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Job Creation and Economic Growth (JOBS Act)

June 28, 2012

On April 5, 2012, the Jumpstart Our Business Startups Act of 2012 (the Act) was signed into law by President Obama. The principal goal of the Act is to increase job creation and economic growth by improving access to the public capital markets for emerging growth companies, whether these companies seek to go public or desire to remain private.  To this end, the Act amends a number of federal laws and regulations to (i) make it easier for emerging companies to raise public capital privately and defer going public, and (ii) remove impediments to raising capital for emerging public companies by easing the requirements for going public and reducing the regulatory burdens on newly public companies. 

Overview of Key Provisions

Aside from the new crowdfunding exemption described below, the Act:

The Crowdfunding Exemption

Title III of the Act relates to crowdfunding, and it amends Section 4 of the Securities Act of 1933 to add a new registration exemption intended to allow companies to raise capital from a large number of people in relatively small amounts, typically through the Internet.  In particular, the exemption allows private companies to raise up to $1 million over a 12-month period from an unlimited number of investors, including unsophisticated investors.  The key provisions of the crowdfunding exemption are as follows:

Final Thought

The ultimate success of the Act in improving access to the public capital markets for emerging growth companies will depend on the decisions made by the SEC in crafting rules and regulations to implement the Act. Stay tuned.

John M Novak