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By: Rebecca G. DiStefano, GREENBERG TRAURIG, P.A.
The U.S. economy was spotlighted during an unprecedented national Presidential election in 2016 with campaign debate focused on the preservation and initiation of new jobs. This topic, of course, is not a new one. In response to the economic malaise following the 2009 financial crisis, the Jumpstart Our Business Startups Act of 2012 (112 P.L. 106, 126 Stat. 306) (JOBS Act), signed into law by President Obama on April 5, 2012, implemented striking changes to the Securities Act of 1933, as amended (Securities Act).
The JOBS Act mandated that the Securities and Exchange Commission (SEC) relax historically rigid financial regulations to enable fledgling start-ups and developmental companies to advertise their ideas and solicit individuals for investments in emergent enterprises. The statute also provided an onramp of greater disclosure flexibility for smaller companies to transition to public companies. The economic rhetoric of the recent presidential election raises the question as to whether these changes made a difference. How is the JOBS Act playing out in reality? Based on economic studies conducted by the SEC, unregistered exempt securities offerings have eclipsed registered offering activity in the years following the financial crisis and passage of the JOBS Act.
Given the utility of unregistered offerings in post-recession capital formation, this article focuses on 2016 trends in small capital formation relating to JOBS Act-mandated changes, including amended Regulation A (known informally as Regulation A+) for raises up to $50 million, recently effective Regulation Crowdfunding (Regulation CF) for online raises to $1 million, and Rule 506(c) (17 C.F.R. § 230.506) of Regulation D permitting public solicitations to tap into unlimited quantities of capital from accredited investors. This article also examines progress under Title I of the JOBS Act, which was adopted to provide access to public markets by smaller companies known as emerging growth companies.
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Rebecca G. DiStefano is a shareholder at Greenberg Traurig, P.A. in Florida. She is both a transactional and regulatory attorney and advisor in the areas of securities regulation, mergers & acquisitions, and corporate law. Rebecca primarily counsels clients in general capital formation matters, Regulation D, Regulation A+, Regulation Crowdfunding, registrations, general solicitation under the JOBS Act of 2012 and the Securities Act of 1933, and the continuing disclosure requirements of the Securities Exchange Act of 1934.
For an overview of how Regulation A+, Regulation Crowdfunding, and Regulation D compare, see
> REGULATION D, REGULATION A+, AND REGULATION CROWDFUNDING REQUIREMENTS CHART
RESEARCH PATH: Capital Markets & Corporate Governance > Private Offerings > Private Placement of Equity Securities > Forms > Checklists
For further information on the respective tiers in Regulation A+, see
> “REGULATION A-PLUS” TIER 1 AND TIER 2 OFFERINGS SUMMARY CHART
For information on the regulation of intermediaries and funding portals under Regulation Crowdfunding, see
> CROWDFUNDING INTERMEDIARIES
RESEARCH PATH: Capital Markets & Corporate Governance > Investment Management > Broker- Dealer > Practice Notes > Broker-Dealer Registration and Regulation
For a discussion on state Blue Sky licensing regulations for crowdfunding intermediaries, see
> UNDERSTANDING STATE INTERMEDIARY LICENSING REQUIREMENTS FOR PARTICIPATION IN OFFERINGS
RESEARCH PATH: Capital Markets & Corporate Governance > State Securities Regulation - Blue Sky Laws > Blue Sky Laws > Practice Notes > Intermediary Licensing
For further information on crowdfunding, see
> AN OVERVIEW OF THE SEC’S CROWDFUNDING REGULATIONS
RESEARCH PATH: Capital Markets & Corporate Governance > Private Offerings > Private Placement of Equity Securities > Practice Notes > Conducting the Private Offering
For an overview of permitted issuer communications in general in registered offerings, see
> WHEN IS A COMMUNICATION AN OFFER OF SECURITIES? CHART
RESEARCH PATH: Capital Markets & Corporate Governance > IPOs > Communications During the Offering Process > Forms > Checklists