a businessman and a government official shake hands over a document labeled "regulation a investment agreement."
By Davy Karkason
Founding Attorney

Securities Exemption Under Regulation A: Navigating Investment Opportunities

Regulation A offers a gateway for issuers to raise capital without the full burden of traditional securities registration. This exemption allows companies to offer and sell securities to the public, providing investors with unique opportunities to diversify their assets. Understanding Regulation A is crucial for both issuers and investors, as it impacts financial statement requirements and investment limits. Keep reading to explore the intricacies of Regulation A and its potential benefits for your financial strategy.

Key Takeaways

  • Regulation a Allows Smaller Companies to Raise Capital From Both Accredited and Non-Accredited Investors
  • Two Tiers of Regulation a Offer Different Capital Raising Limits and Compliance Requirements
  • Tier 1 Allows Up to $20 Million Raised in 12 Months With State-Level Registration
  • Tier 2 Permits Up to $75 Million Raised With Stricter Compliance and Reporting Obligations
  • Investors Should Consult Financial Professionals to Assess Risks and Align With Investment Goals

What Is Regulation A?

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Regulation A, a provision under the Securities Act of 1933, offers an exemption from registration requirements for smaller public offerings of securities. This alternative to traditional initial public offerings (IPOs) and Regulation D private placements allows companies to raise capital from both accredited and non-accredited investors. Regulation A provides a more streamlined approach for businesses seeking to issue stock or other securities, potentially opening up new investment opportunities for a broader range of individuals.

Key Takeaways

You should understand that Regulation A offers a simplified path for smaller companies to raise capital from a wider pool of investors, including non-accredited individuals. This provision, enhanced by the Jumpstart Our Business Startups Act, allows businesses to issue securities without the full rigors of traditional IPO registration, potentially reducing the need for extensive debt financing.

You must recognize that while Regulation A presents opportunities beyond a typical savings account, it also carries inherent risks for investors. Consulting with an accountant or financial advisor can help you assess the potential benefits and drawbacks of participating in these offerings, ensuring you make informed investment decisions aligned with your financial goals and risk tolerance.

Understanding Regulation A

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Regulation A provides a unique avenue for smaller companies to raise capital without the full burden of traditional IPO requirements. This exemption allows businesses to offer securities to both accredited and non-accredited investors, potentially broadening their funding sources beyond conventional options like mutual funds or bonds.

You’ll find that Regulation A offerings can present interesting opportunities for diversifying your investment portfolio, particularly if you’re exploring alternatives to traditional wealth management strategies. However, you must carefully assess the risks associated with these investments, as they may not offer the same level of protection as more established financial products like insurance policies.

You need to recognize that Regulation A plays a role in stimulating economic growth by enabling smaller businesses to access public markets more easily. This can lead to job creation and innovation, potentially contributing to a more dynamic economy.

Consult with financial professionals before participating in Regulation A offerings to ensure they align with your investment goals and risk tolerance. While these investments can offer potential rewards, they may not provide the same level of liquidity or stability as more traditional securities like established mutual funds or government bonds.

Regulation A: Tier 1 vs. Tier 2

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You’ll find that Regulation A offers two distinct tiers for companies seeking to raise capital, each with its own set of requirements and benefits. Understanding the differences between Tier 1 and Tier 2 is crucial for both issuers and potential investors navigating these alternative asset classes. As you explore these options, consider how they might fit into your broader asset management strategy, especially in light of inflation concerns. The specific rules for each tier are outlined in the Code of Federal Regulations, and staying informed through issuer mailing lists can provide valuable updates on offerings and regulatory changes.

Tier 1

Tier 1 of Regulation A allows companies to raise up to $20 million in a 12-month period. This option provides a more accessible alternative to a traditional initial public offering, potentially attracting interest from investors seeking opportunities beyond conventional money markets.

You should note that Tier 1 offerings require registration in states where securities are sold, which may impact real estate investments and other sector-specific ventures. While this tier doesn’t mandate ongoing reporting, you must consider how interest rates and market conditions might affect the value and liquidity of these investments:

  • Lower capital raising limit compared to Tier 2
  • State-level registration requirements
  • No mandatory ongoing reporting
  • Potential for both accredited and non-accredited investors

Tier 2

Tier 2 of Regulation A allows companies to raise up to $75 million in a 12-month period, offering greater potential for portfolio diversification. This tier requires more stringent regulatory compliance, including audited financial statements and ongoing reporting, which can provide you with additional transparency as you evaluate potential income streams from these investments.

You should consider how Tier 2 offerings might impact your overall market exposure, as they often attract more institutional investors and can be listed on national exchanges. While this may increase liquidity, you must weigh the potential for dividend payments against the higher costs associated with maintaining compliance, which could affect the issuer’s profitability and your potential returns.


Regulation A provides a vital pathway for smaller companies to access capital markets, offering investors unique opportunities beyond traditional securities. This exemption enables businesses to raise funds from both accredited and non-accredited investors, potentially fostering economic growth and innovation. The two-tiered system under Regulation A allows for flexibility in capital raising, with Tier 2 offering higher limits and increased reporting requirements. Investors must carefully evaluate these offerings, considering their risk tolerance and consulting financial professionals to make informed decisions that align with their investment goals.

About the Author
As a lawyer and the founder of Transnational Matters, Davy Aaron Karkason represents numerous international companies and a wide variety of industries in Florida, the U.S., and abroad. He is dedicated to fighting against unjust expropriation and unfair treatment of any individual or entity involved in an international matter. Mr. Karason received his B.A. in Political Science & International Relations with a Minor in Criminal Justice from Nova Southeastern University. If you have any questions about this article you can contact Davy Karkason through our contact page.