JOBS Act Breakdown – What the New Crowdfunding Law Actually Means for Startups

This is a follow up to my last post regarding the concept of crowdfunding in general and the progress of the JOBS Act through Congress (full name – Jumpstart Our Business Startups Act).   Since then, the Senate revised and passed the JOBS Act in a 73 to 26 vote.  The House then, voting on the amendments made by the Senate, passed it by a vote of 380 to 41.  This is something that both parties agree on, and were eager to work together to implement.  Josh Earnest, the White House Deputy Press Secretary, stated that President Obama will sign the JOBS Act into law this Thursday, with a bipartisan public announcement.  The President and Eric Cantor, one of the champions of the JOBS Act, will appear together for the signing of the bill into law.

This post will detail the provisions of the JOBS Act and how they will affect companies going forward.  The JOBS Act can be found here if you’d like to take a read.  After it is signed into law, the SEC has 270 days to promulgate regulations.  Expect the SEC to claim that they need more time, as the JOBS Act is a monumental change, and there are various consumer (i.e. the new investor) protections required, especially to prevent fraud which, unfortunately, could run rampant if left unchecked.  Hopefully Congress can put enough pressure on the SEC to get the regulations complete in the actual 270 day time period, and the regulations will actually have some teeth with respect to fraud without stifling startup’s ability to raise money.

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Crowdfunding – A Potential New Wave of Startup Financing

As you may have heard, Congress is now debating certain bills which would allow startups to raise funds in a new less restrictive manner, i.e. through “crowdfunding”.  The lead bill is the Jumpstart Our Business Startups (“JOBS”) Act passed by the House on March 8, 2012.  There is fierce opposition from various groups to the House version of the JOBS Act – including most states, the SEC, the New York Times, Bloomberg, accounting groups, AARP (?) and even the the old “Sherriff of Wall Street” himself, Eliot Spitzer.  In this post we’ll look at what crowdfunding is, what Congress is proposing and the effects it may have.

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