Quick Answer
An issuer files Regulation A's offering statement on Form 1-A, and the Securities and Exchange Commission (SEC) must qualify it before any sale occurs. Not every issuer is eligible to use Regulation A, and once qualified, a Tier 2 issuer owes four kinds of ongoing report while a Tier 1 issuer files only a single exit report.
Qualification is the gate every Regulation A offering has to pass through, and eligibility is the gate an issuer has to pass through before that.
What Happens Between Filing and Qualification?
- Offering statement: the Regulation A filing, made on Form 1-A, that the Securities and Exchange Commission (SEC) must qualify before any sale of securities can occur
- After the offering statement is filed but before it is qualified, the issuer may use three channels, but may not sell: oral offers, written offers made with a preliminary offering circular, and solicitations of interest, which is the testing-the-waters communication Regulation A allows
- Once qualified, any written offer must be accompanied or preceded by the most recent offering circular filed for that offering
Exam Tip: Gotchas
- Filing is not the same as qualifying. No sale may occur until the SEC qualifies the offering statement, even though oral offers are allowed in the filed-but-not-yet-qualified window.
Who Is Eligible to Use Regulation A?
An issuer must meet a residency test and clear a list of disqualifying conditions.
- The issuer must be organized under the laws of the United States or Canada, with its principal place of business in one of the two
- The issuer must NOT be:
- A development-stage company with no specific business plan, or one planning to merge with or acquire an unidentified company or companies
- A registered investment company or a business development company
- An issuer of fractional interests in oil, gas, or other mineral rights
- Under an SEC order revoking or suspending registration of a class of its securities, entered within the past five years
- Behind on its Regulation A or Exchange Act reports for the two years before it files the offering statement, or for the shorter period it was actually required to file them
- Disqualified under Regulation A's own bad-actor rule
Think of it this way: this list exists to keep Regulation A pointed at operating businesses raising real capital, not at blank-check shells or issuers already in regulatory trouble.
Exam Tip: Gotchas
- Regulation A has its own bad-actor disqualification test, separate from the one that applies to Regulation D private placements. The two cover similar ground but are not the same provision; match the disqualification test to the exemption the question names.
What Does a Tier 2 Issuer File After Qualification?
| Report | Form | Frequency |
|---|---|---|
| Annual report | Form 1-K | Once per fiscal year |
| Special financial report | Form 1-K or Form 1-SA | Only if the offering statement's financial statements were not current at qualification |
| Semiannual report | Form 1-SA | Once per fiscal year, covering the first six months of it |
| Current report | Form 1-U | On specified triggering events |
A Tier 1 issuer files none of these. It files a single exit report on Form 1-Z not later than 30 calendar days after the offering ends or is completed. Separately, an issuer with an ongoing offering must file a post-qualification amendment to its offering statement at least every 12 months to bring the financial statements current, or sooner if a fundamental change occurs.
Exam Tip: Gotchas
- Tier 1 has no ongoing periodic reports at all. Its only after-the-fact filing is the single exit report. A long-running continuous or delayed Tier 2 offering can keep selling securities only if the issuer stays current on its annual and semiannual filings. The rule names those two only; the special financial report and the current report are not part of that condition.
What Should You Check on Exam Day?
- Confirm no sale can happen before qualification, even though oral offers are allowed once the offering statement is filed.
- Match each Tier 2 report to its form: annual to Form 1-K, semiannual to Form 1-SA, current events to Form 1-U.
- Remember Tier 1 issuers file zero ongoing reports and only a single exit report on Form 1-Z.
- Keep Regulation A's bad-actor test separate from the one that applies to Regulation D offerings.