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Rule 255

Definition of Rule 255 of Regulation A, the rule that lets a company test the waters before and after filing Form 1-A until qualification, with its required statements and filing duty.

Rule 255 (17 CFR 230.255) is the Regulation A rule that lets a company solicit interest in an offering before the offering is qualified by the SEC. The company, or someone authorized to act for it, may communicate orally or in writing both before and after filing its Form 1-A, but may not solicit or accept money or accept any offer to buy until qualification.

What the rule permits

Rule 255 is the Reg A form of testing the waters. Its window is the longest of the three solicitation rules: it opens before any filing and closes only when the offering statement is qualified, so it covers the SEC review period as well. The communications may be public, and a written solicitation may include a way to give an indication of interest, with a response form that may ask for a name, address, telephone number, and email address. The communications are offers for antifraud purposes.

Required statements

Each solicitation must state, in substance, that:

  1. no money or other consideration is being solicited, and if sent in response, will not be accepted
  2. no offer to buy can be accepted and no part of the purchase price can be received until the offering statement is qualified, and any offer may be withdrawn or revoked without obligation at any time before notice of its acceptance is given after qualification
  3. a person's indication of interest involves no obligation or commitment of any kind

After the Form 1-A is publicly filed, each solicitation must also either name someone from whom the most recent preliminary offering circular can be obtained, with a phone number and address, give a URL to it, or include it in full. If material distributed after filing turns out to be materially inaccurate or inadequate, corrected material must be redistributed in a similar way. The rule text is at Cornell LII, 17 CFR 230.255.

Filing

Testing the waters materials are filed as exhibit 13 to Form 1-A, which makes them public on EDGAR. Materials used after the initial filing may require an amendment. For a Tier 1 offering, state rules on solicitation still apply; for Tier 2, the securities are covered securities and state registration is preempted (see reg-a-tiers and blue-sky-laws).

  • Rule 206 is the Regulation Crowdfunding counterpart, which ends when the Form C is filed.
  • Rule 241 covers an issuer that has not yet chosen an exemption. Rule 241 materials used within 30 days before a Reg A offering starts must also be filed.

Further reading

This page is general information about securities rules, not legal advice. The statements, their placement, and what a particular company may say are questions for its own securities counsel.

Topics:glossarycrowdfundingregulation

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