About the JOBS Act

Early this June, President Obama signed into law the Jumpstart Our Business Startups (JOBS) Act, legislation I supported to give hardworking entrepreneurs a better opportunity to start and grow their companies. It is critical for our economic recovery to encourage investment in high-growth industries and ensure our innovators have a fair chance to succeed. While this bill is not perfect, it represents a promising bipartisan effort to help address those goals. Below are some key details of the JOBS Act, which modifies federal securities laws and regulations to make it less difficult for start-up companies to raise capital.

Moving forward, we must ensure proper oversight and strong protections against investor fraud and recognize that this bill alone does not match the scale of our economic challenges. We have an immediate opportunity to further boost the economy by passing a proposal to fund transportation infrastructure projects for the next two years. It already received broad support from both parties in the Senate, and I have cosponsored identical legislation in the House. I look forward to working in a bipartisan fashion to accelerate job creation.

Emerging Growth Companies
The law reduces the costs of going public for startups by establishing a new category of “emerging growth companies” (EGCs) that qualify for certain regulatory exemptions until they either: (1) report at least $1 billion or more in annual gross revenues – an amount to be periodically indexed for inflation; (2) become a “large accelerated filer,” which SEC regulations define, among other factors, as a company with a global market float of$700 million or more; (3) reach the fifth anniversary of their IPO’s offering date; or (4) issue over $1 billion in non-convertible debt over three years.

Current SEC regulations inhibit crowdfunding, defined as financing through the collective cooperation of people who pool resources, often through an online networking site. This measure enables small companies to raise up to $1 million per group in capital through crowdfunding, provided that each investor’s contribution does not exceed $10,000, or 10 percent of their annual income, whichever is less.

Revision of Existing SEC Exemption

The JOBS Act makes it easier for small companies to raise capital by removing restrictions on general solicitation and advertising when these companies issue securities to accredited investors. Currently, they can only market their securities offerings to investors with whom they already have a relationship.
SEC Regulation Modernization

The new law raises the offering threshold for companies exempted from registration with the SEC under Regulation A from $5 million – set in the early 1990s – to $50 million to help small businesses access capital markets without the costs and delays associated with the current securities registration process.

The bill also aims to eliminate impediments to capital formation by raising the threshold for mandatory registration under Federal securities laws from 500 to 1,000 shareholders, and increasing from $1 million to $10 million the shareholder registration threshold for an issuer of securities.

If you would like more details or have further questions, please call my office at 401-732-9400.

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