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President Obama unveiled the Startup America Initiative on January 31, 2011, which over the course of a year came to recommend different reforms aimed at increasing small businesses' ability to raise capital.[1][2] The resulting bill passed the United States House of Representatives (H.R. 3606) on March 8, 2012.[3] The U.S. Senate began consideration of the bill on Tuesday, March 20, 2012[4] and passed an amended version on March 22, that went back to the House for another vote.[5] The amendment made by the Senate altered the crowd funding exception to require intermediaries in a crowd funding offering to be registered with the SEC.[6] President Obama expressed readiness to sign the JOBS Act when passed by both chambers.[7]

Provisions of bill

The legislation would, among many other things, extend the amount of time that certain new public companies have to begin compliance with certain requirements, including certain requirements that originated with the Sarbanes–Oxley Act, from two years to five years.[8][9]

The primary provisions of the House bill as amended would:

increase the number of shareholders a company may have before being required to register its common stock with the SEC and become a publicly reporting company. Currently, these requirements are generally triggered when a company's assets reach $10 million and it has 500 shareholders of record.[10][11] The House bill would alter this so that the threshold is reached only if the company has 500 "unaccredited" shareholders, or 2,000 total shareholders, including both accredited and unaccredited shareholders.[8][12]
To provide a new exemption from the requirement to register public offerings with the SEC, for certain types of small offerings, subject to several conditions. This exemption would allow use of the internet "funding portals" registered with the government, the use of which in private placements is currently extremely limited by current law. One of the conditions of this exemption is a yearly aggregate limit on the amount each person may invest in offerings of this type, tiered by the person's net worth or yearly income. The limit ranges from 2% of people earning (or worth) up to $40,000, up to a cap of $10,000 for people earning (or worth) $100,000 or more. This exemption is intended to allow a form of crowd funding).[13] While there are already many types of exemptions, most exempt offerings, especially those conducted using the internet, currently are offered only to accredited investors, or limit the number of non-accredited investors who are allowed to participate, due to the legal restrictions place on private placements of securities.
To relieve certain kinds of companies, which the bill calls "emerging growth companies," from certain regulatory and disclosure requirements in the registration statement they originally file when they go public, and for a period of five years after that. The most significant relief provided is from obligations imposed by Section 404 of the Sarbanes-Oxley Act and related rules and regulations. Currently, new public companies have a two year phase-in, so this bill would extend that by an additional three years. Also, smaller public companies are also already entitled to special relief from these requirements, and the bill does not change that.[13]
To lift the current ban on "general solicitation" and advertising in specific kinds of private placements of securities.[13]
To raise the limit for securities offerings exempted under Rule 505 of Regulation D from $5 million to $50 million, thereby allowing for larger fundraising efforts under this simplified regulation.[13]
To raise the number of permitted shareholders in community banks from 500 to 2,000.[13]

The JOBS Act had bipartisan support in Congress.[7][14] It was supported by many in the technology and startup communities, including Google,[15] Steve Case (founder of AOL), Mitch Kapor (founder of Lotus), Jim Newton (founder of TechShop), and many other investors and entrepreneurs. It is also supported by the National Venture Capital Association, which described the bill as modernizing regulations that were put in place almost 100 years before, by among other things facilitating use of online services to make investments in small companies. The "crowdfunding" provisions, which allow companies to sell securities through open platforms, were often likened to the Kickstarter or xvioVC online model for funding business efforts, artists and designers.[16][17]