JOBS ACT Receives Congressional Approval, Awaits President's Signature

March 28, 2012
The House approved the Senate amended version of the Jumpstart Our Business Start-ups, or JOBS, Act 380 to 41. Although, the House overwhelmingly approved the bill earlier this month, the House had to accept the Senate's amendments to the crowd funding provision. Crowd funding allows small business and startups to sale small amounts of stock to many individuals through the internet or other means without registering the shares for public trading with the Securities and Exchange Commission (SEC). However, the companies seeking crowd funding capital must file some basic information with the SEC including a description of the business and its financial condition. Other Senate amendments to the JOBS Act require companies seeking crowd funding capital to provide: Financial statements to all investors; An independent accounting review of their statements, if they are seeking between $100,000 and $500,000 in capital; and, Audited financial statements for companies seeking more than $500,000 in capital. The amendment also limits the total amount that a company can raise through crowd funding to $1 million. The previously approved bill would have allowed companies to raise up to $2 million in crowd funding, if they provided audited financial statements. Under the senate amended version, crowd funding websites are required to register with the SEC as crowd funding internet intermediaries, advise investors of risk and take measures to prevent fraud. The Senate amended version also includes other key components of the original House bill that includes: The creation of an emerging growth companies category that would lower the costs of initial public offerings for smaller firms; and, The abolishment of an SEC rule that prohibits small companies from advertising for investors. According to an article in The New York Times, emerging growth companies also would be exempt from certain financial disclosure and governance requirements for up to five years. Several of these regulations were put in place after the end of the dot-com bubble and the collapse of Enron. The JOBS Act awaits President Obama's approval before it can become law. Read the Senate amended version.