REGULATION A+ AS A POTENTIAL SOLUTION TO THE FUNDING CRISIS

Regulation A+ was enacted as part of the JOBS Act, in order to attract more capital to the public market. The majority of successful Regulation A+ companies have been in the real estate industry, primarily REITs. Regulation A+ does solve the principal problem with the IPO process encountered with utilizing a Form S-1 – state securities laws. Unlike a registration statement on Form S-1, a Regulation A+ offering is automatically  exempt from state law requirements. These requirements, in some cases, arm much more burdensome than the federal requirements and indeed, in most cases involving a startup company, preclude them from using Form S-1 in order to raise money. It is obvious that the SEC hopes that the availability of Regulation A+ will eliminate many of the perceived abuses of the reverse merger process. However, this is an issue which will be clarified only with time.