NSBA Urges Small Biz to Comment on JOBS Act

September 11, 2012

NSBA is urging all small businesses to weigh in on regulations pertaining to the NSBA-supported JOBS Act. This recently-enacted legislation has the potential to dramatically and positively transform the ability of small firms to access the capital they need to grow, to innovate and to create jobs. The JOBS Act will help small firms raise debt and equity capital in private placements and through crowfunding web portals, reduces regulatory costs, allows small firms to lawfully advertise on the web or in newspapers for investors or lenders and makes various other positive changes.

But this will only happen once the Securities and Exchange Commission (SEC) issues regulations under the law and only if those regulations are reasonable. The SEC has already missed its first JOBS Act deadline and there is strong reason to believe that it may so heavily regulate crowdfunding that it will not be a viable option for small firms.

Small firms currently have two opportunities to weigh in. The first is on the SEC web page seeking general comments on the JOBS Act. The second is regarding the SEC proposed rule about the JOBS Act provision that will allow small firms to advertise in newspapers or on the internet seeking investors or lenders.

There is a major effort underway by state regulators, consumer groups and unions to undermine the JOBS Act through the regulatory process.  It is important that small business express their views.

To comment on the JOBS Act generally, click here.

To read the proposed rule, click here. 

To comment on the proposed rule, click here, or email your comments to  rule-comments@sec.gov.

Comments must be made by October 5, 2012 and if emailed must include File Number S7-07-12 on the subject line.

Background on the JOBS Act Implementation
The JOBS Act required the SEC to issue a rule by early July to implement the general solicitation provisions of the law allowing companies to advertise seeking investors or lenders.  On Aug. 29, the SEC issued a proposed rule which adds little to the statutory language in the JOBS Act permitting general solicitation for accredited investors or regarding the requirements that companies “take reasonable steps to verify” an accredited investor’s status. An accredited investor has an income over $200,000 ($300,000 joint) or a net worth over $1 million (excluding the primary residence).  Most institutions also qualify as accredited investors.

In our judgment, the traditional, and almost universal, current practice of using investor suitability questionnaires combined with investor self-certification to establish accredited investor status should continue to be allowed and be deemed to constitute taking reasonable steps to verify that purchasers of the securities are accredited investors, as required by the JOBS Act.  There is neither legislative history supporting nor any other reason to believe the proposition that Congress intended to undermine the laudable policy goals of the Act by changing the current long-standing practice with respect to verifying accredited investor status.

No matter how the SEC ultimately proceeds, the reasonable belief standard regarding accredited investor status should be retained and the rule needs to be written so that offerings not involving general solicitation are not in a worse position than they were prior to the passage of the JOBS Act.

Please click here for more background and to read about NSBA’s testimony on the issue.

To read NSBA’s comments to the SEC on the JOBS Act click here and here.

To read NSBA’s comments to the Financial Industry Regulatory Authority (FINRA) regarding crowdfunding, click here.