Securities Act of 1934

SEC Adopts Jobs Act Amendments

 

On April 5, the Securities and Exchange Commission (“SEC“) announced that it has adopted amendments to increase the amount of money companies can raise through crowdfunding to adjust for inflation. It also approved amendments that adjust for inflation a threshold used to determine eligibility for benefits offered to “emerging growth companies” (“EGCs“) under the Jumpstart Our Business Startups (JOBS) Act.

The SEC is required to make inflation adjustments to certain JOBS Act rules at least once every five years after it was enacted on April 5, 2012. In addition to the inflation adjustments, the SEC adopted technical amendments to conform several rules and forms to amendments made to the Securities Act of 1933 (“Securities Act“) and the Securities Exchange Act of 1934 (“Exchange Act“) by Title I of the JOBS Act. The Commission approved the new thresholds on March 31. They will become effective when they are published in the Federal Register.

The Commission provided a helpful chart that sets out the inflation-adjusted amounts for the maximum amount of offerings and investment limits, specifically: (i) the maximum aggregate amount an issuer can sell in a 12-month period; (ii) the threshold for assessing an investor’s annual income or net worth to determine investment limits; (iii) the lower threshold of Regulation Crowdfunding securities permitted to be sold to an investor if annual income or net worth is less than the adjusted thresholds; (iv) the maximum amount that can be sold to an investor under Regulation Crowdfunding in a 12-month period; and (v) the inflation-adjusted amounts for determining financial statement requirements.

Also, pursuant to sections of the Securities Act and the Exchange Act added by the JOBS Act, which define the term “emerging growth company,” every five years the Commission is directed to index the annual gross revenue amount used to determine EGC status to inflation. To carry out this statutory directive, the SEC has adopted amendments to Securities Act Rule 405 and Exchange Act Rule 12b-2 to include a definition for EGC that reflects an inflation-adjusted annual gross revenue threshold. Press Release.

FINRA Revised Proposed Amendments to NASD Rule 2340

On March 7, FINRA issued a revised proposal to amend NASD Rule 2340 to address the per share estimated values at which unlisted Direct Participation Programs and unlisted Real Estate Investment Trusts are reported on customer account statements.  Among the changes made to the previous proposed amendments to the rule, the revised proposal no longer requires general securities members to provide a per share estimated value, unless and until the issuer provides an estimate based upon an appraisal of assets and liabilities in a periodic or current report filed under Securities Exchange Act of 1934.  In addition, the revised proposal provides members firms with the option of using a modified net offering price or designating the securities as “not priced” during the initial offering period.  Comments to the revised proposal must be submitted by April 11.  FINRA Regulatory Notice.