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CALIFORNIA CORPORATE & SECURITIES LAW

California’s Regulation A Notice Filing Requirement

Two years ago, I posed the question: Will California Require Notice Filings For Regulation A Offerings?   Corporations Code Section 25102.1(a) provides that offers and sales of to “qualified purchasers”, as defined by the Securities and Exchange Commission pursuant to Section 18(b)(3) of the Securities Act, are not subject to qualification under the Corporate Securities Law.  However, the Commissioner of Business Oversight had declared this “exemption” to be “inoperative” because the SEC had never adopted a definition of  “qualified purchaser”.  Things changed in March 2015, when the SEC adopted amendments to Regulation A.  Suddenly, Regulation A had two tiers – Tier 1, for securities offerings of up to $20 million and Tier 2, for offerings of up to $50 million.  From a state securities law perspective, distinguishing between these two tiers is crucial because the SEC provided that “qualified purchaser” includes any person to whom securities are offered or sold in a Tier 2 offering.  As a result, state securities law qualification requirements are preempted pursuant to Section 18(b)(4)(D)(ii) of the Securities Act.  Suddenly, the moribund notice filing requirement in Section 25102.1(a) became relevant.

A few months later, the Commissioner of Business Oversight revised Release 122-C to require that issuers submit the following before any initial Tier 2 offering in California:

  • A copy of the Form 1-A filed with and accepted by the SEC;
  • A consent to service of process or a statement that the issuer is a California
    corporation. If an electronic Form 1-A was filed with the SEC, a consent to service
    of process or Form U-2 is not required; and
  • A filing fee of $600, pursuant to section 25608.1(b) of the California Corporations
    Code.

This notice filing does not require annual renewals. Should you want to submit an amendment to the Form 1-A, please submit a cover letter that states “Informational Filing Only” and includes the DOCQNET Organization ID and Notice ID. These items may be obtained from the Department’s website, www.dbo.ca.gov.  There is no filing fee for amendments.

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