Category: JOBS ACT and Crowdfunding

JOBS ACT and Crowdfunding: As the expected deadline for the SEC to publish rules and regulations enacting the Crowdfunding Act (Title III of the Jumpstart Our Business Startups Act (JOBS Act)) grows nearer, it is a good time for a complete overview of crowdfunding. New Sections 4(6) and 4A of the Securities Act of 1933 codify the crowdfunding exemption and its various requirements as to Issuers and intermediaries. The SEC is in the process of drafting the underlying rules and regulations which will implement these new statutory provisions…

Apr242012

SEC Grapples With Crowdfunding Rulemaking

On April 5, 2012 President Obama signed the JOBS Act into law.

 

The SEC’s Rulemaking Duty

Some of the rules went into effect immediately; others are in the drafting process.   Within 90 days of the signing of the Act (i.e. mid July), the SEC is required to issue enabling rules as to other portions of the Act, including rules related to general solicitation and advertising of accredited investors under Rule 506 of Regulation D. For the SEC that is the easy part.

Finally, the SEC has up to 270 days (beginning of 2013) to release rules relating to the new crowdfunding exemption and crowdfunding platform portal regulations. That will be difficult part.  As a matter of background, the biggest opponents of the crowdfunding bill were the SEC and FINRA.  It is easy to see why, the SEC’s mission, direct from their website is:

“The mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly,

Apr232012

SEC Issues Guidance on Title 1 of the JOBS Act

On April 5, 2012 President Obama signed the JOBS Act into law.  Some of the rules went into effect immediately; others are busily in the drafting process.   The SEC has begun issuing guidance and it is expected will continue to do so often.

On April 16, 2012, the SEC issued guidance on Title 1 of the JOBS Act.  The full text of this guidance is available on the SEC website.  Title 1 of the JOBS Act provides scaled- down business disclosure for Emerging Growth Companies (EGC’s) effectively treating them as small business issuers.  In particular, EGC’s need only provide two years of audited financials (instead of 3) for a registration of an IPO; are treated as small businesses for the reporting of executive compensation; have no Sarbanes-Oxley Act 404(b) auditor attestation requirements and are able to test the waters with communications to QIB’s and institutional accredited investors prior to an offering.

 

Determining When and If a Company Qualifies As

Apr202012

Crowdfunding Timing and Investor Protections

On April 5, 2012 President Obama signed the JOBS Act into law.

Some of the rules went into effect immediately, such as the ability of an Emerging Growth Company to file a registration statement and seek confidential treatment during the review process.  For this process the EGC would avail itself of the new Securities Act Section 6(e).  The SEC issued, albeit limited, guidance on this process for EGC’s yesterday, April 10, 2012.

Within 90 days of the signing of the Act (i.e. mid July), the SEC is required to issue enabling rules as to other portions of the Act, including rules related to general solicitation and advertising under Regulation D.  Finally, the SEC has up to 270 days (beginning of 2013) to release rules relating to the new crowdfunding exemption and crowdfunding platform portal regulations.

 

Crowdfunding Has Been Around For Several Years

It seems to many that the JOBS Act appeared, was enacted into law and is zooming forward

Apr182012

SEC Issues Guidance on Registration and Deregistration Under Jobs Act

On April 5, 2012 President Obama signed the JOBS Act into law.  Some of the rules went into effect immediately, such as the ability of an Emerging Growth Company to file a registration statement and seek confidential treatment during the review process.  For this process the EGC would avail itself of the new Securities Act Section 6(e).  The SEC issued, albeit limited, guidance on this process for EGC’s yesterday, April 10, 2012.

 

SEC Guidance on the JOBS Act

On April 11, 2012, the SEC issued guidance on the JOBS Act amendments to Section 12(g) and Section 15(d) of the Securities Exchange Act of 1934, as amended (Exchange Act).  The full text of this guidance, and the guidance issued on new Section 6(e) is available on the SEC website.

The JOBS Act amends Section 12(g) and Section 15(d) of the Exchange Act as to threshold shareholder requirements and registration and deregistration requirements for banks and bank holding companies.  This blog

Apr172012

The JOBS Act Is Not Just Crowdfunding

On April 5, 2012 President Obama signed the JOBS Act into law.  In my excitement over this ground-breaking new law, I have been zealously blogging about the Crowdfunding portion of the JOBS Act.  However, the JOBS Act impacts securities laws in many additional ways.  The following is a summary of the many ways the JOBS Act will amend current securities regulations, all in ways to support small businesses.

A.       The New “Emerging Growth Company” Category

The JOBS Act will create a new category of companies defined as “Emerging Growth Companies” (EGC).  An EGC will be defined as a company with annual gross revenues of less than $1 billion, that has been public and reporting for a minimum of five years and whose non-affiliated public float is valued at less than $700 million.  EGC’s will have reduced requirements associated with initial public offerings (IPO’s) and ongoing reporting requirements.  For many purposes, EGC’s will be allowed to use the less

Apr162012

Crowdfunding 101

As I recently blogged, the President has signed the Jobs Act including the much anticipated Crowdfunding bill.  Crowdfunding is a process whereby companies will be able to raise small amounts of money either directly off their own website or using intermediaries set up for the purpose.  The Securities Act of 1933, as amended, (Securities Act) prohibits the sale or delivery of any security unless such security is either registered or exempt from registration.  Crowdfunding will be an exemption from registration.  The exemption will likely be codified as a new and separate exemption likely under Regulation D and will include an overhaul of the current general provisions of Regulation D found in Rules 501-503.

Crowdfunding Exemption Possibilities

 

The exemption will likely be limited to $1 million in any twelve (12) month period, or up to $2 million if the company provides certain financial disclosure such as audited financial statements.  As proposed, each investor will be limited $10,000 or 10%

Apr162012

Big Changes Are Coming

I’ve been practicing securities law for 19 years this year (phew!) and for the first time in my career I am excited about changes, big changes, on the horizon for small businesses.  I’m talking about the JOBS Act and its ground breaking crowdfunding bill which has now been signed into law.

A Whole New Exemption

Over the years I have consistently received calls from potential clients that wish to use the exemptions provided for in Regulation D to raise money for small or start up ventures.  Many of these individuals believe, mistakenly, that Regulation D provides them with a method to raise money.  It does not.  Regulation D only lays out rules to follow to utilize an exemption from the registration requirements in the Securities Act of 1933.  These rules include such items as limitations on the dollar amount raised; who you can raise money from, how you can raise money, prohibitions on advertising and solicitation, disclosure documents required,