What is the SEC Regulation A exemption?
Asked by: Maudie Kovacek PhD | Last update: July 19, 2026Score: 5/5 (10 votes)
SEC Regulation A (often called "Reg A+") is a Securities Act exemption that allows companies to raise capital from the public without a full IPO registration. Considered a "mini-IPO," it permits firms to raise up to $75 million annually, offering a more cost-effective, albeit still regulated, path to capital.
What's the difference between reg A and reg A+?
Technically, Regulation A is the correct term, as there is no “Regulation A+” in the Federal Register. The term Regulation A+ came into use after the SEC amended Regulation A under the JOBS Act to expand the availability of its registration exemption.
What is an SEC exemption?
An exempt offering is a securities offering in which the issuer is not required to register the securities with the Securities and Exchange Commission (SEC) under the Securities Act of 1933.
What is Regulation A in securities?
Regulation A (often called "Reg A+" or "Regulation A+") is an SEC-regulated exemption that allows private companies to raise up to $75 million in a 12-month period from both accredited and non-accredited investors without undergoing a full IPO. It acts as a "mini-IPO" offering, often used for crowdfunding, real estate, or early-stage funding.
Who uses Regulation A?
Regulation A (often referred to as Reg A+) is used by U.S. and Canadian small-to-mid-sized companies, particularly in real estate, technology, and consumer-facing sectors, to raise capital from both accredited and retail investors without a full SEC registration. It offers a cost-effective "mini-IPO" route for companies to raise up to $75 million (Tier 2) or $20 million (Tier 1) annually, often leveraging community interest for funding.
What’s the Significance of Filing Form D with the SEC (or not)?
Should I invest in class A or C?
Whether to invest in Class A or Class C shares depends entirely on your time horizon. Choose Class A for long-term investments (5+ years) to benefit from lower annual fees, and choose Class C for short-term investments (under 3–5 years) to avoid up-front sales charges. Class A has a front-end load, while Class C has higher expense ratios.
What is the maximum amount for Reg A?
Updated in the 2015 JOBS Act, Regulation A has two tiers that allow firms to raise $20 million or $75 million, respectively. Tier 1 allows for offerings up to $20 million with minimal reporting requirements, but state qualification is needed.
What is Series A vs B vs C funding?
Series A, B, and C funding are sequential stages in a startup's growth, where Series A focuses on optimizing the product-market fit ($2M–$15M), Series B focuses on scaling operations and growing the team, and Series C focuses on rapid expansion, acquisitions, or preparing for an exit/IPO.
What is better, Series A or series B?
Neither is inherently "better"—they simply represent different stages in a company's life cycle. Series A is for establishing a foundation and finding product-market fit, while Series B is for scaling operations and expanding market reach.
What is Tier 1 of Regulation A?
Regulation A Tier 1 is a SEC exemption allowing companies to raise up to $20 million in a 12-month period from the public without a full IPO. It requires SEC qualification and state-level "Blue Sky" review. Unlike Tier 2, Tier 1 does not mandate audited financials or ongoing annual reporting, requiring only a final exit report.
What is an example of an exempt security?
Exempt securities are financial instruments not required to register with the SEC or comply with standard registration requirements due to their nature, often backed by governments or highly regulated entities. Common examples include U.S. Treasury bonds, municipal bonds, bank securities, non-profit issues, and short-term commercial paper.
What are the 4 types of securities?
The four main types of financial securities are equity, debt, derivatives, and hybrid securities. These instruments represent either ownership, debt, or a contract based on an underlying asset, designed for trading in financial markets to offer income, capital appreciation, or risk management.
What is the difference between exempt and non exempt securities?
Exempt securities are financial instruments exempted from SEC registration requirements due to their nature (e.g., government bonds, commercial paper), while non-exempt securities require full registration. Exempt securities are inherently exempt, while non-exempt securities must register unless sold through a specific exempt transaction (e.g., private placement).
What securities are sold under the provisions of Regulation A+?
The securities that may be offered under Regulation A+ are limited to equity securities, including warrants, debt securities and debt securities that are convertible into or exchangeable into equity interests, including guarantees of such securities.
How risky is Series A?
Series A funding is inherently high risk. Startups at this stage have moved past the initial idea phase but are still attempting to prove their business model and achieve product-market fit. While investors accept this high risk for the potential of massive scale, employees and investors alike face significant chances of financial loss.
Should I buy Class A shares?
Traditionally, Class A shares issued by a company will give shareholders more rights than other classes of shares issued. However, you should note that it is not a requirement that companies give Class A shareholders the most rights and benefits over other shareholders, but this is usually the case.
How much revenue for Series A?
Series A startups typically require $1 million to $5 million+ in Annual Recurring Revenue (ARR), with $2M–$3M being a common benchmark for SaaS companies. Beyond raw revenue, investors expect to see strong product-market fit, with a 25%+ month-over-month growth rate and a clear path to profitability or a repeatable growth strategy.
What are the risks of Series A funding?
In the U.S. startup ecosystem, raising a Series A round is the critical leap toward the next phase of growth. However, this process is full of potential legal risks. A single misstep can trigger future equity disputes, force founder exits, or compromise company control.
What is the 70 30 rule Warren Buffett?
The 70/30 rule is a historical allocation strategy outlined by Warren Buffett in his 1957 letter to his limited partners. It recommended placing 70% of capital into undervalued stocks (general issues) and 30% into corporate work-outs, which are special event-driven situations like mergers, liquidations, or tender offers.
Can you skip seed and go to Series A?
Yes, it is possible to skip a seed round and go directly to a Series A, though it is rare and typically requires exceptional metrics, such as significant revenue (e.g., $500K+ ARR), strong product-market fit, or experienced founders with previous successes. Skipping the seed stage allows companies to secure larger capital early and avoid dilution from multiple early rounds, often seen in high-growth sectors like AI.
How much equity do you give up in Series A?
Series A Round (20–25% Dilution): Series A is where startups begin scaling operations: hiring teams, marketing, expanding product lines. Venture capitalists now invest significant sums for strategic guidance, often taking 20–25% equity.
What not to tell investors?
Avoid telling investors you have no competition, that you need their money to survive (desperation), or that you only need 1% of the market. Never claim your projections are "conservative" or that your product will definitely go viral. Focus on growth, traction, and a clear exit strategy rather than bragging about a high valuation or demanding quick returns.
How much money do I need to invest to make $3,000 a month?
To make $3,000 a month (or $36,000 per year), you will need to invest between $𝟒𝟓𝟎,𝟎𝟎𝟎 and $𝟏.𝟐 million, depending on your chosen investment strategy and risk tolerance.
Is $2 million in assets considered wealthy?
Yes, $2 million in assets (net worth) is considered wealthy by many Americans and fits the definition of a High-Net-Worth Individual (HNWI). According to Charles Schwab's 2025/2026 data, Americans believe an average net worth of around $2.3 million is needed to be considered wealthy, making $2 million very close to this benchmark.
What is the 5% materiality rule?
The 5% materiality rule is a common accounting "rule of thumb" stating that financial misstatements or omissions are considered material—and thus must be disclosed—if they exceed 5% of a company's pre-tax income or net income. It is used as a preliminary guideline, not a legally binding standard, and can be overridden by qualitative factors.