Bankers and financial institution executives should note that the Securities and Exchange Commission has released guidance and other information regarding the Jumpstart Our Business Startups Act of 2012, or JOBS Act, that became law a few weeks ago.
The JOBS makes significant changes to how banks and other businesses can raise capital. It does this by:
· Easing the IPO process and reporting requirements for emerging growth companies;
· Reducing general solicitation and general advertising restrictions for certain private placements;
· Creating a new $50 million small public offering exemption;
· Creating a “crowdfunding” private placement exemption; and
· Perhaps most importantly, for community banks and bank holding companies, increasing the number of shareholders a private company may have without having to publicly report under the Securities Exchange Act of 1934, including specific thresholds for banks and bank holding companies.
A summary of the JOBS Act is provided here.
The recent SEC guidance and other information is outlined below.
FAQs for Exchange Act Registration and Deregistration
On April 11, 2012, the SEC Division of Corporation Finance issued Frequently Asked Questions to provide guidance regarding Title V and Title VI of the JOBS Act. These titles provide for an increase in the number of holders of record that triggers periodic reporting requirements with the SEC under the Exchange Act. For banks and bank holding companies, the threshold number of record holders has been increased to 2,000 persons (increased from 500). Banks and bank holding companies can also now deregister and suspend Exchange Act reporting if the number of holders of record of a class of securities falls below 1,200 (increased from 300).
The FAQs provide information regarding how banks can terminate a not yet effective registration process, or alternatively deregister an effective registration, if the bank no longer meets the registration requirements as a result of the increase in the threshold of shareholders of record. The FAQs further clarify that an issuer may exclude from the holders of record calculation persons who received securities pursuant to an employee compensation plan in transactions exempted from registration requirements, even though the Commission has not yet revised the definition of “held of record” as required by the new law.
FAQs for Emerging Growth Companies
On April 16, 2012, the SEC Division of Corporation Finance issued Frequently Asked Questions to provide guidance under Title I of the JOBS Act. Title I provides scaled disclosure provisions for emerging growth companies, including, among other things, two years of audited financial statements in the Securities Act of 1933 registration statement for an initial public offering of common equity securities, the smaller reporting company version of Item 402 of Regulation S-K, and no requirement for Sarbanes-Oxley Act Section 404(b) auditor attestations of internal control over financial reporting. Title I also enables emerging growth companies to use test-the-waters communications with Qualified Institutional Buyers or “QIBs” and institutional accredited investors and liberalizes the use of research reports on emerging growth companies. The FAQs clarify how an issuer can qualify as an emerging growth company, applicable dates for qualification and registration, and various reporting and disclosure requirements.
FAQs for Confidential Submission Process for Emerging Growth Companies
On April 10, 2012, the Division of Corporation Finance issued Frequently Asked Questions to provide guidance regarding the confidential submission of registration statements for review pursuant to new Securities Act Section 6(e). Section 6(e) provides that an emerging growth company may confidentially submit to the Commission a draft registration statement for confidential, non-public review prior to public filing. The FAQs clarify which registration statements are eligible for submission, among other specific requirements.
Comments on JOBS Act Rulemaking
Finally, on April 11, 2012, the SEC requested public comments before proposing any rulemaking under the JOBS Act.
Links to the SEC issuances follow: