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The On Passage Of The Jobs Act

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Upon passage of the JOBS Act in 2012, the startup community celebrated the bill’s potential. Its intended effect as to herald the next “big thing” by uncorking the excess cash tied up by the meltdown of 2007. The age of crowdfunding had arrived, or so it seemed. While the JOBS Act has been successful in accelerating capital formation, the intentional sequester of Title III by the SEC has the most promising aspect of the Act, Crowdfunding, indeterminate on-hold. Three years of waiting for SEC regulators to define the boundaries and rules of how crowdfunding will become a reality in the U.S. While such delays have proved frustrating to entrepreneurs and investors alike, it has also provided ample time for regulators to examine similarly …show more content…

However, these obligations such as including pre-issuance financial statement disclosures that must be certified or independently audited, can incur significant costs for issuers. These incurred regulatory and administrative costs make crowdfunding an untenable pursuit for many emerging businesses; especially those businesses seeking to raise small amounts of capital. Limited access to seed capital is one of the most common barriers to entrepreneurship in the U.S. As such, a crowdfunding framework that imposes cost prohibitive administrative and regulatory requirements on lower-level capital formation is quite counterproductive.

Historically speaking, there have been other attempts to establish a registration exemption for crowdfunded securities, such as U.S. - H.R. 2390 (the Entrepreneur Access to Capital Act). It did not require issuers to provide significant financial documents to investors in order for them to obtain an exemption from registration. Instead the bill’s provisions merely asked intermediaries to “take reasonable measures to reduce the risk of fraud.” Nevertheless, as the progenitor bill transformed into what became the JOBS Act, legislators negotiated additional specific disclosure obligations.
For example, under Title III, issuers seeking under $100,000 must provide certified financial statements to investors, issuers seeking between $100,000 and $500,000 must submit financial

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