United States: President Signs The JOBS Act

Legislation Eases Regulations Governing Private and Initial Public Offerings

Today, the President signed into law the Jumpstart Our Business Startups Act, H.R. 3606, as amended (the "JOBS Act"). The law offers relief for smaller companies in pre-IPO stages as well as new capital raising options.

Emerging Growth Companies

The JOBS Act creates a new class of companies known as Emerging Growth Companies or EGCs. Generally, an EGC must have $1 billion or less in revenue during its most recently completed fiscal year and cannot have sold any common equity securities pursuant to an effective registration statement before December 9, 2011. The JOBS Act permits EGCs to avoid certain disclosures in its common equity securities registration statement and ongoing filings during the first 5 years after the company's IPO of common equity securities or until the Company becomes a large accelerated filer.

Encouraging IPOs and Other Offerings. The JOBS Acts allows ECGs to:

  • test the waters by discussing a potential IPO with qualified institutional buyers or accredited investors before filing with the Securities and Exchange Commission ("SEC");
  • file a confidential registration statement with the SEC, provided that the registration statement is filed publicly at least 21 days before the date on which the issuer conducts a road show; and
  • file two years of audited financial statements, rather than three years.


Disclosure Relief. For up to five years after an IPO, an ECG will be:

  • exempt from internal control audits required under Sarbanes-Oxley;
  • exempt from full-length executive compensation disclosure;
  • exempt from say-on-pay, say-on-frequency and say-on-golden parachute votes;
  • subject to longer phase-in periods for new GAAP requirements (the same as if the ECG were a private company); and
  • exempt from new PCAOB rules mandating auditor rotation or the auditor discussion and analysis.

Relaxing Restrictions on Research and Communication with Research Analysts. The Jobs Act:

  • allows investment banks to publish research about an ECG even if the investment bank is participating in an offering by the ECG;
  • requires the elimination of the FINRA rules which restrict the publishing of research about an ECG after an offering or the expiration or waiver of a lockup; and
  • prohibits rules that restrict research analysts from communicating with management and investors.

Removal of General Solicitation Prohibition under Regulation D and Rule 144A

The JOBS Act directs the SEC to revise Rule 506 of Regulation D and Rule 144A to eliminate the prohibition against general solicitation or general advertising as applied to offers and sales of securities under Rule 506 and Rule 144A, provided that all purchasers are "accredited investors," or "qualified institutional buyers," respectively. All issuers may take advantage of this change, however, the SEC has 90 days to revise Rule 506 and Rule 144A and the current rules will remain in effect until revised.


In an attempt to allow small companies to raise capital by targeting a wider base of investors, the JOBS Act permits "crowdfunding," including advertising an investment over the internet and through social media. To take advantage of the new crowdsourcing exemption, companies may not sell more than $1 million in securities during the preceding 12 months, including any amount sold in reliance on the crowdsourcing exemption. The amount an investor may invest is capped, and the maximum amount depends on the investor's annual income or net worth. The JOBS Act adds a new Section 4A to the Securities Act of 1933, which details the requirements for crowdfunding, including that any intermediary (such as an internet website) must register as a broker with the SEC and the issuer must provide scaled financial information depending on the target size of the offering.

Increase in Equityholder Threshold for Public Reporting

In addition to eliminating the prohibition on general solicitation for funds exempt from public reporting, the JOBS Act also increases the equityholder threshold for companies required to register under the Exchange Act. Under the existing framework, a company that has at least 500 shareholders of record and more than $10 million in assets is required to register under Section 12(g)(1)(A) of the Exchange Act. Once a company has registered under Section 12(g), all of the reporting requirements under the Exchange Act apply, including the need to file annual, quarterly, and current reports, proxy statements, and certain transaction reports.

The JOBS Act amends Section 12(g)(1)(A) of the Exchange Act to require that an issuer must register its securities with the SEC when it has total assets exceeding $10 million and a class of equity security that is held of record by either (i) 2,000 persons or (ii) 500 persons who are not accredited investors. Section 502 of the JOBS Act further amends Section 12(g)(5) to provide that the definition of "held of record" does not include securities held by persons who received such securities under employee compensation plans.

Small Company Capital Formation

The JOBS Act creates a new exemption from registration for small public offerings up to $50 million in equity, debt, and convertible debt securities within a 12-month period. The issuer may solicit interest in the offering prior to filing any offering statement, but must file audited financial statements with the SEC annually.


The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.