Congress Passes the “Jumpstart Our Business Startups Act”: The JOBS Act Eases Marketing Restrictions for Unregistered Offerings and Lowers Hurdles for IPOs of Smaller Issuers

Sullivan & Cromwell LLP - March 27, 2012

On March 27, 2012, the U.S. House of Representatives passed H.R. 3606, the “Jumpstart Our Business Startups Act” (the “JOBS Act”), in the form passed last week by the U.S. Senate. The JOBS Act:

  • removes the prohibition on general solicitation in connection with transactions effected pursuant to Rule 506 or Rule 144A under the Securities Act of 1933, provided that sales are limited to qualifying investors;
  • alters the thresholds that trigger registration of an issuer’s securities under Section 12(g) of the Securities Exchange Act of 1934, including a different threshold for banks and bank holding companies;
  • provides, to a new category of “emerging growth companies”, relief from various requirements and other restrictions applicable to IPOs and (on a transitional basis, for up to five years) from certain reporting company obligations;
  • authorizes the SEC to increase the amount permitted to be raised in a Regulation A offering to $50 million in any 12-month period; and
  • adds a “crowdfunding” exemption to the Securities Act.

Many of the JOBS Act’s provisions will be effective upon signing by the President, which is expected later this week. Others will require SEC rulemaking.