On April 5, 2012, the JOBS Act was signed into law. The goal of the legislation was to help private firms and startups raise the capital they need to launch and grow their businesses. These capital raises were to be done through online securities offerings. Over the past 10 years since it’s passing and signage, the JOBS Act has enabled a marked increase in capital growth across markets.
Key Components of the JOBS Act
The new rules under the JOBS Act included the creation of Rule 506(c) of Regulation D and Regulation Crowdfunding (Reg CF). Regulation A also received a securities exemption update that was essentially unused before the JOBS Act. The initial amount raised using Reg +- from both accredited and non-accredited investors were close to $50 million USD. The amount raised initially through Regulation Crowdfunding was a little over $1 million USD.
Capital formation online from accredited investors was established through Rule 506(c). Also, a financial intermediary called Funding Portals was created. As platforms regulated by the FINRA, these platforms may be used to issue securities legally through Regulation Crowdfunding, and with regulated broker-dealers.
The passage of the JOBS Act in 2012 did not put all of these rules in force at that time. For example, the SEC took some four years (until 2016) to establish the final rules for Regulation Crowdfunding.
Recent Capital Raise Rule Updates
In 2021, the SEC raised the cap on capital raised through Regulation Crowdfunding from $1.07 million to $5 million. Other improvements were also made, such as an enhancement to Regulation A+ which gives issuers the ability to raise as much as $75 million on a min-IPO offering.
The Results over 10 Years
As of April 2022, securities platforms in the crowdfunding space have raised more than $1 billion, enabling younger companies often outside the influence of well-known tech hubs to raise capital for growth.
It is obvious that the JOBS Act has brought down regulatory hindrances to entrepreneurial access to capital. It has enhanced the ability to create wealth from emerging growth companies and startups. It was passed on a bipartisan basis and enabled businesses and investors alike to benefit over time from its various provisions.
