Learn how recent JOBS Act rulemaking could impact your clients.
To revitalize the economy, the JOBS Act was enacted in 2012 to ease particular securities regulations and fund startups. Here are three examples.
Emerging Growth Companies
Title 1 of the JOBS Act created a new, privileged category of filer, the Emerging Growth Company (EGC), exempt from many of the burdens of the initial public offering registration process. Such companies are even eligible to begin the IPO process confidentially. The EGC provision is aimed at giving fledgling companies a relatively easy path, or an “on-ramp” to going public. EGCs are also entitled to certain shortcuts in their SEC disclosure for the first years of their existence.
The impact. Examples of issues confronting companies who are considering using the EGC provisions include how to measure their revenue, how to evaluate their own eligibility for EGC status and using the confidential submission process.
Lawyers may be called upon to advise clients on the requirements for businesses wishing to take advantage of the exemptions offered by this provision.
How Lexis® Securities Mosaic® can help. Lexis Securities Mosaic is the only SEC Filings provider to allow you to filter on companies that have self-declared their EGC status. See what the Annual Report or Proxy Statement of an EGC looks like, or combine with the IPO filter to see how ECGs have taken advantage of the “IPO on-ramp” created by the JOBS Act. You can also use the SEC Comment Letters page to see how the SEC has responded to filings submitted by EGCs.
On June 19, 2015, Regulation A+ became effective, expanding Regulation A securities registration exemptions for many issuers. Regulation A+ creates two Tiers of offerings that are exempt from registration under the Securities Act. Each tier has different offering caps, disclosure requirements, and ongoing reporting obligations, all of which enable issuers to have increased flexibility depending on their financing needs. Tier 1 has offerings of securities of up to $20 million in a 12-month period and Tier 2 has offerings of securities of up to $50 million in a 12-month period. Both Tiers are subject to certain basic requirements, while Tier 2 offerings are also subject to additional disclosure and ongoing reporting requirements.
The impact. Regulation A+ was enacted as part of the JOBS Act of 2012 to create even more opportunities for small businesses to raise capital without having to comply with some of the more onerous features of the traditional registration process.
How Lexis® Securities Mosaic® Can Help. Use Lexis® Securities Mosaic® to find recent disclosure; rulemaking and administrative guidance; and news and commentary related to Regulation A+, the registration process, and the new rule's real-world applicability to small businesses. Set up alerts at the Securities Mosaic® SEC Filings page to see when new EDGAR® forms for Regulation A+ are filed with the SEC. Also, track changes to Form 1-A and keep track of which companies are utilizing Regulation A+ offerings. In addition, Tier 2 issuers who are interested in listing their securities on a national securities exchange by using the revised Form 8-A short form registration statement can browse the SEC Filings page to see Form 8-A filings that are submitted in connection with Regulation A+ offerings.
Rule 506 Changes
The SEC recently adopted new Rule 506(c), which removes the prohibition on general solicitation or general advertising for unregistered securities offerings made under Rule 506 and Rule 144A of the Securities Act of 1933. Although anyone can be solicited under the new rule, only accredited investors may actually buy.
The impact. Although the Rule 506 changes do not affect the definition of “accredited investor,” the SEC is in the midst of reconsidering that definition as required by the Dodd-Frank Act. How will issuers determine who is a “bad actor” prohibited from being involved in an offering using 506(c)? What constitutes a reasonable effort to confirm accredited investor status?
How Lexis® Securities Mosaic® can help. Find Private Placement Memoranda for offerings that have taken advantage of the new ability to solicit and advertise. See how SEC filers frame the risks and opportunities to their business related to the new rule. Locate SEC guidance and expert commentary (Law Firm Memos) on emerging best practices to comply with the new rule.