What is the JOBS Act of 2012
The JOBS (Jumpstart Our Business Startups) Act of 2012 is a law passed by the United States Congress that aims to encourage funding of small businesses by easing various securities regulations. It includes several provisions that change the rules for companies raising capital, including changes to The U.S. Securities and Exchange Commission (SEC) regulations on crowdfunding and “mini-IPOs.” The Act has several titles that each address different aspects of securities regulation. The main goal of the JOBS Act is to make it easier for small businesses to raise capital and create jobs.
Why Did Congress pass the JOBS Act of 2012
The JOBS Act of 2012 was signed into law by President Barack Obama on April 5, 2012. The bill was passed by a bipartisan majority in both the House and Senate. Congress passed the JOBS Act of 2012 with the main goal of stimulating economic growth and job creation by making it easier for small businesses to raise capital. The Act was passed in response to the difficult economic conditions following the financial crisis of 2008 and the Great Recession, during which small businesses struggled to access the capital they needed to grow and create jobs. Additionally, the JOBS Act was intended to help spur innovation and entrepreneurship by making it easier for small companies and start-ups to go public and access capital markets.
What are the Articles of the JOBS Act of 2012
The JOBS Act of 2012 is divided into several “titles” or sections, each addressing different aspects of securities regulation:
Title I of the JOBS Act is: Reopening American Capital Markets to Emerging Growth Companies which creates a new category of companies known as “emerging growth companies” (EGCs), which are defined as companies with less than $1 billion in annual revenue. EGCs are given certain exemptions from securities regulations, such as the requirement to provide audited financial statements and CEO certifications in IPO registration statements.
This Title creates a new category of companies, known as “emerging growth companies” (EGCs), which are defined as companies with less than $1 billion in annual revenue. EGCs are eligible for reduced reporting and disclosure requirements, such as being allowed to provide only two years of audited financial statements in their IPO registration statement, instead of three years. They also don’t have to provide an auditor’s attestation of the effectiveness of internal control over financial reporting as required by the Sarbanes-Oxley Act.
The goal of Title I is to make it easier for small and growing companies to go public by reducing the regulatory burden and compliance costs associated with an initial public offering (IPO). This can help to increase the amount of capital available to these companies and to create new investment opportunities for the public. By reducing the regulatory burden, it can also help to encourage more companies to go public, which in turn can help to spur economic growth and job creation.
Title II of the JOBS Act is: Access to Capital for Job Creators which allows companies to raise money through crowdfunding platforms, subject to certain regulatory requirements, and also increases the number of shareholders a company can have before it is required to disclose financial information to the public.
This Title allows private companies to raise capital from “accredited investors” (people with a high net worth or certain professional qualifications) through general solicitation and advertising, which was previously prohibited. This increases the ability of private companies to raise capital and reach a larger pool of potential investors.
The Title also raises the threshold for registration under the Securities Exchange Act of 1934, from 500 shareholders of record to 2,000 shareholders of record, or 500 shareholders who are not accredited. This allows small companies to have more shareholders before they are required to disclose financial information to the public. This can help to reduce the costs of compliance for small companies and make it easier for them to raise capital.
The goal of Title II is to provide more opportunities for companies to raise capital and increase the number of investors who can participate in the capital-raising process, which can help spur economic growth and job creation.
Title III of the JOBS Act is: Crowdfunding which creates a new exemption from securities registration for crowdfunding, allowing startups and small businesses to raise money from a large number of small investors through online platforms.
This Title creates a framework for companies to offer and sell securities through crowdfunding portals, under the oversight of the SEC and Financial Industry Regulatory Authority (FINRA). It also puts caps on the amount of money an individual can invest, based on their net worth and income.
Under Title III companies can raise up to $1.07 million in a 12-month period, with individual investments capped at $2,200 for investors with annual income or net worth less than $107,000 and $11,000 for those with income or net worth greater than $107,000.
The goal of Title III is to provide a new way for small businesses and startups to raise capital and to give small investors the opportunity to invest in these companies. It also allows people who might not have been able to invest in private companies before, to participate. This can help to increase the amount of capital available to small businesses and to create new investment opportunities for small investors.
Title IV of the JOBS Act is Small Company Capital Formation which increases the amount of money that small companies can raise through “mini-public offerings” without having to register the offering with the SEC. This title, also known as Regulation A+, allows companies to raise up to $75 million from the public in a 12-month period, which is a significant increase from the previous limit of $5 million. This allows small companies to access a larger pool of potential investors and can provide them with more capital to expand and grow their business. Additionally, the regulation also allows companies to offer securities to both accredited and non-accredited investors. This title also requires the companies to file ongoing reporting with the SEC, making it more transparent and providing more information to investors.
Title V of the JOBS Act is: Private Company Flexibility and Growth which amends the rules for “accredited investors” (people with a high net worth or certain professional qualifications) to invest in private companies. This Title makes it easier for private companies to raise capital by allowing them to sell securities to a larger pool of “accredited investors” (people who meet certain financial thresholds, such as having a net worth of $1 million or an annual income of $200,000) It also allows private companies to solicit investments from the general public and to advertise private securities offerings, which were previously prohibited. This can help private companies to reach a larger pool of potential investors and to raise more capital to grow their business. Additionally, this title also expands the definition of an “accredited investor” to include certain institutional investors and family offices, which allows more types of entities to invest in private companies. The overall goal of this title is to increase the flexibility of private companies to raise capital and to provide more investment opportunities for accredited investors.
Title VI of the JOBS Act is: Capital Expansion which contains various other provisions aimed at making it easier for small businesses to raise capital. This title includes several different provisions that are intended to increase the amount of capital that small companies can raise and reduce the regulatory burden on these companies. Some of the key provisions in Title VI include:
- Increasing the threshold for “regulation A” offerings from $5 million to $50 million. This allows small companies to offer and sell securities to the public without having to register the offering with the SEC, as long as they meet specific requirements.
- Allowing companies to use “regulation D” rules for securities offerings. Regulation D provides an exemption from securities registration for private offerings, which can make it easier for small companies to raise capital from a limited number of investors.
- Allowing companies to “test the waters” before committing to a public offering. This means that companies can gauge investor interest in a potential offering before incurring the costs of preparing and filing a registration statement with the SEC.
- Exempting emerging growth companies from the auditor attestation requirement of the Sarbanes-Oxley Act. This reduces the cost and burden of compliance for these companies.
The overall goal of Title VI is to make it easier for small businesses to raise capital and to reduce the regulatory burden on these companies, which in turn can help to spur economic growth and job creation.
Title VII of the JOBS Act is called “Outreach on Changes to the Law” which requires the SEC to conduct outreach and education efforts to inform small businesses, entrepreneurs, and members of the public about the changes to the law made by the JOBS Act.
This Title requires the SEC to establish an Office of Small Business Policy and to establish a Small Business Capital Formation Advisory Committee to advise the SEC on issues related to small business capital formation.
It also includes a provision that requires the SEC to conduct outreach and education efforts to inform small businesses, entrepreneurs, and members of the public about the changes to the law made by the JOBS Act, including the new crowdfunding provisions.
The goal of Title VII is to make sure that small businesses and entrepreneurs are aware of the changes made by the JOBS Act and how they can benefit from these changes. It also helps to make sure that the SEC is aware of the specific needs of small businesses and entrepreneurs and is able to respond to them effectively.
Where To Get Up to Date Information on The JOBS Act?
The best place to get up-to-date information on the JOBS Act 2012 would be the official website of the U.S. Securities and Exchange Commission (SEC). The SEC is the government agency responsible for enforcing the provisions of the JOBS Act and providing guidance to companies and individuals who are affected by it. Additionally, you can also refer to various financial news websites, business news websites, and other reputable sources of information for updates on the JOBS Act 2012.
