at least
one of the last two fiscal years,\222\ both of which may affect
availability of the exemption, are required to be disclosed in Part I.
Part I is filed with the Commission and publicly available, but is not
required to be provided to investors.\223\
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    \221\ See SEC Rel. No. 33-6275 (Jan. 9, 1981) [46 FR 2637], at
2638.
    \222\ See Rule 251(b).
    \223\ See Rule 251(d)(2); see also SEC Rel. No. 33-6275, at
2639.
---------------------------------------------------------------------------

    Part II of the offering statement consists of an offering
circular--similar to the prospectus in a registration statement--which
serves as the primary disclosure document to investors of the material
facts about the issuer, its

securities, and the offering. Issuers organized as corporations are
given the option of following any one of three disclosure formats in
Part II:
     Model A (Question-and-Answer Format); \224\
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    \224\ Model A is based on the North American Securities
Administrators Association's (NASAA) Form U-7, also known as the
Small Company Offering Registration (SCOR) form, adopted April 28,
1989. See http://www.nasaa.org/industry-resources/corporation-finance/scor-overview/scor-forms/.
---------------------------------------------------------------------------

     Model B, a somewhat scaled version of Form S-1 that
largely follows the Commission's disclosure standards in effect for
registration statements when Model B was adopted in 1981; \225\ and
---------------------------------------------------------------------------

    \225\ See SEC Rel. No. 33-6275 [46 FR 2637], at 2639-40; SEC
Rel. No. 33-6924 [57 FR 9768], at 9771.
---------------------------------------------------------------------------

     Part I of Form S-1.\226\
---------------------------------------------------------------------------

    \226\ 17 CFR 239.11. Issuers choosing Part I of Form S-1 must,
however, follow the financial statement requirements of Form 1-A,
Part F/S.
---------------------------------------------------------------------------

Issuers organized in non-corporate form, such as limited partnerships
and limited liability companies, have the option of using either Model
B or Part I of Form S-1. Part F/S of the offering circular--containing
financial statements and notes--is required disclosure for all issuers.
Part III requires an exhibits index and a description of exhibits
required to be filed as part of the offering statement.
    Commenters generally supported maintaining Regulation A's existing
Form 1-A, with modifications and updates to implement the provisions of
the JOBS Act.\227\ While some commenters supported simplifying the form
or paring it down to focus on matters of greatest significance,\228\
one commenter supported a more expansive disclosure regime.\229\ This
commenter suggested that the Commission coordinate with the States to
create a single disclosure document that would address disclosure from
both a federal and state securities law perspective. In the opinion of
this commenter, a single form with heightened disclosure is better than
a less-comprehensive federal form that would thereafter require
additional disclosure items (and review) by state securities
regulators.\230\ According to this commenter, the need for robust
disclosure is magnified by the increase in the annual offering amount
and by an issuer's ability to solicit indications of interest before
filing the offering statement, engage in general solicitation, and sell
to investors regardless of investor qualifications.\231\
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    \227\ ABA Letter; WR Hambrecht + Co.; NASAA Letter 2.
    \228\ Letter from Thomas D. O'Rourke, President, Alpine
Ventures, Sept. 26, 2012 (``Alpine Ventures Letter''); Letter from
Rutheford B. Campbell, Jr., William L. Matthews Professor of Law,
University of Kentucky, Nov. 13, 2012 (``Campbell Letter''); see
also Letter from Richard Lacey, Small Business Owner, April 23, 2012
(``Lacey Letter'') (suggesting the form should be simple); Letter
from William Klehm, Fallbrook Technologies, September 23, 2013
(``Fallbrook Letter'') (suggesting, among other things, that
Regulation A should be simple and user-friendly); Letter from Og
Oggilby, Bank Clerk, Jan. 22, 2013 (``Oggilby Letter'') (suggesting
relaxed regulations on the sale of securities of small companies).
But see Letter from David R. Burton, General Counsel, National Small
Business Association (``NSBA''), June 12, 2012 (``NSBA Letter'')
(suggesting the Commission not modify or update Regulation A other
than by raising the annual offering limitation to $50 million).
    \229\ Letter from Jack Herstein, President, NASAA, July 3, 2012
(``NASAA Letter 1'') (suggesting that heightened disclosure is
better than a less-comprehensive federal form that would thereafter
require additional disclosure items (and review) by state securities
regulators); NASAA Letter 2.
    \230\ NASAA Letter 1.
    \231\ NASAA Letter 2.
---------------------------------------------------------------------------

    Separately, one commenter suggested that the Commission implement
an offering statement scaled on the basis of offering size.\232\
Another commenter suggested that the Commission consider requiring the
scaled disclosure requirements available to smaller reporting companies
in Form 1-A, while also: (i) Focusing disclosure on matters of the
greatest significance, (ii) limiting risk factors to those deemed
important, (iii) requiring disclosure of valuation assessments (for all
offerings made at a fixed price) and internal projections used to set
budgets as well as a discussion of management's expectations of future
performance, (iv) encouraging the use and filing of research reports,
and (v) if Section 3(b)(2) securities are permitted to list on a
national securities exchange simultaneously with qualification of the
offering statement, incorporating some Form 10 \233\ disclosure
requirements into Form 1-A.\234\
---------------------------------------------------------------------------

    \232\ Campbell Letter (suggesting scaled disclosure in three
tiers for offerings of: $0-up to $1 million; over $1 million-up to
$5 million; over $5 million-up to $50 million).
    \233\ 17 CFR 249.210.
    \234\ WR Hambrecht + Co. Letter; see also Letter from Karl M.
Sjogern, April 25, 2013 (``Sjogern Letter'') (suggesting any issuer
of equity securities should be required to disclose the valuation it
has given itself given the terms of the offering, and to discuss the
factors it considered when setting its valuation).
---------------------------------------------------------------------------

    One commenter suggested that the Commission update its rules
regarding revisions to the offering statement during the post-
qualification period in light of anticipated continuous, best efforts
offerings.\235\ The commenter suggested that the current rule, which
requires any updated or revised offering circular to be filed as an
amendment to the offering statement and requalified in accordance with
Rule 252,\236\ places an unnecessary burden on issuers. This commenter
suggested that the Commission adopt rules analogous to those for
registered offerings where most information meeting the undertaking
requirements of Item 512 of Regulation S-K \237\ requires a post-
effective registration statement, and other updates to the prospectus
in such registration statement may be filed pursuant to Rule 424.\238\
---------------------------------------------------------------------------

    \235\ Kaplan Voekler Letter 2. See related requests for comment
in Section II.C.4. below.
    \236\ See Rule 253(e)(3).
    \237\ 17 CFR 229.512.
    \238\ 17 CFR 230.424.
---------------------------------------------------------------------------

    We propose to maintain Form 1-A's existing three-part structure--
Part I (Notification), Part II (Offering Circular), and Part III
(Exhibits)--while making various revisions and updates to the Form.
a. Part I (Notification)
    Part I of Form 1-A serves as a notice of certain basic information
about the issuer and its proposed offering, which also helps to confirm
the availability of the exemption.\239\ We propose to continue to
require the disclosure of this information in modified and updated
form. The current paper version of Part I of Form 1-A would be
converted into an online XML-based fillable form with indicator boxes
or buttons and text boxes and filed online with the Commission.\240\
The information would be publicly available on EDGAR, as an online data
cover sheet, but not otherwise required to be distributed to
investors.\241\ The fillable form would enable issuers to provide
information in a convenient medium--without the requirement for
specialty software--that would capture relevant data about the issuer
and its offering in a structured format to facilitate analysis of the
Regulation A market and Regulation A issuers by the Commission, other
regulators, third-party data providers, and market participants. As
noted above, the XML-based fillable form would enable the convenient
provision of information to the Commission, and support the assembly
and transmission of such information to EDGAR. Facilitating the capture
of important

financial and other information about Regulation A issuers and
offerings in the proposed XML-based fillable form would enable the
Commission and market participants to monitor any developing market in
Regulation A securities and the types of issuers relying on the
exemption.
---------------------------------------------------------------------------

    \239\ SEC Rel. No. 33-6275 [46 FR 2637], at 2638.
    \240\ As proposed, the cover page to current Form 1-A would be
eliminated as a standalone requirement, while portions of the
information required on the cover page would be combined with Item 1
of Part I of Form 1-A in the XML fillable form.
    \241\ The Commission would disseminate the information in a
format that provides normal text for reading and XML-tagged data for
analysis. With the exception of the items that focus issuers on
eligibility to use Regulation A, much of the information called for
in the XML-based fillable form is also required to be disclosed to
investors in Part II of Form 1-A.
---------------------------------------------------------------------------

    The information collected in Part I would continue to focus issuers
on eligibility to use Regulation A, and would allow Commission staff
reviewing the filings to more easily make a determination about the
conditions to the availability of the exemption. If adopted, this could
conserve issuer time and resources and enhance the efficiency of review
by Commission staff. If, after compiling the information elicited by
Part I, an issuer determined that it was ineligible to rely on
Regulation A, it could choose to register its offering or, if
available, conduct an exempt offering in reliance on a different
exemption from registration.
    The proposed notification in Part I of Form 1-A would require
disclosure in response to the following items:
     Item 1. Issuer Information
     Item 2. Issuer Eligibility
     Item 3. Application of Rule 262 (``bad actor''
disqualification and disclosure)
     Item 4. Summary Information Regarding the Offering and
other Current or Proposed Offerings
     Item 5. Jurisdictions in Which Securities are to be
Offered
     Item 6. Unregistered Securities Issued or Sold Within One
Year
    As proposed, Item 1 (Issuer Information), Item 2 (Issuer
Eligibility), Item 3 (Application of Rule 262 (``bad actor''
disqualification and disclosure)), Item 4 (Summary Information
Regarding the Offering and other Current or Proposed Offerings), and
Item 6 (Unregistered Securities Issued or Sold Within One Year) would
represent substantive changes to Part I.
     Item 1 (Issuer Information) would require information
about the issuer's identity, industry, number of employees, financial
statements and capital structure, as well as contact information.\242\
---------------------------------------------------------------------------

    \242\ As proposed, some of the information in Item 1, such as
the name of the issuer, jurisdiction of incorporation, contact
information, primary Standard Industrial Classification Code Number,
and I.R.S. Employer Identification Number is currently required to
be included on the cover page of Form 1-A. We propose to eliminate
the cover page of Form 1-A and to move the relevant information from
the cover page into Item 1 of Part I.
---------------------------------------------------------------------------

     Item 2 (Issuer Eligibility) would require the issuer to
certify that it meets various proposed issuer eligibility criteria.
     Item 3 (Application of Rule 262 (``bad actor''
disqualification and disclosure)) would require the issuer to certify
that no disqualifying events have occurred and to indicate whether
related disclosure is included in the offering circular (i.e., events
that would have been disqualifying but occurred before the effective
date of the amendments to Regulation A).\243\
---------------------------------------------------------------------------

    \243\ See discussion of proposed Rule 262(a)(3) and (a)(5) in
Section II.G. below.
---------------------------------------------------------------------------

     Item 4 (Summary Information Regarding the Offering and
other Current or Proposed Offerings) would include indicator boxes or
buttons and text boxes eliciting information about the offering
(including whether the issuer was conducting a Tier 1 or Tier 2
offering, amount and type of securities offered, proposed sales by
selling securityholders and affiliates, type of offering, estimated
aggregate offering price of any concurrent offerings pursuant to
Regulation A, anticipated fees in connection with the offering, and the
names of auditors, legal counsel, underwriters, and certain others
providing services in connection with the offering).
     Item 5 (Jurisdictions in Which Securities are to be
Offered) would include data collection about the jurisdiction in which
the securities are to be offered.
     Item 6 (Unregistered Securities Issued or Sold Within One
Year), which largely restates existing Item 5 to Part I, would
eliminate the requirement to provide the names and identities of the
persons to whom unregistered securities were issued.
    We propose to eliminate Item 1 (Significant Parties) of current
Part I, which requires disclosure of the names, business address, and
residential address of all the persons covered by current Rule 262.
Instead, we propose to only require narrative disclosure in Part II of
Form 1-A, as proposed, when the issuer has determined that a relevant
party has a disclosable ``bad actor'' event.\244\ We propose to
eliminate Item 3 of current Part I because we propose to eliminate the
current restrictions on affiliate resales under Rule 251(b).\245\
Information regarding the amount of proposed secondary sales and the
existence of affiliate sales in the offering, however, would continue
to be disclosed in Item 4, as proposed. Item 6 (Other Present or
Proposed Offerings) and Item 9 (Use of a Solicitation of Interest
Document) of current Part I would be incorporated into proposed Item 4
(Summary Information Regarding the Offering and Other Current or
Proposed Offerings). We also propose to eliminate Item 7 (Marketing
Arrangements) and Item 8 (Relationship with Issuer of Experts Named in
Offering Statement) of current Part I, as disclosure of this
information is required in Part II (Offering Circular).
---------------------------------------------------------------------------

    \244\ See discussion in Section II.G. below.
    \245\ The primary purpose of current Item 3 (Affiliate Sales) in
Part I of Form 1-A is to ensure compliance with certain restrictions
on affiliate resales under Rule 251(b). See discussion in Section
II.B.3. above.
---------------------------------------------------------------------------

b. Part II (Offering Circular)
(1) Narrative Disclosure
    As noted above, Part II (Offering Circular) in existing Form 1-A
provides issuers with three options for their narrative disclosure:
Model A, Model B, and Part I of Form S-1.\246\ The use of these three
options has not been revisited, nor have the Model A and Model B
formats been substantively revised by the Commission, since their
introduction in 1992.\247\ In the context of a broader effort to update
Regulation A and make it more useful for market participants, we
believe that the form and content of the Regulation A Offering Circular
is in need of reconsideration. In this regard, we propose to eliminate
Model A as a disclosure option, to update and retain Model B as a
disclosure option (renaming it ``Offering Circular''), and to continue
to permit issuers to rely on Part I of Form S-1 to satisfy the
disclosure obligations of Part II of Form 1-A.
---------------------------------------------------------------------------

    \246\ Non-corporate issuers are not permitted to use Model A.
    \247\ Before the 1992 amendments to Regulation A, Model B was
the only format permissible in Regulation A. See SEC Rel. No. 33-
6275 [46 FR 2637]. Model A and Part I of Form S-1 were added as
additional issuer options at that time. Model B has not been
substantively revised or revisited since it was introduced by the
Commission in 1981. See SEC Rel. No. 33-6924 [57 FR 9768], at 9771.
---------------------------------------------------------------------------

    Model A. Model A was first introduced as an option for corporate
issuers' Regulation A offering statements in 1992. The basis for the
form was the Small Company Offering Registration, or SCOR, form
developed by NASAA, in coordination with state securities
administrators and the securities bar, working through the ABA's State
Regulation of Securities Committee.\248\ Model A was intended to

provide corporate issuers with a ``balanced approach to the capital
raising process, providing a registration form that small businesses
can easily use at a reduced cost while still maintaining investor
protection.'' \249\ In practice, however, Model A has been used much
less frequently than Model B, and offerings using Model A have
generally taken significantly longer to qualify than those using Model
B or Part I of Form S-1.\250\ Commission staff who review Regulation A
filings indicate that Model A's question-and-answer disclosure format
often results in disclosure that lacks uniformity and is hard to
follow. While the question-and-answer approach taken in Model A may
help focus corporate issuers on crucial disclosure issues, we are not
convinced that the disclosure format results in clear and
understandable disclosure being provided to investors. We therefore
propose to eliminate Model A from the narrative disclosure options in
Part II of Form 1-A.
---------------------------------------------------------------------------

    \248\ NASAA's Form U-7 (Small Company Offering Registration) was
first approved for use in connection with certain securities
offerings by NASAA in 1989. See NASAA's Web site on SCOR Forms,
available at: http://www.nasaa.org/industry-resources/corporation-finance/scor-overview/scor-forms/. It was later revised by NASAA in
1999. The revised version has not been approved for use in
connection with Regulation A by the Commission. In its comment
letter, NASAA suggested that the Commission consider allowing
revised Form U-7 to be used in connection with the Section 3(b)(2)
exemption. See NASAA Letter 2.
    \249\ SEC Rel. No. 33-6924, at 23-24.
    \250\ From 2002 through 2012, approximately 21% of qualified
Regulation A offerings have used Model A, 66% have used Model B and
13% have used Form S-1. During the same period, the average time
required for an offering to qualify was 301 days for offerings using
Model A, 220 days for offerings using Model B and 167 days for
offerings using Form S-1. One reason that Model A is used less
frequently may be that it was not updated to correspond to the
version of the SCOR form adopted by NASAA in 1999, so an issuer may
not be able to use the same disclosure document in connection with
Regulation A that it can use for state securities regulation
disclosure.
---------------------------------------------------------------------------

    Model B. Model B disclosure was first introduced by the Commission
in 1981, and was the only available disclosure format at that
time.\251\ It was preserved as a disclosure option in the 1992
amendments to Regulation A.\252\ It has not been substantively updated
or revised since 1981.
---------------------------------------------------------------------------

    \251\ See SEC Rel. No. 33-6275.
    \252\ See SEC Rel. No. 33-6949, at 36444.
---------------------------------------------------------------------------

    Model B was originally the product of a Commission review of the
disclosure practices of Regulation A issuers under Model B's
predecessor, Schedule I.\253\ The Commission found that Regulation A's
then-existing disclosure guidance and rules did not provide
sufficiently detailed directions for the types of offerings that were
being conducted under Regulation A.\254\ As a result, issuers and their
counsel often looked to the existing disclosure guides for the
preparation of registration statements \255\ for guidance on disclosure
under Regulation A.\256\ Such disclosure, however, lacked uniformity,
and caused delays in the Commission staff review and comment
process.\257\ Model B was a codification by the Commission of the
disclosure standards that, in practice, were being applied to
Regulation A offerings at that time.\258\ As enacted, Model B was not
intended to increase the disclosure obligations of issuers. Rather, in
addition to removing uncertainty as to the content of required
disclosures, Model B's more comprehensive and uniform set of disclosure
standards was intended to reduce an issuer's total time spent preparing
and amending the offering circular, and the Commission staff's time
spent reviewing and commenting on it. The result was offering statement
disclosure that closely followed the disclosure requirements then in
effect for registration statements, but scaled for smaller
issuers.\259\
---------------------------------------------------------------------------

    \253\ SEC Rel. No. 33-6275, at 2638.
    \254\ Id.
    \255\ See, e.g., SEC Rel. No. 33-4936 (Dec. 9, 1968) [33 FR
18617] (Guides for Preparation and Filing of Registration
Statements).
    \256\ SEC Rel. No. 33-6275, at 2638.
    \257\ Id.
    \258\ Id.
    \259\ As an example of the variances between Form 1-A and
registered offering disclosure, Item 10 of Part II of Form 1-A
called for disclosure of record ownership of voting securities by
management and certain securityholders, whereas Form S-18, a
simplified registration form available to certain corporate issuers
going public for the first time before 1992, called for broader
disclosure of beneficial ownership of such securities. See SEC Rel.
No. 33-6275, at 2640. This distinction between Form 1-A and
registered offering disclosure (on Form S-1) remains today.
---------------------------------------------------------------------------

    Form S-1. The 1992 amendments to Regulation A also permitted
issuers to draft offering circular disclosure based on the narrative
disclosure requirements for registered offerings found in the then-
newly created Form SB-1.\260\ When Form SB-1 was rescinded as part of
the simplification and modernization of requirements for small
businesses, including the adoption of the smaller reporting company
concept, Form 1-A was revised to permit issuers to follow the narrative
disclosure provisions of Part I of Form S-1.\261\ Thus, issuers are
currently able to provide narrative disclosure under Part I of Form S-1
based on the disclosure requirements for smaller reporting companies
(if applicable) or for larger companies that do not fall within the
definition of a smaller reporting company.\262\
---------------------------------------------------------------------------

    \260\ Form SB-1 replaced Form S-18. See SEC Rel. No. 33-6949, at
36442.
    \261\ See SEC Rel. No. 33-8876, at 166.
    \262\ An issuer that qualifies as a smaller reporting company on
the basis of public float or revenue (see, e.g., Exchange Act Rule
12b-2, 17 CFR 240.12b-2) may follow the narrative disclosure
requirements in Part I of Form S-1 that apply to such companies.
---------------------------------------------------------------------------

    Form S-1 and the narrative disclosure requirements of Regulation S-
K have been revised numerous times since the introduction of Model B
disclosure in 1981 to reflect evolving disclosure requirements and
standards. Model B disclosure, however, has remained essentially
unchanged, as a version of Part I of Form S-1 circa 1981, scaled for
smaller issuers. Thus, while eliciting disclosure of largely the same
information, Model B and Part I of Form S-1 contain different item
numbers and language.
    Proposed Offering Circular. We propose to retain Model B (which, in
light of the proposed elimination of Model A, will be renamed
``Offering Circular'') as a disclosure option under Part II of Form 1-
A, updated as detailed below in accordance with Title IV of the JOBS
Act and to reflect developments in disclosure requirements for
registered offerings since 1981. Updates to the Offering Circular would
also incorporate the disclosure guidelines in the Securities Act
Industry Guides and guidance on the disclosure requirements applicable
to limited partnerships and limited liability companies.\263\
Additionally, we propose to continue to permit issuers to comply with
Part II of Form 1-A by providing the narrative disclosure required in
Part I of Form S-1.
---------------------------------------------------------------------------

    \263\ See Item 7(c)-(d) to Part II of proposed Form 1-A; see
also SEC Rel. No. 33-6900 (June 17, 1991) [56 FR 28979] (setting
forth the Commission's view on the disclosure requirements for
limited partnerships).
---------------------------------------------------------------------------

    We solicit comment as to whether it would be more appropriate to
eliminate Model B disclosure altogether, and, in its place, to require
issuers to follow the disclosure and form requirements of Part I of
Form S-1, while maintaining Model B-specific disclosures where noted.
As with the proposed updates to Model B, to the extent the Commission
chose to require disclosure that tracks Part I of Form S-1, it would
not increase the disclosure obligations of issuers except where noted
below.
    We are aware that eliminating Model A and updating Model B may
raise concerns about an increase in the disclosure required for a
Regulation A offering. Our proposal would create new requirements for
audited financial statements (consistent with the JOBS Act requirement
of the annual filing of audited financial statements) and for a section
containing management's discussion and analysis (MD&A) of the issuer's
liquidity, capital resources, and results of operations.\264\
Consistent with

the requirements of current Form 1-A, issuers that have not generated
revenue from operations during each of the three fiscal years
immediately before the filing of the offering statement would be
required to describe their plan of operations for the twelve months
following qualification of the offering statement.\265\ Otherwise, it
is not intended to substantially alter current Model B disclosure
requirements.
---------------------------------------------------------------------------

    \264\ While not currently an express disclosure requirement in
Model B, some disclosure requirements similar to MD&A are included
in Form 1-A. Disclosure similar to the MD&A required in registered
offerings would provide potential investors with meaningful
information upon which to make an investment decision. The proposed
MD&A disclosure requirements would provide issuers with
comprehensive guidance as to the specific requirements of such
disclosure. The primary differences between the MD&A we propose to
require in Form 1-A and the MD&A required under Item 303 of
Regulation S-K, 17 CFR 229.303, are discussed below.
    \265\ See Item 6(3)(i) of Model B of Part II of Form 1-A.
---------------------------------------------------------------------------

    As proposed, Offering Circular disclosure in Part II of Form 1-A
would cover:
     Basic information about the issuer and the offering,
including identification of any underwriters and disclosure of any
underwriting discounts and commissions (Item 1: Cover Page of Offering
Circular);
     Material risks in connection with the offering (Item 3:
Summary and Risk Factors);
     Material disparities between the public offering price and
the effective cash costs for shares acquired by insiders during the
past year (Item 4: Dilution);
     Plan of distribution for the offering, including the
disclosure required by Item 7 (Marketing Arrangements) of Part I of
current Form 1-A and disclosure regarding selling securityholders (Item
5: Plan of Distribution and Selling Securityholders);
     Use of proceeds (Item 6: Use of Proceeds to Issuer);
     Business operations of the issuer for the prior three
fiscal years (or, if in existence for less than three years, since
inception) (Item 7: Description of Business);
     Material physical properties (Item 8: Description of
Property);
     Discussion and analysis of the issuer's liquidity and
capital resources and results of operations through the eyes of
management covering the two most recently completed fiscal years; and,
for issuers that have not received revenue from operations during each
of the three fiscal years immediately before the filing of the offering
statement, the plan of operations for the twelve months following
qualification of the offering statement, including a statement about
whether the issuer anticipates that it will be necessary to raise
additional funds within the next six months (Item 9: Management's
Discussion and Analysis of Financial Condition and Results of
Operations);
     Identification of directors, executive officers and
significant employees with a discussion of any family relationships
within that group, business experience during the past five years, and
involvement in certain legal proceedings during the past five years
(Item 10: Directors, Executive Officers and Significant Employees);
     Executive compensation data for the most recent fiscal
year for the three highest paid officers or directors (Item 11:
Compensation of Directors and Officers);
     Beneficial ownership of voting securities by executive
officers, directors, and 10% owners (Item 12: Security Ownership of
Management and Certain Securityholders);
     Transactions with related persons, promoters and certain
control persons (Item 13: Interest of Management and Others in Certain
Transactions);
     The material terms of the securities being offered (Item
14: Securities Being Offered);
     Two years of financial statements, which for Tier 2
offerings would be required to be audited. Tier 1 offerings would be
required to provide audited financial statements to the extent the
issuer had prepared them for other purposes; \266\ and
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    \266\ Financial statement requirements are discussed more fully
in Section II.C.3.b(2). below.
---------------------------------------------------------------------------

     Any events that would have triggered disqualification of
the offering under Rule 262 if the issuer could not rely on the
provisions in proposed Rule 262(b)(1).\267\
---------------------------------------------------------------------------

    \267\ See discussion of disqualification provisions in Section
II.G. below. We propose to require this ``bad actor'' disclosure
even if the issuer elects to follow the Part I of Form S-1
disclosure format.
---------------------------------------------------------------------------

    The proposed content of the Offering Circular would update the
disclosure requirements in some respects to more closely align
Regulation A disclosure with the smaller reporting company disclosure
requirements for registered offerings, while certain scaled elements
exclusive to Model B would be retained.\268\ The changes would result
in more detailed instructions on issuer disclosure in the MD&A section
of the Offering Circular, as well as a description of the issuer's
business for a period of three years (as opposed to current Model B's
five-year requirement), with the added disclosure of any legal
proceedings material to the issuer's business or financial condition.
These changes would make Offering Circular disclosure more akin to what
is required of smaller reporting companies in a prospectus, but more
limited in certain respects. Additionally, as with registered offerings
by smaller reporting companies, issuers would be required to disclose
beneficial ownership of their voting securities, as opposed to record
ownership of voting and non-voting securities. Lastly, as to
transactions with related persons, promoters and certain control
persons, issuers would no longer be required to disclose such
transactions in excess of $50,000 in the prior two years (or similar
transactions currently contemplated), but rather to follow the
requirements for smaller reporting company disclosure of transactions
during the prior two fiscal years that exceed the lesser of $120,000 or
1% of the average total assets at year end for the last two completed
fiscal years.\269\
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    \268\ We are not proposing, however, to include in the Offering
Circular all disclosures required of smaller reporting companies
under Regulation S-K. For example, we do not propose to include in
the Offering Circular disclosure required of certain issuers by the
Dodd-Frank Act regarding conflict minerals, payments made by
resource extraction issuers, see SEC Rel. No. 34-67717 (Aug. 22,
2012) [77 FR 56365], pay ratio, pay for performance, hedging, or
clawbacks. We also do not propose to require Regulation A issuers to
provide disclosure regarding the market price of and dividends on
common equity and related stockholder matters under Item 201 of
Regulation S-K, 17 CFR 229.201, changes in and disagreements with
accountants under Item 304 of Regulation S-K, 17 CFR 229.304,
corporate governance matters under Item 407 of Regulation S-K, 17
CFR 229.407, and the determination of offering price under Item 505
of Regulation S-K, 17 CFR 229.505.
    \269\ See 17 CFR 229.404(d)(1).
---------------------------------------------------------------------------

    With the exception of the requirements for disclosure of beneficial
ownership, material legal proceedings, and related party transactions
for certain issuers,\270\ these proposed updates should not result in
an overall increase in an issuer's disclosure obligations. For example,
as mentioned above, issuers would be required to provide fewer years of
business description and certain issuers would have a higher threshold
for reporting transactions with related persons than current Model
B.\271\ Further, issuers would be permitted to provide more streamlined
disclosure of dilutive transactions with insiders by no longer being
required to present a dilution table based on the net tangible book
value per share of the issuer's securities.\272\ Additionally, while
issuers would be provided with more detailed instructions on MD&A

disclosure, similar disclosure is already called for under current
requirements.\273\ The proposed MD&A disclosure would clarify existing
requirements and save issuers time by providing more express guidance
regarding the type of information and analysis that should be included.
We believe the clearer requirements should also lead to improved MD&A
disclosure, which would provide investors with better visibility into
management's perspective on the issuer's financial condition and
operations. Investors would also receive the benefit of disclosure that
is more consistent across issuers in both registered offerings and
Regulation A offerings.
---------------------------------------------------------------------------

    \270\ As proposed, issuers that have $5 million (or less) in
average total assets at year end for the last two completed fiscal
years would be required to disclose related party transactions at a
lower threshold (i.e., 1% or more) than under the requirements of
current Model B, which requires the disclosure of transactions in
excess of $50,000 in the prior two years.
    \271\ See id.
    \272\ See Item 4 (Dilution) to the Offering Circular in Part II
of Form 1-A.
    \273\ MD&A disclosure is specifically required by Model A. Model
B calls for similar information in Item 6, which requires disclosure
of the characteristics of the issuer's operations or industry that
may have a material impact upon the issuer's future financial
performance. Item 6 also requires disclosure of the issuer's plan of
operations and short-term liquidity if the issuer has not received
revenue from operations during each of the three fiscal years
immediately prior to filing the offering statement.
---------------------------------------------------------------------------

    Issuers providing disclosure in the Offering Circular would retain
most of the scaled disclosure provisions currently found in Model B. We
propose to continue to permit Regulation A issuers to:
     provide simplified executive compensation data for the
three highest paid officers and directors in tabular form for the most
recent fiscal year; \274\
---------------------------------------------------------------------------

    \274\ Cf. Item 402(l)-(r) of Regulation S-K, 17 CFR 229.402(l)-
(r), which requires more extensive disclosure and tabular
information for the two most recent fiscal years.
---------------------------------------------------------------------------

     disclose 10% beneficial owners of voting securities; \275\
and
---------------------------------------------------------------------------

    \275\ Cf. Item 403 of Regulation S-K, 17 CFR 229.403, which
requires disclosure of beneficial owners of more than 5% of voting
securities.
---------------------------------------------------------------------------

     follow fewer specific disclosure requirements for the
description of business section.\276\
---------------------------------------------------------------------------

    \276\ Compare the requirements of Item 6 of Model B, Part II of
Form 1-A with the more prescriptive requirements of Item 11 of Form
S-1 and Item 101 of Regulation S-K, 17 CFR 229.101.
---------------------------------------------------------------------------

    Additionally, the Offering Circular would, in comparison to Model B
of Form 1-A, contain more express MD&A disclosure requirements and
guidance.\277\ These requirements would not, however, be as extensive
as those contained in Item 303 of Regulation S-K.\278\ For example, the
Offering Circular would include detailed guidance and requirements
similar to Item 303 with respect to liquidity, capital resources, and
results of operations, including the most significant trend
information,\279\ but would not require disclosure (in the normal
course) of off-balance sheet arrangements or contractual
obligations.\280\ As with the treatment of smaller reporting companies
under Item 303(d), Regulation A issuers would only be required to
disclose information about the issuer's results of operations for the
two most recently completed fiscal years. Further, consistent with
existing Form 1-A, issuers that have not generated revenue from
operations during each of the three fiscal years immediately before the
filing of the offering statement would have to describe their plan of
operations for the twelve months following qualification of the
offering statement, including a statement about whether, in the
issuer's opinion, it will be necessary to raise additional funds within
the next six months to implement the plan of operations.\281\
---------------------------------------------------------------------------

    \277\ The requirements for financial statements in Part F/S of
Part II of Form 1-A are discussed in Section II.C.3.b(2). below.
    \278\ 17 CFR 229.303 (Management's discussion and analysis of
financial condition and results of operations in the context of
registered offerings).
    \279\ 17 CFR 303(a)(1)-(3). Cf. Form 20-F, at Item 5.
    \280\ During the course of the qualification process, Commission
staff reviewing the offering statement may request the disclosure of
such information, where the disclosure of such information would be
material to an understanding of the issuer's financial condition.
    \281\ See Form 1-A, Model B, at Item 6 (Description of
Business).
---------------------------------------------------------------------------

    Consistent with the treatment of issuers in registered offerings,
we further propose to permit issuers to incorporate by reference into
Part II of the Form 1-A certain items previously submitted or filed on
EDGAR. Incorporation by reference would be limited to documents
publicly submitted or filed under Regulation A, such as Form 1-A and
Form 1-K, and their exhibits. In order to be permitted to incorporate
by reference, issuers would have to be subject to the ongoing reporting
obligations for Tier 2 offerings.\282\ Issuers would be required to
describe the information incorporated by reference, which would be
required to be accompanied by a separate hyperlink to the relevant
document on EDGAR, which need not remain active after the filing of the
related offering statement.
---------------------------------------------------------------------------

    \282\ Issuers following the Offering Circular disclosure model
would be permitted to incorporate by reference Items 2 through 14,
whereas issuers following the narrative disclosure in Part I of Form
S-1 would be permitted to incorporate by reference Items 3 through
11 of Part I of Form S-1. See General Instruction III to proposed
Form 1-A. As with Model B, the item numbers in the Offering Circular
model of proposed Part II of Form 1-A and Part I of Form S-1 do not
align.
---------------------------------------------------------------------------

(2) Financial Statements
    Part F/S of Form 1-A currently requires issuers in Regulation A
offerings to provide the following financial statements prepared in
accordance with U.S. GAAP:
     a balance sheet as of a date within 90 days before filing
the offering statement (or as of an earlier date, not more than six
months before filing, if the Commission approves upon a showing of good
cause) but, for filings made more than 90 days after the end of the
issuer's most recent fiscal year, the balance sheet must be dated as of
the end of the fiscal year;
     statements of income, cash flows, and stockholders' equity
for each of the two fiscal years preceding the date of the most recent
balance sheet, and for any interim period between the end of the most
recent fiscal year and the date of the most recent balance sheet;
     financial statements of significant acquired businesses;
and
     pro forma information relating to significant business
combinations.
    As noted above, the financial statements are not required to be
audited unless the issuer has already obtained an audit of its
financial statements for another purpose. If the issuer has audited
financial statements, the qualifications and reports of the auditor
must meet the requirements of Article 2 of Regulation S-X \283\ and the
audit must be conducted in accordance with U.S. Generally Accepted
Auditing Standards (GAAS) or the standards of the Public Company
Oversight Board (PCAOB), but auditors are not required to be registered
with the PCAOB.\284\
---------------------------------------------------------------------------

    \283\ 17 CFR 210.1 et seq.
    \284\ See Form 1-A, Part F/S.
---------------------------------------------------------------------------

    We have not received extensive comment on the potential financial
statement requirements for issuers under Title IV of the JOBS Act. One
commenter suggested audited financial statements should be required for
all offerings.\285\ Another commenter urged the Commission to prohibit
the use of financial projections unless they are reviewed, and filed
along with the issuance of an unqualified opinion, by a licensed
certified public accountant.\286\ Another commenter suggested--while
discussing offering statements generally--that the Commission should
consider scaling financial statement requirements on the basis of
offering size.\287\
---------------------------------------------------------------------------

    \285\ WR Hambrecht + Co. Letter.
    \286\ NASAA Letter 2.
    \287\ Campbell Letter.
---------------------------------------------------------------------------

    We propose to generally maintain the existing financial statement
requirements of current Part F/S for Tier 1 offerings, while requiring
issuers in Tier 2 offerings to file audited financial

statements in Part F/S.\288\ Specifically, we propose to require all
issuers to file balance sheets as of the two most recently completed
fiscal year ends (or for such shorter time that they have been in
existence), instead of the current requirement to file a balance sheet
as of only the most recently completed fiscal year end. In light of the
requirement in Part F/S for issuers to provide statements of income,
cash flows, and stockholders' equity for each of the two fiscal years
preceding the date of the most recent balance sheet, we believe issuers
would already have the additional balance sheet or be in a position to
easily generate the additional balance sheet at minimal additional
cost, and that comparison between the two balance sheets would provide
valuable additional information. Financial statements for U.S.-
domiciled issuers would be required to be prepared in accordance with
U.S. GAAP, as is currently the case. We propose, however, to permit
Canadian issuers to prepare financial statements in accordance with
either U.S. GAAP or International Financial Reporting Standards (IFRS)
as issued by the International Accounting Standards Board (IASB).\289\
---------------------------------------------------------------------------

    \288\ See paragraph (c) of Part F/S of Form 1-A. An issuer
offering up to $5 million that elects to conduct a Tier 2 offering
would be required, in addition to filing audited financial
statements in the offering statement, to provide ongoing reports to
the Commission on the proposed annual and semiannual basis, with
interim current event updates, see Section II.E.1. below, and only
be permitted to terminate their ongoing reporting obligation by
satisfying the requirements for filing a Form 1-Z described in
Section II.E.4. below.
    \289\ If the financial statements comply with IFRS as issued by
the IASB, such compliance must be unreservedly and explicitly stated
in the notes to the financial statements and the auditor's report
must include an opinion on whether the financial statements comply
with IFRS as issued by the IASB. See General Rule (a)(2) to Part F/S
of proposed Form 1-A. Cf. Item 17(c) of Form 20-F.
---------------------------------------------------------------------------

    In general, issuers conducting Tier 1 offerings must follow the
requirements for the form and content of their financial statements set
out in Part F/S, rather than following the requirements in Regulation
S-X. However, in certain less common circumstances, such as for an
acquired business or subsidiary guarantors, Part F/S directs issuers
conducting Tier 1 offerings to comply with certain portions of
Regulation S-X, which provides guidance on the financial statements
required in such transactions.\290\
---------------------------------------------------------------------------

    \290\ We propose to update the requirements for financial
statements of businesses acquired or to be acquired in Part F/S to
refer to the requirements of Rule 8-04 of Regulation S-X. We also
propose to provide specific references to the relevant provisions of
Regulation S-X regarding the requirements for financial statements
of guarantors and the issuers of guaranteed securities (Rule 3-10 of
Regulation S-X), financial statements of affiliates whose securities
collateralize an issuance of securities (Rule 3-16 of Regulation S-
X), and financial statements provided in connection with oil and gas
producing activities (Rule 4-10 of Regulation S-X). The financial
statements provided in these circumstances would only be required to
be audited to the extent the issuer had already obtained an audit of
its financial statements for other purposes.
---------------------------------------------------------------------------

    For all Tier 2 offerings, however, issuers would be required to
follow the financial statement requirements of Article 8 of Regulation
S-X, as if the issuer conducting a Tier 2 offering were a smaller
reporting company, unless otherwise noted in Part F/S. This requirement
would include any financial information with respect to acquired
businesses required by Rule 8-04 and 8-05 of Regulation S-X.\291\
---------------------------------------------------------------------------

    \291\ Issuers would, however, follow paragraph (a)(3) of Part F/
S of Form 1-A with respect to the age of the financial statements
and the periods to be presented.
---------------------------------------------------------------------------

    As with current Regulation A, financial statements in a Tier 1
offering would not be required to be audited. However, we also propose
to maintain Regulation A's existing requirement that, if an issuer
conducting a Tier 1 offering has already obtained an audit of its
financial statements for other purposes, and that audit was performed
in accordance with U.S. generally accepted auditing standards or the
auditing standards of the PCAOB, and the auditor was independent
pursuant to Rule 2-01 of Regulation S-X, then those audited financial
statements must be filed. The auditor may, but need not be, registered
with the PCAOB.
    Issuers conducting Tier 2 offerings would, by contrast, be required
to have their financial statements audited. As with Tier 1 offerings,
the auditor of financial statements being filed as part of a Tier 2
offering must be independent under Rule 2-01 of Regulation S-X and must
comply with the other requirements of Article 2 of Regulation S-X, but
need not be PCAOB-registered.\292\ Issuers conducting Tier 2 offerings
would, however, be required to provide financial statements that are
audited in accordance with the standards of the PCAOB. In addition to
auditing standards, PCAOB standards include requirements on auditor
ethics, independence and quality control that, in comparison to the
auditing standards of U.S. GAAS, could improve the quality of the audit
and the financial statements provided to investors in potentially
larger Tier 2 offerings.
---------------------------------------------------------------------------

    \292\ See Part F/S of Form 1-A (referencing Article 2 of
Regulation S-X, 17 CFR 210.2-01 et seq.).
---------------------------------------------------------------------------

    Additionally, we propose to update the Form 1-A financial statement
requirements to be consistent with the proposed timetable for ongoing
reporting.\293\ Under Regulation A, as currently in effect, issuers are
required to prepare a balance sheet as of a date not more than 90 days
before filing the offering statement, or not more than six months
before filing if the Commission approves upon a showing of good
cause.\294\ If the financial statements are filed more than 90 days
after the end of the issuer's most recently completed fiscal year, the
financial statements must include that fiscal year.\295\ In practice,
however, Commission staff reviewing Form 1-A filings routinely affords
issuers the six-month accommodation, subject to the requirement that
financial statements must otherwise be dated as of the end of the most
recently completed fiscal year if filed more than 90 days after the end
of such fiscal year.
---------------------------------------------------------------------------

    \293\ Our proposals for ongoing reporting are discussed in
Section II.E. below.
    \294\ See Form 1-A, Part F/S.
    \295\ Id.
---------------------------------------------------------------------------

    We propose to extend the permissible age of financial statements in
Form 1-A to nine months, in order to permit the provision of financial
statements that are updated on a timetable consistent with our proposed
requirement for semiannual interim reporting.\296\ We also propose to
add a new limitation on the age of financial statements at
qualification, under which an offering statement could not be qualified
if the date of the balance sheet included under Part F/S were more than
nine months before the date of qualification.\297\ For filings made
more than three months after the end of the issuer's most recent fiscal
year, the balance sheet would be required to be dated as of the end of
the most recent fiscal year.\298\ For filings made more than nine
months after the end of the issuer's most recent fiscal year, the
balance sheet would be required to be dated no earlier than as of six
months after the end of the most recent fiscal year.\299\ If interim
financial statements are required, they would be required to cover a
period of at least six months.\300\ Requiring issuers to file

interim financial statements no older than nine months and covering a
minimum of six months would have the beneficial effect of eliminating
what could otherwise be a requirement for certain issuers to provide
quarterly interim financial statements during the qualification process
and would be consistent with the timing of our proposed ongoing
reporting requirements.\301\ We propose to generally maintain the
timing requirement of existing Form 1-A concerning the date after which
an issuer must provide financial statements dated as of the most
recently completed fiscal year, but to change the interval from 90
calendar days to three months, which we believe would simplify
compliance.
---------------------------------------------------------------------------

    \296\ This age of financial statements requirement is also
consistent with the treatment of foreign private issuers in the
context of registered offerings. See Division of Corporation
Finance's Financial Reporting Manual, at 6620, available at: http://www.sec.gov/divisions/corpfin/cffinancialreportingmanual.pdf#topic6.
    \297\ Currently, Form 1-A does not expressly limit the age of
financial statements at qualification. In practice, however,
Commission staff requires issuers to update financial statements
before qualification to the extent such financial statements no
longer satisfy Form 1-A's requirements for the age of financial
statements at the time of filing.
    \298\ See paragraph (a)(3)(i) to Part F/S of proposed Form 1-A.
    \299\ Id.
    \300\ See paragraph (a)(3)(iv) to Part F/S of proposed Form 1-A.
    \301\ See discussion in Section II.E.1.b. below (Semiannual
Reports on Form 1-SA).
---------------------------------------------------------------------------

    We solicit comment below on whether issuers conducting Tier 2
offerings should be required to provide their financial statements to
the Commission and on their corporate Web sites in interactive data
format using the eXtensible Business Reporting Language (XBRL).\302\ We
have not received any public comment on this issue to date and do not
propose any such requirement. If the Commission were to adopt any such
requirement, as with registered offerings, the interactive data would
have to be provided as an exhibit to the offering statement filed with
the Commission. On the same basis and subject to the same
qualifications, interactive data would be required for all periodic and
current reporting, as well as for the annual audited financial
statements. Filers would be required to prepare their interactive data
using the list of tags the Commission specifies and submit them with
any supporting files the EDGAR Filer Manual prescribes.\303\
Interactive data would be required for the complete set of their
financial statements, which includes the face financial statements and
all footnotes.\304\ Filers would be required to tag every financial
statement line item and ``detail tag'' the footnotes by tagging each
amount.
---------------------------------------------------------------------------

    \302\ Data becomes interactive when it is labeled or ``tagged''
using a computer markup language such as XBRL that software can
process for analysis. For a discussion of current financial
statement interactive data requirements, see SEC Rel. No. 33-9002
(Jan. 30, 2009) [74 FR 6776]. Financial statements for issuers
seeking to qualify Tier 1 offerings may be treated differently
because audited financial statements may not be required in the
offering statements of such issuers.
    \303\ The EDGAR Filer Manual is available at: http://www.sec.gov/info/edgar/edmanuals.htm.
    \304\ 17 CFR 210.12-01 et seq.
---------------------------------------------------------------------------

c. Part III (Exhibits)
    We have not received any comments about the exhibits that should be
filed with the offering statement.\305\ We propose to continue to
permit issuers to incorporate by reference certain information in
documents filed under Regulation A that is already available on EDGAR,
but, in addition to the requirement to describe the information
incorporated by reference, issuers would be required to include a
hyperlink to such exhibit on EDGAR.\306\ As proposed, such issuers
would also have to be subject to the ongoing reporting obligations for
Tier 2 offerings. To the extent post-qualification amendments to
offering statements must include audited financial statements, the
consent of the certifying accountant to the use of such accountant's
certificate in connection with the amended financial statements must be
included.\307\ Additionally, and consistent with the requirements of
existing Regulation A, any solicitation materials used by the issuer
would have to be included as an exhibit to the offering statement at
the time of non-public submission or filing.
---------------------------------------------------------------------------

    \305\ Part III (Exhibits) of Form 1-A currently requires issuers
to file the following exhibits with the offering statement:
Underwriting agreement; Charter and by-laws; Instrument defining the
rights of securityholders; Subscription agreement; Voting trust
agreement; Material contracts; Material foreign patents; Plan of
acquisition, reorganization, arrangement, liquidation, or
succession; Escrow agreements; Consents; Opinion re legality; Sales
material; ``Test the water'' material; Appointment for agent for
service of process; and any additional exhibits the issuer may wish
to file.
    \306\ See General Instruction III to proposed Form 1-A and
discussion in Section II.C.3.b(1). above regarding incorporation by
reference in Part II of Form 1-A. The hyperlink must be active at
the time of filing, but need not remain active after filing.
    \307\ This is consistent with current practice under Regulation
A, but would be made an express requirement under the proposed
rules. See proposed Rule 252(h)(1)(ii).
---------------------------------------------------------------------------

d. Signature Requirements
    Under current Regulation A, an issuer must file seven copies of the
offering statement with the Commission, at least one of which must be
manually signed.\308\ In light of the proposed electronic filing
requirements for Regulation A offering materials discussed above,\309\
however, issuers would no longer be required to file a manually signed
copy of the Form 1-A with the Commission.\310\ Similar to the
requirement for issuers in the context of registered offerings, issuers
would instead be required to manually sign a copy of the offering
statement before or at the time of filing that would have to be
retained by the issuer for a period of five years.\311\ Issuers would
be required to produce the manually signed copy to the Commission, upon
request.\312\
---------------------------------------------------------------------------

    \308\ See Rule 252(e).
    \309\ See discussion in Section II.C.1. above.
    \310\ This proposed requirement would also apply to any Form 1-A
non-publicly submitted to the Commission.
    \311\ See Instruction 2 to Signatures in Form 1-A; cf. Rule
402(e), 17 CFR 230.402(e).
    \312\ Id.
---------------------------------------------------------------------------

    Additionally, if the issuer filing a Form 1-A under current
Regulation A is a Canadian issuer, its authorized representative in the
United States is required to sign the offering statement.\313\ This
requirement corresponds to a similar requirement under Section 6 of the
Securities Act for filings of registration statements by foreign
issuers.\314\ We propose to eliminate this requirement under Regulation
A. Offerings qualified under Regulation A are not subject to the
liability provisions of Section 11 of the Securities Act, and having a
signatory in the United States does not provide purchasers with
significant additional protections. In addition, we propose to maintain
the requirement that Canadian issuers file a Form F-X \315\ to provide
an express consent to service of process in connection with offerings
qualified under Form 1-A. This treatment is similar to requirements for
Canadian companies making filings under the multijurisdictional
disclosure system.\316\
---------------------------------------------------------------------------

    \313\ See Rule 252(f) and Instruction 1 to Signatures of Form 1-
A.
    \314\ 15 U.S.C. 77f(a).
    \315\ 17 CFR 239.42.
    \316\ See SEC Rel. No. 33-6902 (June 21, 1991) [56 FR 30036]
(adopting the multijurisdictional disclosure system).
---------------------------------------------------------------------------

Request for Comment
    45. Should we continue to require a Part I (Notification) to be
filed as part of the offering statement on Form 1-A? If so, should we
require additional (or less) information in Part I than is currently
required or proposed? If so, provide justifications for such
disclosure.
    46. As proposed, what would be the costs and benefits associated
with requiring an issuer, as part of the electronic filing process, to
enter key information about itself and its securities on a formatted
cover sheet to accompany the EDGAR-formatted text file attachment?
    47. Some market participants have urged us to simplify the
disclosure requirements associated with Regulation A in order to
facilitate more cost-effective capital formation by small
companies.\317\ Most commenters,

however, have not made specific suggestions. Are there particular
disclosure requirements associated with Regulation A that are most in
need of simplification? Are there currently required disclosures that
could be modified? Alternatively, are there any disclosure standards,
not currently required or proposed in Regulation A, that should be
included as disclosure requirements in the new Form 1-A? If so, which
disclosure could be reduced or eliminated, or should be included?
---------------------------------------------------------------------------

    \317\ Alpine Ventures Letter; Campbell Letter; Lacey Letter;
Oggilby Letter.
---------------------------------------------------------------------------

    48. As proposed, should we continue to maintain certain disclosure
requirements in the proposed Offering Circular, while updating others
to be more in line with the disclosure required of smaller reporting
companies? If not, why not? Please provide suggestions as to what
disclosure should be preserved in the Offering Circular or updated to
accord with the smaller reporting company requirements in the context
of registered offerings.
    49. Should we provide for scaled narrative disclosure in Form 1-A
based on the size of the issuer or size of the offering? Why or why
not? If so, on what size-based attributes of an issuer or the offering
should we base any such scaled disclosure requirements and what types
of scaled disclosure would be applicable to each resulting category?
    50. Should we update and provide more specific guidance as to the
MD&A section required to be included in the Offering Circular, as
proposed? Is there any additional guidance we should provide?
    51. As proposed, and consistent with the requirements of smaller
reporting companies under Item 303 of Regulation S-K, should we permit
Regulation A issuers to provide only two years of information about
their results of operations? Why or why not? Are there any other
specific provisions from Item 303 of Regulation S-K that would (or
would not) be appropriate for the types of issuers likely to rely on
Regulation A? If so, please explain why any such provision should (or
should not) apply.
    52. Should we continue to require, as proposed, the disclosure of
an issuer's plan of operations for the twelve months following
qualification of the offering statement? Why or why not? Alternatively,
is this disclosure requirement appropriate for the types of issuers
likely to rely on Regulation A? If not, why not?
    53. Should we consider adding a disclosure requirement in Part II
of Form 1-A that would require issuers to disclose the value of the
issuer prior to the contemplated Regulation A offering (i.e., pre-money
value)? If so, are there any practical limitations on the ability of
issuers with complicated capital structures to provide investors with
an accurate figure or basis for such a calculation? Should we also
consider requiring disclosure of how the price to the public of the
securities being offered was determined?
    54. Would it be an efficiency to issuers if we were to eliminate
the proposed Offering Circular disclosure format, and instead have Form
1-A refer issuers item-by-item to Form S-1 requirements, while
preserving--where noted in Form 1-A itself--Model B-specific scaling?
Alternatively, should we continue to allow issuers to use Part I of
Form S-1 as a separate disclosure option in Part II of Form 1-A? Why or
why not?
    55. Should we make changes to the exhibit requirements of Part III
of Form 1-A in addition to those proposed? For example, should we
change the standard for filing material contracts by specifically
excluding certain types of contracts?
    56. As proposed, should we permit issuers that are current in their
Tier 2 reporting obligations to incorporate by reference certain
information in documents filed under Regulation A into Part II of the
offering statement, while also requiring issuers to include a hyperlink
to such information on EDGAR? Why or why not? If so, should we also
permit successor entities to incorporate by reference to the extent
their predecessors were eligible? Why or why not? If we permit the
incorporation by reference of information already available on EDGAR,
should we exclude shell companies or any other types of entities from
being able to rely on any such accommodation? \318\ Why or why not?
Should issuers be permitted to incorporate by reference to Exchange Act
reports and documents filed in connection with registered offerings?
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    \318\ Shell companies (other than business combination shell
companies) are currently unable to incorporate by reference prior
Exchange Act reports in Form S-1. See General Instruction VII.D. to
Form S-1.
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    57. Should we alter the proposed period of time in which an issuer
must have been current in their ongoing reporting in order to be able
to incorporate by reference certain information into Part II of Form 1-
A that is already available on EDGAR? If so, what period of time should
apply to any requirement that an issuer be current in filing its
ongoing reports?
    58. Instead of the proposed general requirement that issuers must
file audited financial statements for Tier 2 offerings, should the
rules require audited financial statements at a different threshold
(e.g., for all offerings--whether under Tier 1 or Tier 2--in excess of
the $500,000 requirement for audited financial statements set forth
under the Commission's proposed crowdfunding exemption pursuant to
Section 4(a)(6) of the Securities Act, or for all Regulation A
offerings)? Are there other characteristics of an offering, other than
the aggregate offering amount, that should trigger the audited
financial statement requirement, such as public float or asset size of
the issuer? If so, which other characteristics?
    59. For Tier 2 offerings, should the financial statement updating
requirement be changed from the proposed requirements in Part F/S of
Form 1-A that would permit issuers to file financial statements based
on a balance sheet dated within nine months of non-public submission or
filing, but must otherwise be dated as of the end of the most recently
completed fiscal year, if non-publicly submitted or filed three months
after the end of such fiscal year? Or should Part F/S of Form 1-A
require updating for Tier 2 offerings on a schedule similar to what
would be required in a registered offering by a smaller reporting
company? Why or why not?
    60. As proposed, should we require issuers to file balance sheets
for the two most recently completed fiscal years, instead of the
current requirement to file a balance sheet for only the most recently
completed fiscal year? Why or why not?
    61. As proposed, should we permit Canadian issuers to prepare their
financial statements using IFRS as issued by the IASB, rather than U.S.
GAAP? If so, as noted above in Section II.B.1.a., to the extent we
extend issuer eligibility to include foreign private issuers, should we
permit all foreign private issuers to prepare their financial
statements using IFRS as issued by the IASB, rather than U.S. GAAP?
    62. As proposed, in Tier 1 offerings should we only refer to
Regulation S-X when describing the auditor independence and compliance
requirements of Article 2 and the financial statement requirements
relating to guarantors and issuers of guaranteed securities, affiliates
whose securities collateralize an issuance, or issuers engaged in oil
and gas producing activities? Should we clarify the financial statement
requirements in other specific situations? Instead of referring to
Regulation S-X, should we develop new standards appropriate for Tier 1
offerings?
    63. As proposed, should we permit issuers that do not qualify as a
smaller

reporting company to only provide two years of audited financial
statements for Tier 2 offerings? Or should we require such issuers to
file three years of financial statements? Why or why not?
    64. As proposed, should we require that, when audited financial
statements are required to be filed in Part F/S for Tier 2 offerings,
those audits be conducted in accordance with PCAOB standards?
Alternatively, as with existing Regulation A, should we require the
financial statements audit to be performed in accordance with U.S. GAAS
or the PCAOB standards? Should we require auditors to be PCAOB-
registered? Why or why not?
    65. Would there be a cost difference to issuers of requiring audits
in Tier 2 offerings to be conducted in accordance PCAOB standards, as
proposed, compared to U.S. GAAS? Would there be a benefit to investors?
    66. Would there be a cost difference to issuers if, in addition to
requiring auditors to conduct the audits in Tier 2 offerings in
accordance with PCAOB standards, as proposed, we also required auditors
to be PCAOB-registered? Would there be a benefit to investors?
    67. Should we require interactive data tagging of financial
statements included in Regulation A offering statements? If so, should
we require interactive data for all Regulation A offerings, or only
Tier 2 offerings? What effect would the cost of compliance with any
interactive data tagging requirements have on the issuers likely to
rely on Regulation A? If we require interactive data tagging, should we
implement a phase-in period for such tagging and detailed footnote and
schedule tagging?
    68. As noted above in Section II.B.1.b. discussing issuer
eligibility, in order to address concerns regarding the use of
Regulation A by REITs (and on the potential use by BDCs) absent
additional REIT- (or BDC-) specific disclosures, should we require
additional disclosure by REITs (and BDCs, if ultimately permitted to
rely on the exemption)? Why or why not? If so, please make specific
recommendations as to the form and content of any such additional
disclosure.
    69. As proposed, should we continue to permit issuers to
incorporate by reference certain information into Part III (Exhibits)
of the offering statement that was previously filed on EDGAR, while
also requiring issuers to be subject to a Tier 2 reporting obligation?
Or, as with current Regulation A, should we permit issuers to
incorporate by reference in Part III of Form 1-A certain information
irrespective of their obligation to file ongoing reports under Tier 2
of Regulation A? Why or why not?
    70. As proposed, should we require issuers to retain manually
signed copies of the offering statement for a period of five years? Or
should we consider an alternative retention period? Alternatively,
should we eliminate the requirement altogether in favor of alternative
signature methods (e.g., electronic signatures)? Why or why not?
    71. As proposed, should we eliminate the requirement that Form 1-A
be signed by an authorized representative in the United States when the
filer is a Canadian issuer? Should we, as proposed, require Canadian
issuers to file a Form F-X to provide an express consent to service of
process in connection with offerings qualified under Form 1-A? Why or
why not? If so, should Form F-X be required to be filed by Canadian
issuers in connection with other filings under Regulation A, including
proposed new Form 1-K, Form 1-SA, Form 1-U, or Form 1-Z? \319\ Why or
why not?
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    \319\ The proposed rules for ongoing reporting, and related
forms, are discussed in Section II.E.1. below.
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4. Continuous or Delayed Offerings and Offering Circular Supplements
    Rule 251(d)(3) currently allows for continuous or delayed offerings
under Regulation A if permitted by Rule 415.\320\ By reference to the
undertakings of Item 512(a) of Regulation S-K,\321\ Rule 415 does not
necessarily require every change in the information contained in a
prospectus to a registration statement in a continuous offering to be
reflected in a post-effective amendment.\322\ On the other hand,
Regulation A requires every revised or updated offering circular in a
continuous offering to be filed as an amendment to the offering
statement to which it relates and requalified in a process analogous to
the Commission staff review, comment and qualification process for
initial offering statements.\323\ The requalification process can be
costly and time consuming for smaller issuers conducting continuous
offerings of securities pursuant to Regulation A.\324\ As discussed
more fully below, we propose to clarify in the proposed rules for
Regulation A the scope of permissible continuous or delayed offerings
and the related concept of offering circular supplements.
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    \320\ 17 CFR 230.415.
    \321\ 17 CFR 230.415(a)(3).
    \322\ See 17 CFR 229.512(a)(1) (requiring issuers to file a
post-effective amendment for purposes of an update under Section
10(a)(3) of the Securities Act, to reflect any facts or events
arising after effectiveness that, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement, or to include, subject to certain
exceptions, any material information with respect to the plan of
distribution not previously disclosed (or material changes to
information previously disclosed) in the registration statement).
    \323\ See Rule 253(e); Rule 252(h)(1).
    \324\ See Kaplan Voekler Letter 2.
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    Rule 415 attempts to promote efficiency and cost savings in the
securities markets by allowing for the registration of certain
traditional and other shelf offerings.\325\ When Rule 415 was adopted,
the Commission recognized that certain traditional shelf offerings have
been allowed by administrative practice for many years despite the
absence of such a rule.\326\ Since Rule 415 only addresses registered
offerings, however, the precise scope of continuous or delayed
offerings under Regulation A has been unclear. We believe that proposed
Regulation A should continue to allow for certain traditional shelf
offerings to promote flexibility, efficiency, and to reduce unnecessary
offerings costs.\327\ However, we propose to condition the ability to
sell securities in a continuous or delayed offering on being current
with ongoing reporting requirements at the time of sale. We believe
this additional condition will not impose incremental costs on issuers,
which are in any case required to update their offering statement and
to file such ongoing reports, and will insure parity of information in
secondary markets.
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    \325\ See SEC Rel. No. 33-6499 [48 FR 52889] (Nov. 23, 1983)
(noting the efficiency and cost savings issuers experienced during
the eighteen month trial period for a previous temporary version of
the rule).
    \326\ Certain ``traditional shelf offerings'' have been allowed
since at least 1968 by the Commission's guides for the preparation
and filing of registration statements, such as Guide 4, and related
administrative practice. See id.; see also SEC Rel. No. 33-4936 [33
FR 18617] (Dec. 9, 1968) (adopting Guide 4 and other Commission
guides).
    \327\ See SEC Rel. No. 33-6499, at IV.A. (``[T]he procedural
flexibility afforded by the Rule enables a registrant to time its
offering to avail itself of the most advantageous market conditions
. . . registrants are able to obtain lower interest rates on debt
and lower dividend rates on preferred stock, thereby benefiting
their existing shareholders. The flexibility provided by [Rule 415]
also permits variation in the structure and terms of securities on
short notice, enabling registrants to match securities with the
current demands of the marketplace.'').
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    To provide clarity regarding the application of Rule 415 concepts
to Regulation A offerings, we propose to add a provision to Regulation
A similar to Rule 415, but with limitations we believe would be
appropriate in the context of Regulation A. The provision would
establish time limits similar to those in Rule 415 and make conforming
changes as necessary.\328\
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    \328\ Proposed Rule 251(d)(3).

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    The proposed rule would provide for continuous or delayed offerings
for the following types of offerings:
     securities offered or sold by or on behalf of a person
other than the issuer or its subsidiary;
     securities offered and sold pursuant to a dividend or
interest reinvestment plan or an employee benefit plan of the issuer;
     securities issued upon the exercise of outstanding
options, warrants, or rights;
     securities issued upon conversion of other outstanding
securities;
     securities pledged as collateral; or
     securities the offering of which commences within two
calendar days after the qualification date, will be made on a
continuous basis, may continue for a period in excess of 30 days from
the date of initial qualification, and will be offered in an amount
that, at the time the offering statement is qualified, is reasonably
expected to be offered and sold within two years from the initial
qualification date.\329\
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    \329\ Id.
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    The Rule 415 offerings we have not proposed to incorporate into
Regulation A are those that would not have been available under
existing Regulation A, such as those requiring securities to be
registered on Form S-3 or Form F-3 or those conducted by issuers
ineligible to use Regulation A,\330\ as well as certain offerings that
we do not currently believe would be appropriate to include in the
Regulation A framework. For example, transactions typically done on
Form S-4, such as acquisition shelf business combination transactions,
would be excluded under the proposed rules. Further, we propose to
prohibit all ``at the market'' offerings under Regulation A.\331\ While
it is possible that a market in Regulation A securities may develop
that is capable of supporting primary and secondary at the market
offerings, rather than permit such offerings at the outset, we believe
that any Regulation A market that develops on the basis of the proposed
rules should be monitored in the short term to determine whether the
exemption would be an appropriate method for such offerings going
forward. Further, an offering sold at fluctuating market prices may not
be appropriate within the context of an exemption that is contingent
upon not exceeding a maximum offering size. We do, however, seek
comment as to whether the provision should permit primary and/or
secondary offerings conducted in reliance on Regulation A to be sold at
market prices.
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    \330\ Rule 415(a)(1)(xi) discusses investment companies and
BDCs.
    \331\ See proposed Rule 251(d)(3)(ii).
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    Under the proposed rules, changes in the information contained in
the offering statement would no longer necessarily trigger an
obligation to amend.\332\ Offering circulars for continuous Regulation
A offerings would continue to be required to be updated, and the
offering statements to which they relate requalified, annually to
include updated financial statements, and otherwise as necessary to
reflect facts or events arising after qualification which, in the
aggregate, represent a fundamental change in the information set forth
in the offering statement.\333\ In addition to post-qualification
amendments to the offering statement that must be qualified, however,
we also propose to allow issuers to use offering circular supplements
in certain situations.\334\ Further, we propose to permit issuers in
continuous offerings to qualify additional securities in reliance on
Regulation A by a post-qualification amendment.\335\
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    \332\ See proposed Rule 252(h)(1).
    \333\ Proposed Rule 252(h)(2). See also discussion in Section
II.E.1. below.
    \334\ One commenter suggested that such supplements be
permitted. See Kaplan Voekler Letter 2.
    \335\ See note to proposed Rule 253(b).
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    The proposed rules would build on Regulation A to create a regime
similar to what is permissible for registered offerings, and would draw