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. The time and cost of acquiring permission from each state makes Tier 2 the better choice.
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