Section 12(g)

SEC Proposes Amendments to Implement JOBS Act Mandate for Exchange Act Registration Requirements

As mandated by the Jumpstart Our Business Startups Act (JOBS Act), on December 17 the Securities and Exchange Commission approved the issuance of proposed amendments to revise the rules related to the thresholds for registration, termination of registration, and suspension of reporting under Section 12(g) of the Securities Exchange Act of 1934.

Among other things, the proposal would:

  • Amend Exchange Act Rules 12g-1 through 4 and 12h-3 which govern the procedures relating to registration, termination of registration under Section 12(g), and suspension of reporting obligations under Section 15(d) to reflect the new thresholds established by the JOBS Act
  • Apply the definition of “accredited investor” in Rule 501(a) under the Securities Act of 1933 to determinations as to which record holders are accredited investors for purposes of Exchange Act Section 12(g)(1).  The accredited investor determination would be made as of the last day of the fiscal year.

The JOBS Act revised Exchange Act Section 12(g) to raise the threshold at which an issuer is required to register a class of equity securities.  Under the revised threshold, an issuer that is not a bank or bank holding company is required to register a class of equity securities under the Exchange Act if it has more than $10 million of total assets and the securities are “held of record” by either 2,000 persons, or 500 persons who are not accredited investors

The SEC will seek public comment on the proposed rule amendments for 60 days following their publication in the Federal Register.

Letter from the SEC to Rep. Darrell Issa on Capital Formation and Section 12(g) of the Securities Exchange Act

On April 6, SEC Chairman Schapiro issued a public letter to Rep. Darrell Issa, Chairman of the Committee on Oversight and Governmental Reform, in response to his letter on March 22 concerning the SEC and capital formation. Among the items discussed in the letter, Chairman Schapiro addressed Section 12(g) of the Exchange Act and the limit of 500 holders of record before a company must register its securities with the SEC. In light of the burdensome nature of registering the securities of smaller companies as well as the ability of much larger companies to aggregate multiple shareholders under a single holder of record, thereby avoiding registration, Chairman Schapiro stated, “I believe that both the question of how holders are counted and how many holders should trigger registration need to be examined.” SEC Letter.