How Did the JOBS Act Change Mandatory Exchange Act Registration?

JOBS Act Attorney

Securities Lawyer 101 Blog

On April 5, 2012, President Obama signed the Jumpstart Our Business Startups Act (the “JOBS Act”), which is intended to help smaller and emerging growth companies access the U.S. capital markets. The JOBS Act amends, and adds new sections to, the Securities Act of 1933 (the “1933 Act”) and the Securities Exchange Act of 1934 (the “1934 Act”), as well as the Sarbanes-Oxley Act of 2002. Section 12(g) of the Exchange Act requires companies with more than $10 million in assets whose equity securities are held by more than 500 shareholders of record to file periodic reports with the Securities and Exchange Commission (the “SEC”). 

Generally, Title V of the JOBS Act amends Section 12(g)(1) of the Exchange Act to increase the holders of record threshold to either (i) 2,000 persons, or (ii) 500 persons who are not accredited investors. For banks and bank holding companies, the threshold number of holders of record will be increased to 2,000 persons.

Title V of the JOBS Act also provides that persons holding securities received pursuant to an employee compensation plan in transactions exempted from the registration requirements of Section 5 of the 1933 Act will be excluded from the number of record holders of record for purposes of calculating holders under Section 12(g).

The JOBS Act did not change how record holders are determined. Beneficial owners of securities held in “street name” will generally not be counted as holders of record. Securities held in street name by the Depository Trust Company (“DTC”) will still be calculated by reference to the number of DTC participants holding the securities.

The JOBS Act Impact on Section 12(g)(4)

Title VI of the JOBS Act amends Section 12(g)(4) of the 1934 Act, which permits termination of registration of any class of securities with less than 300 record holders, and Section 15(d), which allows suspension of periodic reporting obligations with respect to any class of securities with fewer than 300 record holders, to provide for termination or suspension of reporting obligations, if the issuer is a bank or bank holding company whose securities are held of record by fewer than 1,200 persons.

These changes will make it possible for some private companies seeking to go public directly to raise more capital and increase their shareholder base without becoming  subject to the SEC’s reporting requirements.

For more information about the JOBS Act please visit our blog article at: http://www.gopublic101.com/JOBS-Act-general-solicitation-and-advertising/

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 protected] 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 advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.

Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855
www.SecuritiesLawyer101.com