Amendments to the JOBS Act

On March 31, 2017, the U.S. Securities and Exchange Commission ("SEC") adopted certain amendments with respect to fundraising rules, including:  (i) changes to the dollar amounts used in Regulation Crowdfunding; and (ii) an increase in the revenue threshold amount for determining eligibility for benefits offered to "emerging growth companies" ("EGCs") under the Jumpstart Our Business Startups Act ("JOBS Act").  The foregoing changes represent adjustments for inflation, which the SEC is required to make for certain JOBS Act rules at least every five (5) years from its enactment on April 5, 2012. Pursuant to the amended rules:

  • the maximum aggregate amount an issuer can sell under Regulation Crowdfunding in a twelve (12)-month period has been increased from $1 million to $1.07 million;
  • the threshold amount for assessing an investor's annual income or net worth to determine investment limits has been increased from $100,000 to $107,000;
  • the amount of Regulation Crowdfunding securities permitted to be sold to an investor if annual income or net worth is less than $107,000 has been increased from $2,000 to $2,200; and
  • the maximum amount that can be sold to an investor under Regulation Crowdfunding in a twelve (12)-month period has been increased from $100,000 to $107,000.

In addition to the foregoing inflation adjustments, the SEC adopted certain technical amendments to conform several rules and forms to the statutory changes outlined above.

The SEC also amended the threshold amount for qualifying as an EGC under the JOBS Act.  In general, an issuer that qualifies as an EGC is exempt from certain regulatory requirements (e.g., with respect to disclosure and shareholder voting) that can be burdensome and costly for a small public company.  Originally, an EGC was defined under the JOBS Act as any issuer with total annual gross revenues of less than $1 billion during its most recent fiscal year.  As a result of the recent changes, however, the inflation-adjusted threshold to meet the definition of an EGC has been increased to $1.07 billion.

All of the foregoing amendments became effective upon being published in the Federal Register on April 12, 2017.

If you have questions about this Alert, please contact Yelena Maltser at 212.573.8429 or ymaltser@sglawyers.com.

Cheryl Spratt