## Facts

- Congress, through NSMIA, preempted state securities registration for certain “covered securities,” including securities sold to a “qualified purchaser” as defined by the SEC.
- NSMIA expressly authorized the SEC to define “qualified purchaser” and to define it differently for different categories of securities, consistent with the public interest and investor protection.
- The SEC adopted Regulation A-Plus, creating a two-tier exempt offering framework; Tier 2 permitted offerings up to $50 million with enhanced federal disclosure and ongoing reporting.
- The SEC rule deemed “any person” offered or sold securities in a Tier 2 offering to be a “qualified purchaser,” triggering NSMIA preemption of state registration and qualification requirements for Tier 2 offerings.
- The rule included an investment limit for non-accredited investors (10% of the greater of annual income or net worth) and required audited financials and continuing disclosure for Tier 2 issuers.
- State securities regulators petitioned for review, arguing the SEC’s definition exceeded statutory authority, improperly displaced state regulation, and was arbitrary and capricious under the APA.

## Issues

1. Whether NSMIA unambiguously forecloses the SEC from defining “qualified purchaser” to include all offerees and purchasers in Tier 2 Regulation A offerings, thereby broadly preempting state registration.
2. If NSMIA is ambiguous, whether the SEC’s definition is a reasonable construction consistent with the statutory direction to consider the public interest and investor protection.
3. Whether the SEC’s rulemaking was arbitrary or capricious under the APA for inadequate explanation, response to comments, or economic analysis.

## Decision

- The court denied the petitions for review and upheld the SEC rule.
- At Chevron step one, the court held NSMIA does not unambiguously require “qualified purchaser” to be limited to traditionally sophisticated or wealthy investors and instead leaves the definition to the SEC.
- At Chevron step two, the court held it was reasonable for the SEC to define “qualified purchaser” by offering category (Tier 2) and to rely on disclosure, reporting, and investment limits as investor protections.
- The court held the resulting preemption of state registration for Tier 2 offerings was an intended consequence of NSMIA’s covered-securities scheme when the SEC acts within delegated authority.
- The court rejected APA challenges, finding the SEC considered relevant factors and provided a satisfactory explanation, including an adequate economic analysis.

## Legal Principles

- When Congress delegates authority to an agency to define a statutory term and permits varying definitions across categories, courts apply Chevron and generally defer to reasonable agency constructions.
- NSMIA’s “qualified purchaser” provision authorizes the SEC to adopt definitions tied to categories of securities or transactions, not solely to investor characteristics.
- Federal preemption that follows from a valid agency definition within an express statutory preemption framework is permissible even if it substantially limits state registration regimes.
- Under the APA, a rule is upheld if the agency reasonably considers relevant factors, responds in a reasoned manner to significant comments, and explains its policy choices.

## Conclusion

The D.C. Circuit upheld the SEC’s Regulation A-Plus definition treating Tier 2 offerees and purchasers as “qualified purchasers,” concluding NSMIA left the term to the SEC’s judgment and that the SEC reasonably balanced capital formation and investor protection while complying with the APA, thereby validly preempting state registration for Tier 2 offerings.


Lindeen v. Sec. & Exch. Comm’n, 825 F.3d 646 (D.C. Cir. 2016)