What is Regulation A?
Regulation A — sometimes called "Reg A+" after it was significantly expanded by the Jumpstart Our Business Startups (JOBS) Act of 2012 — is an exemption from the full registration requirements of the Securities Act of 1933. In plain English, it lets a private company sell securities to the general public (including ordinary retail investors) without going through a traditional initial public offering (IPO) and without registering with the SEC in the full, formal way a publicly traded company does.
The exemption is codified at 17 CFR 230.251 through 230.263 and is sometimes referred to as a "mini-IPO" because it results in securities that can be freely transferred and, in many cases, traded on secondary markets. That's a meaningful distinction from other private-offering exemptions like Regulation D, where the resulting securities are typically "restricted" and subject to holding periods.
Regulation A became far more useful to both issuers and retail investors after the JOBS Act. Prior to 2015, Regulation A capped fundraising at just $5 million in a 12-month period, which made the regulatory cost of preparing a Reg A offering disproportionate to what a company could actually raise. The post-JOBS Act update raised the ceiling to $50 million, and a 2020 amendment raised it further to $75 million for Tier 2 offerings, making Regulation A a meaningful tool for growth-stage private companies.
Primary source: SEC — Regulation A; 17 CFR 230.251–230.263.
Tier 1 vs Tier 2
Regulation A has two distinct tiers. Choosing between them is one of the most consequential decisions an issuer makes when structuring a Reg A offering, and understanding the difference is essential for investors evaluating these deals.
Tier 1
Tier 1 permits issuers to raise up to $20 million in a 12-month period. It has lighter federal disclosure requirements than Tier 2 — for example, no mandatory audited financial statements and no periodic federal reporting after the offering — but issuers must comply with state-level "Blue Sky" securities laws in every state where the securities are offered or sold. Because each state has its own review process and filing fees, a multi-state Tier 1 offering can be administratively complex and expensive.
In practice, Tier 1 is most commonly used by smaller, regional issuers — companies raising money from investors in a single state or a small number of states — where the Blue Sky burden is manageable.
Tier 2
Tier 2 permits issuers to raise up to $75 million in a 12-month period and, critically, preempts state Blue Sky review for the offering (states can still impose notice filings and fees but cannot substantively review the deal). In exchange for that preemption, Tier 2 issuers must provide audited financial statements, file annual reports (Form 1-K), semiannual reports (Form 1-SA), and current-event reports (Form 1-U), and comply with ongoing disclosure obligations that resemble — though are lighter than — those of a fully public company.
Tier 2 also imposes an investment cap on non-accredited investors: in most cases, no more than 10% of the greater of the investor's annual income or net worth in any 12-month period. (Accredited investors have no cap.) This cap is designed to limit retail investors' exposure to any single illiquid investment.
Which tier is more common?
Tier 2 is by a wide margin the more commonly used path today. The higher raise limit, the Blue Sky preemption, and the ability to market nationally make it more economical for most issuers, despite the higher disclosure burden. Tier 1 remains relevant for smaller, geographically concentrated raises or for issuers who specifically want to avoid audited financials.
Sources: SEC — Regulation A; 17 CFR 230.251; SEC Final Rule Release No. 33-10884 (Nov. 2, 2020) raising Tier 2 cap to $75M.
Who can invest in a Regulation A offering
Unlike Regulation D Rule 506(c) offerings — which are limited to accredited investors — Regulation A is open to the general public. Anyone of legal age can participate, subject to any investment caps the offering or regulations impose.
Under Tier 2, non-accredited investors are generally limited to investing no more than 10% of the greater of annual income or net worth per offering per 12-month period (excluding the value of a primary residence). Accredited investors — defined roughly as individuals with $1M+ net worth excluding a primary residence, or $200K+ annual income ($300K joint) — have no cap. Tier 1 does not impose a federal investment cap on non-accredited investors, though state-level Blue Sky laws may impose their own.
These caps are self-certified in most cases — meaning issuers typically rely on investor representations rather than conducting third-party verification. Regulation D 506(c), by contrast, requires affirmative verification of accredited status, which is a meaningful operational difference.
Source: 17 CFR 230.251(d)(2)(i)(C); SEC guidance on investor participation in Reg A offerings.
Reporting and disclosure requirements
Every Regulation A offering begins with the filing of a Form 1-A offering statement with the SEC. The Form 1-A is the Reg A equivalent of an S-1 registration statement used in traditional IPOs. It must include an offering circular that describes the company's business, management, financial condition, use of proceeds, risk factors, and the terms of the securities being offered. The SEC reviews the Form 1-A and must "qualify" it before the offering can begin — this is the Reg A analogue of the SEC "declaring a registration statement effective" for a traditional IPO.
Tier 1 issuers face no ongoing federal reporting obligation after the offering closes, though they must file a final report (Form 1-Z) with the SEC upon termination. Tier 2 issuers have continuing reporting obligations that include:
- Form 1-K — annual report, including audited financial statements (due 120 days after fiscal year end)
- Form 1-SA — semiannual report (due 90 days after the first six months of the fiscal year)
- Form 1-U — current event report, similar to an 8-K, filed on the occurrence of specified material events
These ongoing obligations matter for investors: they ensure you can monitor a Tier 2 investment over time, review how the business is performing, and — critically — verify that management is complying with its disclosure obligations. An issuer that fails to make required filings creates a compliance risk and can lose the ability to continue offering securities under Regulation A.
Source: SEC — Forms list; 17 CFR 230.257.
Blue Sky preemption and why it matters
"Blue Sky laws" are state-level securities laws that require securities offered in a given state to be registered with or qualified by that state's securities regulator. The name comes from a turn-of-the-20th-century effort to stop speculators from selling investors the "blue sky above."
One of the most consequential features of Regulation A Tier 2 is that it preempts state Blue Sky registration and qualification. States can still require notice filings and charge fees, but they cannot substantively review or block a Tier 2 offering. This is a huge operational advantage: under Tier 1, an issuer offering securities in, say, 30 states may need to prepare 30 different state filings, pay 30 different fees, and respond to 30 different sets of reviewer comments before being able to sell.
Tier 1 does not benefit from this preemption, which is the single most important reason Tier 2 has become the dominant Reg A path despite its heavier federal disclosure burden. For a multi-state offering, the elimination of Blue Sky review typically outweighs the cost of audited financials.
Source: Section 18(b)(4)(D)(ii) of the Securities Act (covered security definition); 17 CFR 230.256.
The Regulation A qualification process
A typical Reg A offering follows a multi-step sequence, from initial preparation through qualification and sale:
- Engage counsel and advisors. Because Reg A involves substantive SEC review and ongoing disclosure, most issuers work with securities counsel and — for Tier 2 — a PCAOB-registered auditor.
- Prepare Form 1-A. This offering statement includes the offering circular, financial statements, and exhibits. It's the central document reviewed by the SEC and relied upon by investors.
- File Form 1-A with the SEC. Filing can be public or, initially, confidential (for first-time issuers). The SEC then reviews and typically issues comment letters.
- "Test the waters." Under Reg A, issuers may solicit indications of interest from prospective investors before qualification — this is a distinctive feature of the exemption and helps issuers gauge demand before incurring full costs.
- Qualification. Once the SEC is satisfied that disclosures are adequate, it "qualifies" the offering. The issuer can now sell securities.
- Ongoing compliance. Tier 2 issuers begin filing annual, semiannual, and event reports. Tier 1 issuers file a final Form 1-Z upon termination.
The qualification process typically takes anywhere from a few months to a year or more, depending on the complexity of the offering and the SEC's review workload. The process is meaningfully faster and cheaper than a traditional IPO, but it is not instantaneous.
Secondary trading of Regulation A securities
A key feature that distinguishes Reg A securities from those issued under Reg D is that Reg A securities are generally freely transferable from the moment of issuance — they are not "restricted securities" subject to Rule 144 holding periods. This creates the legal foundation for secondary trading.
That said, the practical availability of secondary liquidity depends on whether a venue exists to match buyers and sellers. Reg A securities can trade:
- On a national securities exchange (NYSE, Nasdaq, etc.) if the issuer lists
- On the OTC markets
- On a registered Alternative Trading System (ATS), which is a SEC-regulated venue for matching buyers and sellers of securities outside the exchanges
Listing on a national exchange typically requires the issuer to separately register under the Exchange Act and meet listing standards, which is a significant additional step beyond Reg A qualification. For most Reg A issuers, the realistic liquidity path is OTC trading or an ATS. Trading volume and price discovery depend on the breadth of the investor base and the willingness of market makers or matching venues to support the security.
Read more about Alternative Trading Systems
Source: 17 CFR 240.3a1-1; SEC — Regulation ATS.
Frequently asked questions
Regulation A is an SEC exemption from the full registration requirements of the Securities Act of 1933. It allows private companies to sell securities to the general public — including non-accredited retail investors — in offerings of up to $75 million per 12-month period (Tier 2) or $20 million (Tier 1), subject to SEC-reviewed disclosure and periodic reporting requirements that are lighter than a full IPO.
Yes. Regulation A is one of the primary SEC exemptions that opens private market investing to non-accredited retail investors. Under Tier 2, non-accredited investors are generally limited to no more than 10% of the greater of their annual income or net worth per offering per 12-month period.
Tier 2 issuers must file audited financial statements, annual reports on Form 1-K, semiannual reports on Form 1-SA, and current-event reports on Form 1-U. Tier 1 issuers have lighter federal reporting (no ongoing reports after the offering closes) but must comply with state-level Blue Sky laws.
Reg A securities are generally freely transferable — they are not restricted securities. But whether they actually trade in volume depends on whether a venue (national exchange, OTC market, or SEC-registered ATS) exists to match buyers and sellers, and on the depth of investor interest in that specific security.