A Masterstroke of Some Kind: Crowdfunding and the JOBS Act

A Masterstroke of Some Kind: Crowdfunding and the JOBS Act

"Everyone agrees the title was a work of pure genius," says Dick Phillips of K&L Gates in a recent podcast, referring to the Jumpstart Our Business Startups (JOBS) Act. "It's impossible to vote against in an election year." When a law is so well named, it's important to look a little deeper at what other special terms it's using and how it might work in practice. The real story is that it's the most significant change to the U.S. securities law landscape in a generation, and the clever wording goes beyond the name.

First of all, no one knows if this will create jobs. But there's more: of all the provisions in the JOBS Act, the one that is most unknown concerns the Silicon Valley flavor du jour: crowdfunding. That's right, terms that are not yet in Webster's are now included in American law. Generally, this crowdfunding provision allows companies to raise small amounts of money from lots of people through a lightly regulated intermediary.

Specifically, the JOBS Act amends the Securities Act of 1933 with a registration exemption for transactions involving individual investments limited to the lesser of $10,000 or 10% of an investor's income. Under this exemption, companies can raise up to $1 million this way annually without providing potential investors with audited financial statements. The issuer or intermediary will have to comply with certain requirements related to disclosure and the resale of securities-though these aren't yet defined-as well as file a notification with the Securities and Exchange Commission (SEC).

Read the entire article at This is real law.

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