Entoro Reg A+ Monthly Newsletter October 4th

October 4, 2023


Welcome to another insightful edition of our monthly Regulation A+ newsletter. This month, we delve into a critical aspect of the Regulation A+ journey: the SEC review process. Whether you're a seasoned issuer or considering your first Regulation A+ offering, understanding how to navigate this process is crucial for a successful campaign.

The SEC Review Process: An Overview

For those new to Regulation A+, the SEC review process involves submitting a comprehensive offering statement to the Securities and Exchange Commission (SEC) for approval. This statement includes detailed information about your company, your financials, and the terms of your offering. The SEC's role is to ensure that the offering complies with all relevant securities laws and regulations.

Tips for a Smooth SEC Review:

Plan Ahead: Start the SEC review process well in advance of your intended offering launch date. The SEC's review can take several weeks or even months, depending on the complexity of your offering and the workload of the SEC staff.

Engage Legal Counsel: Working with experienced legal counsel who specializes in Regulation A+ offerings is essential. They can help you prepare a complete and compliant offering statement, increasing your chances of a smooth review.

Transparency Is Key: Be transparent and thorough in your offering statement. Provide clear, concise, and accurate information about your company, financials, and offering terms. Avoid any exaggerations or omissions that could raise red flags during the review.

Know Your Risks: Understand the risks associated with your business and the offering. Acknowledge and address potential challenges and uncertainties honestly in your offering statement.

Review and Revise: Before submitting your offering statement to the SEC, conduct a thorough internal review. Make sure all disclosures are accurate and up-to-date. Even minor errors or inconsistencies can lead to delays in the review process.

Response to SEC Comments: It's common for the SEC to issue comments and requests for clarification during the review. Be prepared to respond promptly and professionally to these comments. Your legal counsel can help you navigate this part of the process effectively.

Compliance is Key: Ensure that your offering complies with all relevant securities laws, including state securities regulations if you're conducting a Tier 2 offering.

Stay Informed: Keep abreast of any changes in SEC regulations and guidelines that may affect your offering. Regulatory updates can impact the review process and disclosure requirements.

The Benefits of a Successful SEC Review:

A successful SEC review sets the stage for a smooth offering and instills confidence in potential investors. It demonstrates your commitment to compliance and transparency, which can be a strong selling point for your Regulation A+ offering.

As you navigate the SEC review process, remember that preparation, transparency, and compliance are your allies. Stay focused on delivering a compelling offering that not only meets regulatory standards but also resonates with potential investors.

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What kind of funding is not allowed under Reg A+?

Reg A+ does not allow funding for the following:

• Companies with headquarters outside the U.S. or Canada. It is fine to move or set up the legal headquarters in the US or Canada for international businesses.
• Investment companies as defined by the Investment Company Act of 1940. Pure venture capital firms cannot use Reg A+. VC firms that are Debt based (minimum of 60% debt holdings) are allowed to use Reg A+ in specific circumstances - ask us and your securities attorney.
• Public companies. Reporting and non-reporting public companies are allowed to use Regulation A+.
• Development stage companies with no business plan or purpose.
• Companies issuing fractional, undivided interests in oil, gas, or mineral rights.
• Companies disqualified under the “bad actor” rules.

That’s it. If your company doesn’t fall into one of those exclusions, you’re eligible.

How does Regulation A+ provide liquidity to investors and founders and long term investors?

For the investor, the degree of actual liquidity depends on the Issuer company's Reg A+ offering. If they list on the NASDAQ or NYSE then liquidity can be excellent. If they list on the OTCQB or the OTCQX, then the liquidity can be good to very good.

When an Issuer company does not list on the above exchanges, then liquidity is limited to the specialized Reg A+ aftermarket exchanges, and broker-dealers that support Reg A+ share trading in the aftermarket. These exchanges are small and offer limited liquidity at present; they are growing to fill the need.
The Issuer company may choose to offer direct liquidity to their investors by defining what valuation method they will use and what other restrictions will apply in their Offering Circular. This type of liquidity is regulated.

The company's Affiliates will need to resell their Reg A+ shares in reliance on Rule 144 if they want to sell publicly. There's no holding period imposed, but there are limitations on the number of shares they can sell at any one time, they'll need to sell through a broker or market maker, they'll have to file a Form 144 with the SEC and "adequate current public information" must be available about the company, which means it must be compliant with Regulation A's ongoing reporting requirements.


See why so many Issuers trust us to facilitate a successful offering.

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Entoro Capital is a FINRA-registered Broker-Dealer in all 50 states, Puerto Rico, and the District of Columbia. The top choice for a Reg A+ broker-dealer and will answer all your questions.  We support Issuers through the entire Reg A+ process from pre-filing preparation, to SEC review, marketing selection, and completion of the offering. Call Entoro today and let our team show you how to Reg A+ the right way.


Morgan Sills                                

Director – Investment Banking                                  
Entoro Capital, LLC                                                      
D: +1 832.987.4051                                                      
E: msills@entoro.com  

Sean Levine

Managing Director

Entoro Capital, LLC

M: +1 917.715.1489

E: slevine@entoro.com

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