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Flashcards in Federal Securities: JOBS Act of 2012 Deck (5)
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1

Federal Securities:
JOBS Act of 2012

- Securities law intended to make registration easier for small companies to raise capital
- Jump-start Our Business Startups
- Five Major Changes
1. created "emerging growth companies"
2. encouraged "crowdfunding"
3. Increase Regulation A exemptions ceiling from $5 to $50
4. Allowed private placements to use general solicitation and advertising
5. changed the definition of "public company" in order to allow firms to grow bigger before required to go public

2

Federal Securities:
Emerging Growth Companies

- allowed small firms to go public but delays filing requirements
- Criteria:
1. have less than $1 billion in annual gross revenues
2. publicly traded for less than 5 years
3. have public float of less than $700M
4. have not issues $1 billion in non-convertible debt in past 3 years
- remains EGC for 5 years after date of IPO
- Benefits:
1. only 2 years of financials in IPO registration statement
2. reduced disclosure of executive pay
3. right to submit draft IPO registration statement for review
4. exempt for 5 years from:
- section 404(b)
- new PCAOB rules
- various executive compensation rules
Allows more publicity around IPOs

3

Federal Securities:
Crowdfunding

- process by which entrepreneurs can use the internet to raise capital. large # ppl, small amount of money.
- up to $1M in 12 month period from individual investors over the internet
- congress imposed several limitations and SEC will issue additional rules
- easier to invest, but less disclosure
- Other requirements
- foreign companies cannot use crowdfunding
- capped at $1M in 12 month period
- limits amounts a single investor may invest to less than:
- greater of $2,000 or 5% investor's annual income if less that $100,000
- 10% investors annual income or net worth not to exceed $100,000 if $100,000 or more
- invest only through a funding portal (go fund me) which must:
- provide investors with risk
- due diligence in background checks for officers, directors, and 20%+ owners
- ensure that money is put in escrow until targeted amount reached
Disclosures
- $100,000 or less: file most recent tax return and financials certified by CEO with SEC
- $100,000-500,000: also have financials reviewed by independent public accountant
- 500,000 to $1M: audited
Cannot give portal owners the investors personal info
State securities laws are preempted

4

Federal Securities:
General Solicitation

- relaxes ban under Regulation D of general solicitation
- eliminates ban so long as investors are "accredited investors"
- requires issuer to confirm "accredited investor" status

5

Federal Securities:
# shareholders

raised to 2,000

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