The 2012 “Jump-start Our Business Startups” (JOBS) Act is a U.S. law that is meant to make it easier for small businesses in the U.S. to get funding by making fewer rules about securities. Under the Securities Act of 1933, if you want to sell securities to the public, you must either register with the Securities and Exchange Commission (SEC) or meet certain requirements to avoid having to register.
Regulation A of the JOBS Act has rules that let some companies raise money through crowdfunding without having to go through the registration process. In 2015, the SEC made changes to Regulation A exemptions under Title IV of the JOBS Act. These changes are known as “Regulation A+.” Before selling securities to the public, issuers must get approval from the SEC and give out an offering circular (a scaled down version of a prospectus).
The rule sets up two levels of services. Tier 1 includes securities sales that bring in up to $20 million in a year. Tier 1 must register or qualify their offering in every state where they want to offer or sell securities. Tier 2 is made up of securities offerings that raise up to $50 million in a year and do not have to be registered or approved by state securities regulators.
This makes it so that state “blue sky” securities rules don’t apply to all tier 2 offerings (but in most cases a notification process is still required). Tier 2 issuers must also provide audited financial statements, file annual, semiannual, and current event reports, and limit the amount of securities offered to non-accredited investors to no more than 10 percent of the investor’s annual income or net worth.