Earlier today (April 5, 2012), President Obama signed the Jumpstart Our Business Startups Act (the “JOBS Act” or the “Act”). The signed Act is largely unchanged from its original House version, which passed overwhelmingly through the House by a massive 390-23 margin, and similarly passed through the Senate by a 73-26 margin with only one amendment. In a rare product of election year bipartisanship, the Act attempts to make it easier for small and emerging businesses to raise capital and create jobs by relaxing several existing securities regulations. However, because the Act passed so swiftly, it did not receive the scrutiny usually given to such extensive legislation. Accordingly, numerous ambiguities and questions remain which will need to be resolved through SEC rulemaking or otherwise. Specifically, the Act:
- Removes the prohibition on general solicitation in connection with private offerings under Rule 506 or Rule 144A under the Securities Act of 1933, as long as sales are made only to qualified investors;
- Adds an exemption to the Securities Act for “crowdfunding” offerings (soliciting small investments from a large pool investors over the Internet) of up to $1 million in a 12-month period;
- Provides an IPO on-ramp for “emerging growth companies” by relieving such companies from various requirements and restrictions applicable to IPOs, and allowing them to phase in certain ongoing reporting requirements over up to a five year period;
- Authorizes the SEC to increase the amount allowed to be raised in a Regulation A offering from $5 million to $50 million in any 12-month period; and
- Increases the thresholds for the number of shareholders that trigger registration of an issuer’s securities under Section 12(g) of the Securities Exchange Act of 1934.
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