Originally published in Business Law Today - May 2012.
The JOBS Act springs from a belief that smaller companies are the engines of economic growth and job creation. In this view, the decline of the smaller company IPO market over the last decade threatens the long-term prospects of the American economy, as smaller companies that cannot access the IPO market must either rely on private capital to finance their growth or sell themselves to larger companies.
In an effort to restore vibrancy to the smaller company IPO market, the JOBS Act eases disclosure and other regulatory requirements for smaller companies in the initial public offering process and in subsequent public reporting. The belief is that, over the past decade, smaller companies have been discouraged from entering public markets for capital due to the cost of regulatory compliance, particularly in the wake of the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. If we create a new “on-ramp” to public markets by easing the regulatory burden for smaller companies, the thinking goes, more of these companies will seek to go public.
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