The Securities and Exchange Commission recently released a rulemaking agenda revealing that it plans to finalize the Title III Equity Crowdfunding rules and the Title IV Regulation A+ rules from the JOBS Act by October 2015. Given that these rules will then require 60 days to be published in the federal register and become law, it appears likely that the earliest date small businesses will be able to utilize these JOBS Act provisions to raise capital will be the beginning of 2016.
This announcement comes nearly three years after the overwhelming bipartisan passage into law of the JOBS Act, a historic piece of legislation designed to help small businesses raise funds to launch and grow. The announcement is also a remarkable 700 days past the deadline the law itself contains mandating the date that the final crowdfunding rules were supposed be released by the SEC.
The additional delay will certainly darken the spirits of entrepreneurs who have been patiently waiting to use equity crowdfunding and Regulation A+ to raise millions of dollars to start and grow small businesses.
Under Title III of the JOBS Act, small businesses will eventually be allowed to use an online crowdfunding portal to sell equity in their business to the general public and to raise up to $1,000,000 in capital. Equity crowdfunding under the JOBS Act has been seen as a democratization of the startup and small-business investment process, and one which will put the ability of entrepreneurs to raise capital into the hands of “the crowd” and not just wealthy investors, banks and Wall Street brokers.
Title IV, or “Regulation A+,” holds even more excitement for some, given that it will allow a small or emerging business to raise up to $50,000,000 in capital from “the crowd” through a relatively inexpensive form of a public offering. For now, both appear to be on hold for at least another year.
Most industry insiders expected the final rules on crowdfunding and Regulation A+ to be released in late 2014. As recently as October, SEC Chair Mary Jo White stated in her opening remarks to the SEC’s Investor Advisory Committee, that the agency would “be pushing forward in the near term” on “finalizing our remaining JOBS Act mandates.”
Apparently, “near term” means “next year” to the SEC.
In its recently published rulemaking agenda, the SEC set a target date of October 2015 to adopt final rules regarding the offer and sale of securities through crowdfunding and small and additional issues exemptions under Regulation A+.
Will the SEC actually follow through on these agenda items at or before that time? The SEC has often not met the target dates included in its rulemaking agendas, so the October 2015 target date should not be seen as set in stone by anyone waiting to utilize these valuable funding laws.