The Jumpstart Our Business Startups (“JOBS”) Act was signed into law by President Obama on April 5, 2012. The JOBS Act requires the Securities and Exchange Commission (the “SEC”) to issue final regulations regarding the portions of the JOBS Act relating to crowdfunding within 270 days of the law’s enactment on December 31, 2012.
As of its deadline, the SEC had not yet issued the JOBS Act’s crowdfunding final regulations.
Until that happens the future of crowdfunding in securities offerings remains in limbo.
The Purpose of Crowdfunding under the JOBS Act
The purpose of the act is to make it easier for small businesses, characterized as “emerging growth companies,” to raise money more cheaply and easily.
That will be accomplished by reducing such companies’ disclosure requirements, by allowing advertising of certain kinds of public placements, and by permitting more non-accredited investors to participate in these offerings. The last two are critical elements of what is called “crowdfunding.”
As useful as all that will be for small issuers, until the SEC promulgates its final regulations, crowdfunding in securities offerings remains illegal.
Crowdfunding under the JOBS Act
Even though the crowdfunding provisions of the Act have not yet been approved, many companies are being bombarded with solicitations by fraudsters offering to help them raise capital using crowdfunding.
Companies presently seeking to offer and sell securities without registering with the SEC must comply with the prohibition against general solicitation or advertising in Rule 506 offerings, and must also comply with Rule 506’s disclosure requirements for non-accredited investors regardless of the amount of money raised in the company’s offering.
Illegality of Crowdfunding until SEC Establishes Regulations
As appealing as the crowdfunding provisions of the JOBS Act are for small busineses wishing to go public, and for small issuers who are already public, it’s important for them to be aware that it is not yet available to them as a fundarising tool. They should resist the hype thrown their way by hucksters out to make a quick buck, and wait for the SEC to complete its work on the relevant regulations.
For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton Florida, (561) 416-8956, by email at email@example.com or visit www.securitieslawyer101.com. This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. For more information about going public and the rules and regulations affecting the use of Rule 144, Form 8K, crowdfunding, FINRA Rule 6490, Rule 506 private placement offerings and memorandums, Regulation A, Rule 504 offerings, SEC reporting requirements, SEC registration statements on Form S-1 , IPO’s, OTC Pink Sheet listings, Form 10 OTCBB and OTC Markets disclosure requirements, DTC Chills, Global Locks, reverse mergers, public shells, direct public offerings and direct public offerings please contact Hamilton and Associates at (561) 416-8956 or firstname.lastname@example.org. Please note that the prior results discussed herein do not guarantee similar outcomes.
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