JOBS Act Issues

JOBS Act Highlights

• Provides exemptions from many existing securities law requirements for emerging growth companies (“EGCs”).  For example, EGCs:
  • Can present only two years of audited financial statements in their IPO registration statements and are exempt from the internal audit controls in section 404(b) of the Sarbanes-Oxley Act
  • Can submit draft IPO registration statements for confidential review by SEC staff prior to their public filing
  • Can “test the waters” by engaging in oral or written communications with potential investors that are qualified institutional buyers (“QIBs”), or institutions that are accredited investors, to determine whether such investors might have an interest in a contemplated securities offering
  • May meet executive compensation disclosure requirements by complying with the reduced disclosure requirements generally available to smaller reporting companies
• Allows hedge funds to engage in general solicitation and advertising
• Provides exemptions for crowdfunding transactions (i.e., transactions in which a large group of people provide small amounts of financing for an issuer). The JOBS Act permits non-reporting issuers to raise up to $1 million under the exemption within any 12-month period. The transactions must occur on a website that is either a broker-dealer or a registered “funding portal.” In order to protect investors, there are caps on individual donations
• Increases the threshold that triggers required SEC registration for unlisted companies from 500 record-shareholders to 2,000 record-shareholders