JOBs Act 4.0

Proposed changes to the JOBS Act 4.0 have received bipartisan support and will drive growth in the addressable market by reducing the compliance burden and improving access for smaller investors.

The changes are focused on the following:

Encourage Companies to be Publicly Traded

  • Conducting a study to reduce costs of going public
  • Extending emerging growth company status to ten years (from five) to provide regulatory relief to small companies still expanding operations
  • Reduce reporting requirements to semi-annual
  • Establish venture exchanges so issuers can focus on trading on a single exchange

Improving the Market for Private Capital

  • Expanding permitted size of angel funds (up to 500 investors) and maximum capital up to $50 million; expands access to angel capital for small and medium sized companies
  • Allows VC funds that are not registered with the SEC to acquire eligible portfolio investments through the secondary market
  • Exemptions for micro-offering rounds up to $500K
  • Exempt finders meaning to allow more people to identify investors without SEC broker registration
  • Exempt from SEC registration people who help buy and sell small companies and do not handle funds / securities (less than $25 million in gross revenue) to help small businesses use professional services to drive growth

Enhancing Retail Access to Investment Opportunities

  • Improves the crowdfunding statute by pre-empting state securities law registration for secondary transactions and reducing unnecessary and costly regulations on crowdfunding portals; making crowdfunding more workable for smaller companies
  • Permits self-certification of accredited investor status under Rule 506(c) and expands the definition of an accredited investor by (1) requiring the SEC to establish an examination to allow an individual to obtain accredited investor status regardless of their income level and (2) allowing anyone to invest in Regulation D securities up to 10% of their income
  • Pre-empt state securities law registration for secondary transactions for Regulation A Tier 2 securities (state securities law registration is already preempted for primary transactions). This will help companies raise money through Reg. A+ by improving the secondary market for Reg A+ securities

Improving Regulatory Oversight

  • Authorize the SEC to increase any statutory exemption ceiling, such as those governing offering sizes, if the SEC determines it appropriate. This clarification would make it easier for the SEC to reduce the regulatory burden on smaller entities
  • SEC to create a public database of persons (bad actors) subject to criminal, civil, and administrative actions relating to financial services to make it easier to protect average investors from financial fraud

If these changes are accepted and passed it will have a material improvement on how companies can raise capital.

Sources: CNBC, CrowdfundInsider, US Chamber of Commerce, National Venture Capital Association (NVCA), US Senate

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