TLDR: Nearly three years after the law was signed, the Securities and Exchange Commission has taken an important step toward implementing the so-called JOBS Act.
It’s been years since the Jumpstart Our Business Startups (JOBS) Act was signed into law but one of the major components has yet to be fully implemented, i.e. crowdfunding. Indeed, crowdfunding is where small businesses and startups raise needed capital by pooling together a large number of relatively small investments. Many have criticized the Securities and Exchange Commission (SEC) for being slow to finalize the rules regarding crowdfunding but lately the agency has picked up the pace and there is growing optimism among small business owners and aspiring entrepreneurs. The Washington Post explains, “Commissioners on Wednesday approved rule changes that allow companies to raise up to $50 million a year, up from a longstanding cap of $5 million, through what’s known as Regulation A offerings. Under Reg A offerings, as they’re commonly called, companies looking to raise relatively small amounts of money through a public offering are subject to a much simpler SEC registration process, putting fewer bureaucratic hoops between them and investors. Until now, the Reg A path, which is nearly as old as the SEC itself, has been sparingly used. Congress voted to lift the cap as part of the Jumpstart Our Business Startups (JOBS) Act, which was signed into law in April 2012, largely to encourage more small and mid-sized companies to consider that option. However, it’s another more subtle change the SEC has made to the rules – one that the agency was not specifically required to adopt – that some experts believe will make the Reg A option now much more appealing to companies in need of capital. In keeping with the initial regulations proposed about a year ago, the commissioners finalized new rules that exempt Reg A offerers from registering with state financial regulators in every state in which they’re prospective shareholders reside…”