News & Events

The JOBS Act: Quick Reference

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 summarizes in a quick reference chart certain of the key provisions of the Act. 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 Requirement, The JOBS Act: Crowdfunding and The JOBS Act: Emerging Growth Companies and the IPO On-Ramp.

Emerging Growth Companies and the IPO On-Ramp

Emerging Growth Company

An issuer with total gross revenues of less than $1 billion until it:

  • has gross revenues in excess of $1 billion;
  • has been a public company for 5 years
  • issues $1 billion or more of non-convertible debt
  • becomes a large accelerated filer ($750 million or more in public float)

Facilitation of IPOs

An Emerging Growth Company may:

  • confidentially submit to SEC its registration statement for confidential review
  • engage in communications with QIBs and institutional accredited investors to gauge interest
  • present 2 years of audited financials in registration statements and periodic reports
  • present scaled disclosures available to smaller public reporting companies

Relaxation of Reporting Requirements

An Emerging Growth Company is not required to:

  • provide a Section 404(b) auditor’s attestation report on internal control over financial reporting
  • comply with certain executive compensation-related provisions of the Dodd-Frank Act
  • comply with new GAAP pronouncements until the pronouncements are applicable to private companies
  • comply with PCAOB rules mandating audit firm rotation or requiring a supplement to the auditor’s report

Research Analysts

Research analysts of syndicate members may:

  • issue research reports prior to, during and after an IPO
  • participate in meetings with investment banking personnel
  • make public appearances regarding the Emerging Growth Company’s IPO

Immediately Effective

Yes: April 5, 2012

Rule 506 Private Placements and Rule 144A Exempt Offerints

General Advertising and General Solicitation

General advertising and general solicitation permitted provided that all investors are accredited investors or are QIBs

Offering Platforms and Offering Mechanisms

Offering platforms and mechanisms do not have to register as “brokers” or “dealers” if they participate in Rule 506 private placements that utilizes general advertising provided that they:

  • do not receive any compensation
  • do not have possession of customer funds or securities
  • are not subject to a statutory disqualification

Immediately Effective

No: the SEC must revise Rule 506 and Rule 144A within 90 days of April 5, 2012

Crowdfunding

Crowdfunding involves the pooling or combining of monies, typically smaller amounts, from various sources in furtherance of
an initiative in an effort to raise sufficient capital to advance the purposes of the initiative

Exemption From Registration

Crowdfunded offerings do not have to be registered if:

  • aggregate amount sold to all investors is not more than $1,000,000
  • amount sold to any investor does not exceed (i) the greater of $2,000 or 5% of the annual income or net worth of the investor if either the annual income or the net worth of the investor is less than $l00,000 or (ii) 10% of the annual income or net worth of an investor not to exceed a
  • maximum aggregate amount sold of $l00,000 if either the annual income or net worth of the investor is equal to or more than $l00,000
  • conducted through a compliant broker or “funding portal”

Availability of Exemption

Exemption is only available for U.S. issuers that are not subject to the reporting requirements of the Exchange Act and that are not “investment companies”

Registration and Reporting Requirements

Yes: issuers and brokers or “funding portals” must satisfy multiple registration and reporting requirements

Immediately Effective

No: the SEC must promulgate implementing rules and regulations within 270 days of April 5, 2012

Section 12(G) Registration Requirement

Issuer (non-bank and non-bank holding company)

Register

  • Total assets in excess of $10 million
  • A class of equity securities held of record by either 2,000 or more persons or 500 or more persons who are not accredited investors

De-Register
File certification with the SEC if the number of record holders is reduced to less than 300 persons

Bank or bank holding Company

Register

  • Total assets in excess of $10 million
  • A class of equity securities held of record by 2,000 or more persons

De-Register
File certification with the SEC if the number of record holders is reduced to less than 1,200 persons

Immediately Effective

Yes: April 5, 2012, though the SEC must promulgate implementing rules and regulations for the new bank or bank holding company registration and de-registration thresholds

The content of this Alert is intended for general informational purposes only, is not intended to be comprehensive with respect to the subject matter and is not intended to create an attorney-client relationship with any user. This Alert is not designed nor intended to render legal or other professional advice, as any such advice requires the consideration of the facts regarding a specific situation. For further information, please contact a member of the Capital Markets and Securities Group below. The invitation is not a solicitation to render professional services and should not be construed as a statement as to any availability to perform legal services in any jurisdiction in which such attorneys are not permitted to practice. IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised that any federal tax advice contained in this communication or any attachment does not constitute a formal tax opinion. Accordingly, any federal tax advice contained in this communication or any attachment is not intended, or written to be used, and cannot be used, by any recipient for the purpose of avoiding penalties that may be asserted by the Internal Revenue Service. Free Background Information is available upon request. This Alert is an advertisement.