Is it time for the JOBS Act, Part Two?

When the JOBS Act was passed, a lot of people hoped that it would de-regulate startup finance, resulting in a boom of new startups being funded.  Through repealing the ban on general solicitation, allowing online angel investment platforms, creating the new “Regulation A+,” and allowing equity crowdfunding, the JOBS Act was supposed to make funding startups considerably easier.  But there have been some significant bumps in the road.  First, in my view, the equity crowdfunding exemption that was included in the bill was unworkable from the beginning. That continues to be true under the crowdfunding regulations proposed by the SEC and of course the SEC has yet to adopt final equity crowdfunding regulations (which means that equity crowdfunding is still largely prohibited for non-accredited investors). While the SEC finally did implement the lifting of the ban on general solicitation by creating the new Rule 506(c), it also has proposed new onerous rules governing its use (as well as the use of the existing Rule 506(b)). The SEC has proposed implementing regulations for Regulation A+, but has not adopted final regulations, which means that the exemption still cannot be used. In addition, the SEC is getting pushback from state securities regulators on the proposed Regulation A+ on the issue of preempting state registration requirements, which may result in the removal of preemption from the final regulations (which would make the exemption considerably less useful).  Furthermore, since Regulation A+ investors would be counted as shareholders for purposes of triggering reporting under the Securities Exchange Act of 1934 (the “Exchange Act”), as the proposed rules are currently written, any use of the exemption would also likely trigger expensive Exchange Act reporting requirements. [Read more…]

Thoughts on the Proposed Crowdfunding Regulations

On October 23, 2013, the Securities and Exchange Commission issued proposed regulations to implement Title III of the JOBS Act, which will allow for the public sale of securities using crowdfunding under an exemption from registration under securities laws. [Read more…]

First Enforcement Action Taken Against Crowdfunding Site

For the first time, regulators are taking action against one of the many crowdfunding sites that have sprung up since the passage of the JOBS Act.  The Ohio Division of Securities issued a notice of intent to issue a cease-and-desist order against the Cincinnati-based crowdfunding platform SoMoLend and majority owner/CEO Candace Klein in June. If issued, the order will shut down SoMoLend. [Read more…]

The JOBS Act, a Year Later – Part 5: Crowdfunding

This post is the fifth in a series examining the impact of the Jumpstart Our Business Startups Act (or JOBS Act) one year after its passage and focuses on the provisions related to crowdfunding.

Previously in this series, I discussed the progress of implementing the JOBS Act, specifically Titles I and II.   In this fifth post, I will continue that discussion by focusing on Title III, which creates a new exemption from the federal securities registration requirement for certain small offerings conducted over the internet, a practice commonly known as “crowdfunding.” [Read more…]

The JOBS Act, a Year Later – Part 1: Introduction

It’s been almost a year since Congress passed the Jumpstart Our Business Startups Act (or JOBS Act). At the time, the passage of this bill was greeted with significant enthusiasm from the start-up community. Among other things, it provided for a crowdfunding exemption from securities registration requirements and a repeal of the prohibition on general solicitation of investors in connection with certain private offerings. A year later, how do things stand? In this first of a series of posts, I’ll explore how implementation of the JOBS Act has progressed and what we might expect in the future. [Read more…]