The JOBS (Jumpstart Our Business Startups) Act of 2012, is an amendment to both the Securities Act and the Exchange Act. Its purpose is to encourage economic growth and the increase in jobs, by relaxing the regulatory encumbrances on business start-ups that trying to raise capital in securities markets. There are three major differences in the JOBS Act, along with other smaller revisions of existing rules.
This gives small companies the ability to use online markets to sell securities to many small investors. This is the first time that non-public companies can raise capital from public investors without needing to go to register their offerings under state or federal law. This does not mean that there are no restrictions on crowdfunding, however. Among other conditions, the seller has to provide an elaborate offering document, and that the intermediary must be registered by the SEC. One of the biggest crowdfunding platforms today is Kickstarter, which helps smaller companies gain the funding that they need to successfully launch their business, project, etc.
This act also simplifies the company’s process of marketing private placements. As long as the securities are sold to exclusively “accredited investors,” the company can market their private offerings in far-reaching public markets under Regulation D (which allows smaller companies to raise capital by selling equity or debt securities without having to register their securities with the SEC).
Emerging Growth Companies
The JOBS Act alleviates some of the restrictions and difficulties of “emerging growth companies.” When registering their IPOs they face fewer requirements, like confidential filing and the ability to “test the waters.” In the following five years the companies receive exceptions from some of the disclosure and corporate governance rules that would be enforced for other public companies.
Through the JOBS Act of 2012, “emerging growth companies” will have an easier time gaining capital and marketing their securities. This expedites economic growth stimulation and the creation of more jobs.