The U.S. Securities and Exchange Commission (SEC) defines Regulation A as “an exemption from registration for public offerings”. It is also referred to as a mini-IPO (initial public offering) because there are fewer disclosure requirements and lower costs.
Under Regulation A, there are two tiers known as Tier 1 and Tier 2, which allow offerings of up to $20 million and $50 million, respectively, in a 12-month period. The two tiers of Regulation A share requirements such as their manner of offering, disclosure requirements, and general solicitation allowances.
These tiers differ in many areas, but the most notable distinction is that Tier 1 requires the sponsor to receive permission from every state in which an investor is located. In most cases, the time and cost of acquiring permission from each state, as required by Tier 1, makes Tier 2 the better choice.
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