On June 30, 2025, Harter Secrest & Emery LLP’s Securities and Capital Markets team secured no-action relief from the Securities and Exchange Commission (the “SEC”), on behalf of a client (the “Company”) allowing the Company to terminate its ongoing reporting obligations under Regulation A of the Securities Act of 1933, as amended (the “Securities Act”). Prior to this relief, issuers contemplating a Tier 2 Regulation A offering ran the risk that they would be locked into up to a full year of reporting obligations without knowing if their proposed Tier 2 Regulation A offering would be successful. This relief sets precedent that will benefit issuers that qualify a Tier 2 Regulation A offering but abandon the offering prior to closing on any investments and issuing any securities to investors.
Background
Pursuant to Rule 257 of Regulation A under the Securities Act, issuers that have an offering statement qualified for a Tier 2 Regulation A offering must file annual, semi-annual, and current reports, similar to the reporting obligations of companies required to file reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Pursuant to Rule 257(d) of Regulation A, an issuer can suspend its Regulation A reporting obligations only if it has fewer than 300 shareholders of record and has filed all reports required to be filed since it became a Regulation A reporting company. However, an issuer cannot suspend its reporting obligations under Regulation A during the fiscal year in which a Tier 2 offering statement is qualified or if it has not filed its an annual report for the fiscal year in which a Tier 2 offering statement was qualified. As a result, prior to this relief, issuers that qualified a Tier 2 offering statement would be required to commence complying with the Regulation A ongoing reporting obligations and file at least one full annual report with audited financial statements prior to being able to suspend such ongoing reporting obligations, regardless of whether they sold any securities pursuant to the offering that triggered such obligations.
The Company had an offering statement for a Tier 2 Regulation A offering qualified during the first month of its current fiscal year. The Company elected to abandon the Regulation A offering prior to issuing any securities in that offering. Under Rule 257(d) of Regulation A, the Company would not have been able to suspend its Regulation A reporting obligations because it had an offering statement qualified during its current fiscal year and had not yet filed an annual report for the fiscal year in which the offering statement was qualified. In seeking no-action relief, the Company pointed out that because it had abandoned the offering and not issued any securities pursuant to the Tier 2 offering statement, there was no secondary market for its securities and no investors to benefit from its ongoing reporting obligations, and accordingly it should be able to terminate its reporting obligations notwithstanding the technical requirements of Rule 257(d).
No-Action Relief
The SEC granted no-action relief, indicating that the Staff will not recommend enforcement action to the SEC if (i) the Company does not submit ongoing reports required by Rule 257(b) of Regulation A and (ii) files a Form 1-Z in reliance on Rule 257(d) of Regulation A to suspend its reporting obligations on the basis of the facts and circumstances laid out in the Company’s no-action request letter.
The no-action relief granted by the SEC aligns Regulation A precedent with similar no-action relief granted to issuers who abandon their initial public offering and terminate their ongoing reporting obligations under Rule 12h-3 of the Exchange Act.
Benefits for Regulation A Issuers
This relief will benefit Tier 2 Regulation A issuers who abandon their offering prior to issuing any securities. Absent this relief, Tier 2 Regulation A issuers who have an offering statement qualified by the SEC would have to complete up to a full year of ongoing reporting, regardless of whether they sold any securities pursuant to Regulation A.
We believe this relief reduces the risk of launching a Regulation A offering and makes Tier 2 Regulation A offerings more attractive to issuers because they will now have the flexibility to terminate burdensome ongoing reporting obligations in the event the offering does not go as planned. This benefit could be particularly helpful for smaller companies considering an alternative to a traditional IPO at times of uncertainty in the wider equity capital markets.
Next Steps
As with any no-action relief, it is based on the specific facts and circumstances at the time relief is sought. Accordingly, there are important considerations for issuers both before and after a Tier 2 Regulation A offering is launched to enable issuers to avail themselves of this new no-action relief. If you have questions about this no-action relief, whether you may qualify for this type of relief, or how to terminate Regulation A reporting obligations, please contact a member of Harter Secrest & Emery’s Securities and Capital Markets group.