House Passes October 31 Deadline For Section IV Of JOBS Act
By Vela Wood
On May 15, 2013, the House approved H.R. 701, a bill that requires the Securities and Exchange Commission to finalize Section IV of the JOBS Act by October 31, 2013. Section IV of the JOBS Act, titled Small Company Capital Formation, exempts small businesses from satisfying some of the requirements of an initial public offering.
There’s been a lot of excitement surrounding this bill. Unfortunately, it doesn’t directly affect crowdfunding. But since you’re reading – here’s a brief rundown on H.R. 701.
Current Exemption: Regulation A
The current exemption related to Section IV is known as Regulation A. Regulation A provides a registration exemption for a public offering by non-reporting issuers of up to $5 million within a 12-month period. Furthermore, an issuer is not required to provide audited financial statements unless the audited financial statements have been prepared for another reason, and an issuer may not be subject to certain periodic reporting requirements.
Section IV of JOBS Act
Section IV of the JOBS Act increases the amount of capital that can be raised by a non-reporting issuer from $5 million to $50 million in a 12-month period. However, Section IV requires issuers to file audited financial statements annually with the SEC after completion of the offering, and issuers may be subject to periodic reporting requirements. The SEC will determine what these requirements will be, if any, by the October 31st deadline.
While this is definitely a step in the right direction for providing small businesses with access to capital, this deadline is not imposed on Section III of the JOBS Act, the crowdfunding regulations. It remains unclear as to when the SEC will adopt the crowdfunding regulations. We’ll keep you posted.