Federal Securities: JOBS Act of 2012 Flashcards

1
Q

Federal Securities:

JOBS Act of 2012

A
  • Securities law intended to make registration easier for small companies to raise capital
  • Jump-start Our Business Startups
  • Five Major Changes
    1. created “emerging growth companies”
    2. encouraged “crowdfunding”
    3. Increase Regulation A exemptions ceiling from $5 to $50
    4. Allowed private placements to use general solicitation and advertising
    5. changed the definition of “public company” in order to allow firms to grow bigger before required to go public
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2
Q

Federal Securities:

Emerging Growth Companies

A
  • allowed small firms to go public but delays filing requirements
  • Criteria:
    1. have less than $1 billion in annual gross revenues
    2. publicly traded for less than 5 years
    3. have public float of less than $700M
    4. have not issues $1 billion in non-convertible debt in past 3 years
  • remains EGC for 5 years after date of IPO
  • Benefits:
    1. only 2 years of financials in IPO registration statement
    2. reduced disclosure of executive pay
    3. right to submit draft IPO registration statement for review
    4. exempt for 5 years from:
    • section 404(b)
    • new PCAOB rules
    • various executive compensation rules
      Allows more publicity around IPOs
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3
Q

Federal Securities:

Crowdfunding

A
  • process by which entrepreneurs can use the internet to raise capital. large # ppl, small amount of money.
  • up to $1M in 12 month period from individual investors over the internet
  • congress imposed several limitations and SEC will issue additional rules
  • easier to invest, but less disclosure
  • Other requirements
    • foreign companies cannot use crowdfunding
    • capped at $1M in 12 month period
    • limits amounts a single investor may invest to less than:
      • greater of $2,000 or 5% investor’s annual income if less that $100,000
      • 10% investors annual income or net worth not to exceed $100,000 if $100,000 or more
  • invest only through a funding portal (go fund me) which must:
    • provide investors with risk
    • due diligence in background checks for officers, directors, and 20%+ owners
    • ensure that money is put in escrow until targeted amount reached
      Disclosures
  • $100,000 or less: file most recent tax return and financials certified by CEO with SEC
  • $100,000-500,000: also have financials reviewed by independent public accountant
  • 500,000 to $1M: audited
    Cannot give portal owners the investors personal info
    State securities laws are preempted
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4
Q

Federal Securities:

General Solicitation

A
  • relaxes ban under Regulation D of general solicitation
  • eliminates ban so long as investors are “accredited investors”
  • requires issuer to confirm “accredited investor” status
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5
Q
Federal Securities:
# shareholders
A

raised to 2,000

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