In April of 2012, Congress passed legislation permitting equity and debt crowdfunding. This was done through the Jumpstart Our Business Startups (JOBS) Act as a means of stimulating the American economy. The Securities and Exchange Commission (SEC) must issue its rules and regulations before non-accredited investors can take advantage of this opportunity, although Georgia and Kansas are currently using an intrastate exemption to allow crowdfunding now (see our article on the Invest Georgia Exemption.)
To view or download the JOBS Act, click here: http://www.govtrack.us/congress/bills/112/hr3606/text
Highlights of the JOBS Act include:
· Increasing the number of shareholders a company can have before being required to register their stock with the SEC. That threshold will increases from 500 to 2,000 shareholders.
· Providing some small offerings an exemption from the requirement to register public offerings with the SEC and allowing registered Internet “portals” to be used for funding. There are conditions for using this exemption, one of which is the yearly aggregate amount each person is allowed to invest in these offerings based on their own personal income and wealth (non-accredited or accredited investor status).
· Lifting the ban on “general solicitation” and advertising in specific kinds of private placements of securities.
· Raising the limit for securities offerings exempted under Regulation A from $5 million to $50 million, thereby allowing for larger fundraising efforts under this simplified regulation.
The first six “Titles” of the JOBS Act are named after the original bills that each was based on; Title III is known as the crowdfunding provision and is considered by many to be the most productive securities exemption since the Securities Act of 1933.
Titles I, V, and VI of the JOBS Act are in effect at this time, but Titles II, III, and IV must wait for the SEC rules to be promulgated before equity crowdfunding for non-accredited investors will be available.