The JOBS Act

With the recent release of another new set of proposed rules by the SEC, now is perhaps a good time to step back and look at where we are with regards to implementation of the JOBS Act.

The JOBS Act was signed into law in April 2012; however, large parts of the JOBS Act required SEC regulations to implement the law, and the SEC regulations are not yet complete.  The JOBS Act is divided into numerous parts (referred to as “Titles”) and is perhaps best known for its crowdfunding laws, although it actually has far wider applicability.

Titles of the JOBS Act

Certain Titles within the JOBS Act became effective immediately: (1) Title I, exempting Emerging Growth Companies (generally those with under $1 billion in revenues) from certain disclosures that were thought to dissuade companies from an IPO; (2) Titles V & VI, expanding the number of shareholders a company can have from 500 to 2,000 before certain Exchange Act reporting requirements kick in; and (3) Title VII, requiring the SEC to take steps to educate SMEs and businesses run by women, veterans, and minorities about the new regulations.

General Solicitation

Titles II, III, and IV, require SEC regulations to implement.  Title II concerns the use of general solicitation in private offerings under Rule 506.  The SEC has published final regulations permitting the use general solicitation materials in certain offerings, however issuers must comply with complex filing requirements and can only sell securities to accredited investors.  In addition, the SEC has also proposed regulations that would increase the number of Form D filings required by all issuers relying on Rule 506.  Unfortunately, nothing in the Title II regulations provides a definition of general solicitation, which means activities like pitch fairs are still shrouded in uncertainty.

Crowdfunding Rules of the JOBS Act 

Title III contains the “crowdfunding” rules.  The SEC released proposed rules on October 23, 2013, which, when implemented, will allow companies to raise up to $1 million from unaccredited investors in a twelve-month period, as long as the issuer uses a registered funding platform.

Finally, the Title IV regulations of the JOBS Act are still outstanding, however when released they will expand the use of Regulation A by increasing the offering limit from $5 million to $50 million for issuers who file mini registration statements and comply with relevant state laws.

The SEC is behind schedule with implementation of the JOBS Act, however, with the release of another set of proposed regulations, perhaps now the end is in sight.

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Roger Royse
rroyse@rroyselaw.com

Roger Royse, the founder of the Royse Law Firm, works with companies ranging from newly formed tech startups to publicly traded multinationals in a variety of industries. Roger regularly advises on complex tax structuring, high stakes business negotiations and large international financial transactions. Practicing business and tax law since 1984, Roger’s background includes work with prominent San Francisco Bay area law firms, as well as Milbank, Tweed, Hadley and McCloy in New York City.
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