President Obama signs JOBS Act into law

By Sarah Carabias-Rush

On Thursday, April 5th surrounded by both Democrat and Republican lawmakers, President Obama signed the JOBS Act into law.  These pro-innovation, pr0-capital formation bills are designed to make it easier for small businesses and entrepreneurs to gain access to early stage capital.

The balance between protecting investor rights and providing access to capital will be critical to the success of this bill.  President Obama called to ensure that the Securities and Exchange Commission (SEC) is properly funded in order to protect this new investor class – namely the average American citizen.

The new law will do the following:

  1. Reopening American Capital Markets to Emerging Growth Companies Act:   Also known as the “on ramp” bill. Data shows job growth is directly linked to an IPO. This bill reduces the cost of going public by providing companies with a temporary reprieve from SEC regulations by phasing in certain regulations over a five-year period, making it easier for smaller companies to go public.
  2. Private Company Flexibility and Growth Act:   Under SEC regulations, privately held companies are limited to 500 shareholders, or they must go public. This bill increases the cap on shareholders from 500 to 1,000 and would exclude from the cap securities held by shareholders who received their securities as part of an employee compensation plan. This is the first cap increase in nearly 50 years.
  3. The Small Company Capital Formation Act:  This bill raises the Regulation A SEC exemption for mini-IPOs from $5M to $50M. Raising the offering threshold helps small companies gain access to capital markets without the costs and delays associated with the full-scale SEC securities registration process. This is the first time in 20 years that the cap has been raised.
  4. Entrepreneur Access to Capital Act:   This bill legalizes crowdfunding. The SEC regulations prohibited entrepreneurs from raising equity capital from a large pool of small investors. Under this bill, companies can pool up to $1M from investors, with each individual investor limited to $10,000 or 10% of his/her annual income, whichever is less.
  5. Access to Capital for Job Creators Act:   The SEC regulations prohibited companies from “general solicitation or advertising” to protect less sophisticated investors. This bill eliminates the ban, so long as the purchasers are “accredited investors” and sufficient steps are taken to protect the less sophisticated investors. This would allow companies greater access to new sources of capital (accredited investors only).
  6. Capital Expansion Act:   This bill is designed to support the ability of community banks to make loans to start-ups and small businesses. The bill increases the number of permitted shareholders in community banks from 500 to 2,000, allowing these banks to better deploy their capital without the increased SEC compliance costs.

The Dallas Regional Chamber applauds this bipartisan effort and encourages businesses and investors alike to educate themselves on the new opportunities afforded them through this new law.  As these laws into implementation, we encourage the SEC and others to provide the leadership necessary in striking a balance between appropriate investor protections and making it easier for start-up businesses to raise the capital necessary to grow and create new jobs.

For more information on the Dallas Regional Chamber’s innovation and entrepreneurship initiatives, visit www.dallaschamber.org/innovation or www.InnovateDFW.com.  For the Chamber’s small business initiatives, visit www.dallaschamber.org/index.aspx?id=SmallBusinessInitiative. Lastly, for the more information on the Chamber’s public policy efforts, please visit www.dallaschamber.org/publicpolicy.

5 Comments

Filed under Chamber Communications, Economic Development, Innovation and Industry Clusters, Public Policy

5 responses to “President Obama signs JOBS Act into law

  1. Nice work here. Most chambers are yet to realize the impacts this Act could have on their members.

    If you are interested, here is a post on chambers and the jobs act – http://frankjkenny.com/chamber-social-media-strategy-engage/

  2. Sarah Carabias-Rush (sarahcrush)

    Thanks for your note!

  3. My pleasure Sarah. Congrats on an active blog.

  4. anthony

    I fully support any initiative to help small businesses but I think there’s a more serious problem to which little attention has been paid in the last months. I am talking about small farmers who get practically no protection from the government and they are often discriminated against by the companies holding a monopoly such as Monsanto. As a big fan of organic farming I would welcome some more initiative to protect this particular industry sector which also involves a number of small businesses but their owners are often left with little alternative but to respect the rules set by the bigger players. I think if the right solution were found to this problem it would be more useful for small business than the Jobs Act.

  5. Sarah Carabias-Rush (sarahcrush)

    Anthony, thank you for your comment. Personally I try to buy as much local, organic produce, meats, and other goods as possible. As such, I understand your passion for this issue. We will be sure to take a look at this issue to see if our membership would be in support of positions supporting small business farmers. Thank you again for your feedback.

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