The Jumpstart Our Business Startups Act, or JOBS Act, was signed into law by President Obama on April 5 of 2012. The legislation had previously passed Congress the week prior to the signing with a 73-26 Senate vote and a 380-41 House vote approving the measure. While having many different functions, the one that has captured the most attention is the area surrounding Crowdfunding.
There are three exemptions within the JOBS Act that enable crowdfunding:
Title II or Accredited Crowdfunding
Issuers may raise an unlimited amount of funds under Regulation D (506c). Issuers may “generally solicit” or advertise the offer online and elsewhere. Investors must be accredited only. Platforms/Issuers must verify investors are qualified to invest under this exemption (as opposed to Reg D 506b where investors may self-certify but issuers may not advertise).
Title II or Reg CF or Regulation Crowdfunding
This exemption allows a smaller company to raise up to $1.07 million from both accredited and non accredited investors. The offers must follow a highly prescriptive set of rules. The offer must be listed on a FINRA approved funding portal or with a Broker Dealer. Investors are limited in the amount they may invest.
Title IV or Reg A+ also described as a Mini-IPO exemption
There are two tiers of Reg A+. Tier I issuers may raise up to $20 million. Tier 2 may raise up to $50 million. Tier 2 issuers may raise funds from all 50 states and issuers are exempt from state Blue Sky review. Both accredited and non accredited investors may participate. A detailed filing must be provided to the SEC and gain regulatory approval for the issuer to commence the offer. Investors are limited in the amount they may invest.
The final language of the JOBS Act of 2012 is embedded below.