May 18, 2022

JOBS Act at 10: Exempt Offering Legacy

For some reason, 2022 turns out to have a lot of big anniversaries. I have mentioned in the blog several times that my 15-year anniversary of writing for and our other publications is fast approaching. My 30-year wedding anniversary is coming up in June. But I did not want to let one big anniversary pass by unacknowledged — the 10-year anniversary of the JOBS Act!

On April 5, 2012, the Jumpstart Our Business Startups (JOBS) Act was signed into law by then-President Barack Obama. The JOBS Act required the SEC to write rules and issue studies on capital formation, disclosure, and registration requirements. It was a rare piece of bipartisan legislation that was made up of various measures that had been circulating in Congress. Recall that in 2012, we had just made it to the other side of the Financial Crisis and the Great Recession, and there was a great deal of interest in stoking the economy by encouraging capital formation, particularly for smaller companies. On top of that, the number of public companies in the U.S. had been consistently shrinking following the pop of the late 1990s Internet bubble, the early 2000s corporate scandals and the enactment and implementation of the Sarbanes-Oxley Act.

One of the most striking things about the JOBS Act to me was the way that it reshaped the exempt offering framework. In the Fall semester when I co-teach a course on exempt offerings at Georgetown Law Center, I think about how short the class would be if we did not have all of the JOBS Act exemptions to talk about. While over the years I have sometimes been critical of some of the “new” JOBS Act exemptions, they were enacted and faithfully implemented by the SEC with the noble goal of trying to improve access to capital for smaller companies. Pre-JOBS Act, smaller companies seeking capital pretty much just had Regulation D and a few other relatively narrow exemptions to utilize, while now they have a much broader menu of options, such as Regulation A+, Regulation Crowdfunding and Rule 506(c) (unbound from the chains of general solicitation). Further, the reforms to the mandatory registration thresholds in Exchange Act Section 12(g) gave private companies more runway to raise capital and compensate employees without being forced to go public. Finally, with the SEC’s 2020 exempt offering harmonization rulemaking, these offering alternatives became more useful and the overall exempt offering framework was substantially improved.

So while the exempt offering legacy of the JOBS Act isn’t perfect, the availability of more exemptions for small business capital raising is certainly something we have all benefited from, and will continue to benefit from in the future.

– Dave Lynn