SEC rulemaking teams have been working on the proposed regulations to implement the Jumpstart Our Business Startups Act (JOBS Act), enacted on April 5, 2012, which makes significant changes to the federal securities laws, SEC Chair Mary Schapiro told the House Financial Services Committee. The teams include staff from across the SEC, including economists from the Division of Risk, Strategy and Financial Innovation. These teams are beginning to prepare proposed rules with economic analyses to recommend to the Commission to implement the various provisions of the JOBS Act. Some of the JOBS Act’s provisions became effective immediately upon enactment, while others require extensive Commission rulemaking, in some cases under what Chairman Schapiro described as very tight deadlines.
Among other things, the JOBS Act alters the initial public offering process for securities of a new category of issuer, called an emerging growth company, and provides exemptions for such companies from various disclosure and other requirements generally for up to five years following their initial public offerings. The ACT also requires the Commission to modify the prohibition against general solicitation and general advertising in Rule 506 of Regulation D and Rule 144A under the Securities Act. It also requires the Commission to provide exemptions under the Securities Act for crowdfunding offerings and unregistered public offerings up to $50 million. The Act increases the number of shareholders a company can have before it must register under the Securities Exchange Act, and changes the Exchange Act thresholds for registration and deregistration for banks and bank holding companies.
The SEC Chair also told the House panel that the rulemaking required for implementation of many new JOBS Act provisions will be complex. Additionally, the JOBS Act requires the Commission to undertake a number of studies and complete several reports. Because many of the rulemakings, studies, and reports are subject to near-term deadlines, she noted, resources will need to be shifted to these projects. Longer term, certain of the changes in the federal securities laws caused by the JOBS Act will require ongoing staff resources, including for the review of confidential draft registration statements submitted by emerging growth companies and supervision of intermediaries in crowdfunding transactions.