President Obama signed the JOBS Act today, April 5, 2012. “Ready, set, crowdfund!” was the constant drum beat on Twitter.
In one of the most perplexing moments of the day, the White House released a statement which said “The President is directing the Treasury Department, Small Business Administration and Department of Justice to closely monitor the implementation of this legislation to ensure that it is achieving its goals of enhancing access capital while maintaining appropriate investor protections. These agencies, consulting closely with the SEC and key non-governmental stakeholders, will report their findings to the President on a biannual basis, and will include recommendations for additional necessary steps to ensure that the legislation achieves its goals.” So it is the SEC vs the SBA?
The immediate SEC response on signing day was rather tepid. We know they know the JOBS Act was signed, because they released a statement outlining a procedure to use for submitting registration statements for confidential review pursuant to the JOBS Act. The review is free as no fee is required. Perhaps there is no statutory mechanism to impose a fee on a draft. Since only a “draft” need be submitted, its not clear if it needs to be signed, and whether you need accountants consents and the usual attendant detail. The SEC statement says “Please note that this submission is not a public filing and that a registration statement submitted through this process is not filed for purposes of Section 5 of the Securities Act of 1933.” For crowdfunders, I believe that is SEC speak meaning no oral offers to sell securities may be made at this time, the draft canot be provided to anyone or otherwise published, and don’t even think about posting anything on your web site relating to the sale of securities.
A group has been formed to establish a self-regulatory organization for crowdfunding portals. The idea is regulation light, and avoid the jaws of FINRA. The National Crowdfunding Association has been formed to promote best practices.
Services for crowdfunders are springing up like weeds. One offers real-time planning, reporting, analysis, compliance, transparency and GAAP compliant financial statements. Another offers to create and publish via a crowdfunding portal a complete offering package that will comply with SEC rules.
And the general solicitations have begun. One offers potential shareholders a ground floor opportunity and is referred to on Twitter as perhaps the next Google. Another appears to offer entrepenuers an online news release site which some have chosen to use to seek funding. We are not yet advising clients to place adds related to the sale of securities on the Interweb.
The barn doors are open. The clowns are running the circus. Choose your metaphor. Investors and those seeking capital are advised to proceed with caution.
Check jobs-act-info.com frequently for updated information on the JOBS Act, the Dodd-Frank Act and other important securities law matters.