SEC implementation of new laws could hurt startups
Senators Pat Toomey (R-PA) and John Thune (R-SD) teamed up to write a letter to the Securities and Exchange Commission (SEC) Chairman, Mary Jo White, stating that rules created and proposed by the SEC for startups, despite being based on the JOBS Act, could counteract the benefits of the bill.
The letter reads, “The additional measures that the SEC has proposed go beyond Congress’s clear mandate in Section 201, and would impose unnecessary and burdensome requirements that will have adverse effects on small businesses and investors, and undo the progress made under Section 201.”
Further, the Senators note, “As sponsors of this provision, we respectfully urge the Commission to note Congressional intent and not adopt the additional proposals in order to ensure the benefits of the JOBS Act are realized for small businesses and investors.”
The JOBS Act
The JOBS Act was initially designed to create jobs and grow businesses by reducing regulations surrounding the process of investment, and was signed into law in the spring of 2012. Senators Toomey and Thune assert that the SEC is propsing rules that actually make the investment process more difficult.
This summer, the JOBS Act did away with a rule dating back 80 years that banned the general solicitation and advertising of Regulation D (“Reg D”) offerings, putting businesses in a situation where they previously could not say publicly that they were fundraising, rather could only solicit investors they knew personally or had been personally introduced to. Now, accredited investors must have a net worth over $1 million, or an individual income exceeding $200,000 for a minimum of two years, or a joint net worth with a spouse of over $300,000 for a minimum of two years.
As the push and pull at the SEC continues, Chairman White is in a tight spot, as the JOBS Act cannot truly go into effect until all rules are finalized.