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Abstract

Title IV of the JOBS Act, which is entitled "Small Company Capital Formation," requires the Securities and Exchange Commission to adopt new rules regarding offerings under Regulation A. The Commission has now adopted its final regulations implementing Title IV and providing a new regulatory regime for exempt offerings under Section 3(b) of the Securities Act of 1933. The new regime is generally referred to as Regulation A+.

Unfortunately, history and empirical data regarding the use of Regulation A and Regulation D strongly suggest that the final Regulation A+ rules are unlikely to provide any material relief for small businesses in their difficult search for efficient sources of external capital. Instead, the exemption provided by Regulation A+ will likely be attractive only to larger businesses that are not currently reporting companies under the Securities Exchange Act of 1934.

To a significant extent, this outcome is the result of an effective campaign mounted by state securities regulators, prosecuted through their trade association, the North American Securities Administrators Association (NASAA), and enabled by the Securities and Exchange Commission (Commission). Once again, NASAA—aided and abetted by the Commission—effectively blocked small businesses from a fair and efficient path to external capital, destroying an important component of the JOBS Act that was specifically designed to facilitate small business capital formation. In the vernacular of the day, small businesses were—again—thrown under the bus.

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