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Advantages and Disadvantages of Regulation D Offerings vs. Regulation A+ Offerings

The two primary exemptions that most companies use to sell securities are Regulation D and Regulation A+.  Listed below are the advantages and disadvantages of Regulation D based offerings and Regulation A+ based offerings:

Regulation A+ Offering Program


– Allows sales to accredited and non-accredited investors
– Public solicitation and general advertising allowed
– Tier 2 Offerings (most commonly used) are federally covered securities and not subject to State qualification
– Securities sold are freely trading immediately


– More complex preparation process than a Reg D since the Form 1-A offering circular and offering have to be reviewed and approved by the SEC (usually 3-5 months)
– Basic annual and semi-annual reporting to SEC (can opt out of this requirement if you have less than 300 shareholders).  The reports are fairly simplistic and not the same level of detail as required of a fully reporting company. Our firm will offer services for semi-annual and annual reports.
– Audited financials required – however for start-up or special purpose entities (real estate funds, oil and gas funds, single asset acquisitions, etc.) the only financial statement available and required for audit is the balance sheet.
– Due to the additional time and effort to obtain qualification from the SEC for the offering – the preparation cost for the offering is higher than a Reg D.

Regulation D Offering Program


– 506(c) Program allows public solicitation and general advertising (accredited investors only)
– Streamlined preparation process since the offering is not submitted for SEC approval
– 506 based offerings are federally covered securities and not subject to State qualification or rules
– No audited financials required for 506 based offerings sold only to accredited investors
– No on-going reporting after close of the offering
– Lower costs for preparation as compared to a Reg A+


– Securities sold are not freely trading immediately and are subject to the Rule 144 restrictions
– Limited capability for sales to non-accredited investors and sales to non-accredited investors eliminates the capability to use 506(c) and generally solicit the public for investors
– Audited financials required if selling to non-accredited under a 506(b)

We will have many clients opting to mitigate the preparation time disadvantage of Regulation A+ but starting an offering using 506(c) and transitioning into a Reg A+ once the Reg A+ is qualified.  This allows the benefit of starting fund raising activities within 4-6 weeks from onset of offering preparation and still deriving the benefits of a Reg A+ several months later as the Reg A+ is ultimately qualified and approved.

Questions about Reg A+ or our Regulation D services?  Please call us at (303) 984-4883 for more information.

Author: admin

Friday January 31, 2020

Category: Capital Formation and Regulation D

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