Jul 20, 2023

Challenges in Terminating Post-Qualification Amendments: Navigating Ongoing Disclosure Requirements for Reg A and Reg CF Offerings

Securities Attorneys (Exchange Act) By Patrick Costello
man and woman looking at documents

As the owner of a company conducting offerings of the same securities under Tier 2 of Regulation A (“Reg A”) and Regulation Crowdfunding (“Reg CF”), you encounter the complex task of fulfilling ongoing reporting obligations. To comply with the regulations, your company must file various periodic and current reports, including annual reports on Form C-AR and Form 1-K under Reg CF and Reg A, respectively. When preparing these annual reports, you are required to file amendments that update your offering statement on Form C and offering circular on Form 1-A under Reg CF and Reg A, respectively, with the information from your annual reports. To reduce legal and regulatory costs, you may explore the possibility of terminating the requirement to file post-qualification amendments (“PQA”) of your Form 1-A. However, you will soon discover that achieving this goal is currently impossible.

The duty to file periodic and current reports and the necessary post-qualification amendments to an offering circular on Form 1-A form a vital part of the ongoing disclosure requirements for businesses conducting a Reg A offering. These reporting obligations play a crucial role in providing investors with information about an issuer’s financial status and operational performance. Presently, there are two avenues available for terminating the continuing disclosure requirements for Tier 2 Reg A issuers: Rule 257(b)(6) and Rule 257(d) (7 CFR § 230.257(b)(6), (d)).

Under Rule 257(b)(6), an issuer may cease its ongoing reporting requirements under Reg A if it becomes a reporting company under Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and has filed all necessary reports as required by those sections. However, transitioning from Reg A to Exchange Act reporting obligations should not be taken lightly, as the reporting requirements under the Exchange Act are more rigorous and time-consuming.

Under Rule 257(d), an issuer can terminate their continuing reporting requirements if there are fewer than 300 holders of record as of the date on which the issuer files an exit report on Form 1-Z, and if the issuer has made all the required filings under Reg A in the 12 months preceding the date of the exit report. Compliance with Rule 257(d) hinges on whether a company has an up-to-date and accurate record of its stockholders or a transfer agent. Even if a company knows the number of holders of the securities sold via Reg A, repurchasing those shares can be a costly and burdensome process. It’s important to note that complying with Rule 257(d) terminates all Reg A reporting requirements, not solely the duty to file PQAs under certain circumstances.

Interestingly, unlike the duty to update public offerings on Form S-1, the inability to terminate the duty to file PQAs poses a unique challenge. To end the obligation to update a registration statement on Form S-1, an issuer only needs to file an amendment stating that it is terminating or has completed its public offering. Surprisingly, neither Congress nor the Securities and Exchange Commission has codified a method for terminating the duty to update a Form 1-A. The absence of such codification raises the question of whether an issuer can terminate the responsibility to update an offering circular on Form 1-A by filing a PQA or Form 1-Z.

Nevertheless, understanding all potential risks associated with accessing the U.S. capital markets through an exempt offering is crucial. If you want to learn more about Regulation Crowdfunding, Regulation A, or other capital funding methods, please reach out to Patrick G. Costello at or (202) 869-0888 (ext. 130). You can also contact us through our general information email at