The JOBS Act: Crowdfunding

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On April 5, 2012, President Obama signed into law the Jumpstart Our Business Startups Act (the “Act”), a wide-ranging legislative response to the private sector which repeatedly voiced concerns regarding the existence of substantial burdens on the ability of issuers to engage in capital formation activities. As expected, the Act will have a significant impact upon federal securities laws and is intended, among other things, to provide increased access to debt and equity capital for issuers generally and “Emerging Growth Companies” specifically.

This Alert primarily addresses the Act’s sanction of crowdfunding (i.e., crowd financing, equity crowdfunding and/or hyper funding) (collectively, “Crowdfunding”), a capital raising mechanism which is an outgrowth of the Internet and recent technological advances. For additional information regarding the Act, please refer to The JOBS Act: General Solicitation and Advertising in Certain Private Placements and Exempt Offerings, The JOBS Act: Increase and Division of Section 12(g) Registration Requirements, The JOBS Act: Emerging Growth Companies and the IPO On-Ramp and The JOBS Act Quick Reference Chart.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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