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SEC Levies Civil Penalties Against 10 Microcap Companies for Regulation A Violations

Client Alert | 2 min read | 05.30.23

The Securities and Exchange Commission announced on May 16, 2023 that ten microcap companies violated Regulation A+ and have been ordered to pay civil penalties ranging from $5,000 to $90,000. In a press release, Daniel R. Gregus, Director of the SEC’s Chicago Regional Office, stated, “Companies that choose to benefit from Regulation A as a cost-effective way to raise capital must meet its requirements. These actions stand as a reminder that companies which choose to circumvent Regulation A’s requirements by engaging in prohibited conduct or making fundamental changes to their offerings without qualification will face action by the SEC.”

Generally known as “Reg A+”, this registration exemption gained market traction after amendments to the original Regulation A were passed as part of the Jumpstart Our Business Startups (JOBS) Act, enacted in 2012 and effective in 2015. Reg A+ provides an exemption from registration under the Securities Act of 1933 for U.S. and Canadian companies to raise up to $75 million in a 12-month period. In order to qualify for the exemption, a company must file with the SEC a Form 1-A describing its business and the terms of its offering, and have the Form 1-A qualified by the SEC before an offering may be commenced. Securities issued in a Reg A+ offering are not resale restricted under Rule 144 for persons unaffiliated with the issuer. Affiliates of the issuer, however, remain subject to Rule 144 resale restrictions.

Depending on the size of the Reg A+ offering, an issuer may have certain ongoing reporting requirements such as the filing of quarterly and annual statements.  An issuer is also required to file an amendment to Form 1-A, which must be qualified by the SEC, if it makes material changes to the size or terms of an on-going offering. 

Each of the ten companies subject to monetary penalties by the SEC had their Form 1-A “qualified” by the SEC, but subsequently made material changes to their offerings without appropriately amending or updating their offering materials, or failed to timely comply with certain periodic reporting requirements. The SEC stated that the changes included “improperly increasing the number of shares offered, improperly increasing or decreasing the price of shares offered, failing to file updated financial statements at least annually for ongoing offerings, engaging in prohibited at the market offerings, or engaging in prohibited delayed offerings.”

To the extent you are contemplating a Reg A+ offering, or are conducting an on-going Reg A+ offering, we highly recommend reviewing the offering and related disclosure for compliance with the applicable rules.  Issuers may avoid significant monetary penalties from the SEC by ensuring that their disclosure meets applicable rules, and amendments are timely filed as necessary.   Please contact Crowell & Moring LLP if you have any questions or concerns related to your Reg A+ financing.

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Client Alert | 4 min read | 07.02.25

Supreme Court Upholds the Constitutionality of the U.S. Preventive Services Task Force and the Affordable Care Act’s Preventive Service Coverage Scheme

On June 27, 2025, the Supreme Court upheld the constitutionality of the USPSTF and its role in identifying preventive services for coverage under the ACA in Kennedy v. Braidwood Management.[1]In the case, the Supreme Court considered whether the Secretary of HHS’s appointment of USPSTF members without the advice and consent of the Senate complied with the Appointments Clause in Article II of the United States Constitution. The Supreme Court found that USPSTF members were “inferior Officers” under the Appointments Clause who did not require Senate confirmation because the Secretary of HHS had the authority to remove USPSTF members at will and “to directly review and block Task Force recommendations before they take effect.” The Supreme Court therefore affirmed that the USPSTF as currently structured may legally recommend preventive services for coverage without cost-sharing requirements under the ACA....