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


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


Federal Securities:

- 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
- $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


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


Federal Securities:
# shareholders

raised to 2,000

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