Abstract
T HE PASSAGE of the Securities Act of 1933 marked the end of the doctrine of caveat emptor in the raising of capital through the interstate sale of private corporate securities in the United States. This was accomplished by making available to the buying public a registration statement and prospectus, as filed with the Securities and Exchange Commission, which contains substantial information about the proposed sale of a new issue of securities. These disclosures are designed to enable a prospective purchaser to make an informed investment decision. Sales by private persons who do not control the issuer are exempt from these requirements. The mechanism by which this is accomplished is Section 5 of the Securities Act of 1933.1 Section 5 makes it a violation of the act to offer, sell or deliver a security unless a registration statement has become effective with respect to such security. A copy of the prospectus must precede or accompany the delivery of the security. Although these safeguards are necessary, they are also expensive and time consuming. Moreover, they may create civil liability and, in some circumstances, a continuing obligation to file reports with the SEC. These burdens are inappropriate and forbidding when the funds to be raised are not large. Regulation A,2 promulgated under section 3(b) of the act, is the Commission's solution. It is designed to facilitate the public financing of new enterprises, often in the promotional stage; small established companies seeking to expand; or large corporations making a small public offering to fulfill a special need, such as an employee stock option plan. When a public offering of an issue of securities does not exceed
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