JOBS Act eases securities-law requirements for smaller companies

On April 5, President Obama signed into law the Jumpstart Our Business Startups (JOBS) Act, which Congress passed on March 27 in a rare instance of bipartisan action. The JOBS Act is intended to facilitate the creation of new jobs by easing securities-law burdens on capital-raising activities by smaller companies.

The JOBS Act creates a new category of “emerging growth companies” and relaxes many SEC requirements for these companies in connection with their initial public offerings (IPOs) and transition to full SEC-reporting status. The new law also decreases some of the regulatory burdens on companies relating to their unregistered capital-raising activities. In addressing these issues, the JOBS Act scales back some disclosures required in SEC registration statements and reports, adds a new exemption from the requirement for auditor attestation of internal controls, liberalizes SEC rules on some offering-related communications, exempts limited “crowdfunding” transactions from Securities Act registration, raises the ceiling for offerings under Securities Act Regulation A, and increases the number of shareholders of record private companies may have without triggering registration under the Exchange Act. Most provisions of the JOBS Act became effective at the date of enactment, while other provisions will require SEC rulemaking to become operative or to be fully implemented.

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