SEC's New JOBS Act Rules will Help Small Firms Raise Capital

We're pleased the Securities and Exchange Commission (SEC) finalized rules today that will make it easier for small businesses to raise capital through small public offerings. We know from our scientific opinion polling that access to capital is a longstanding problem for small businesses. These rules increase the options for small businesses struggling to gain the capital they need.

Specifically, the new rules will increase the amount small companies can raise under the SEC's Regulation A from $5 million to $50 million per year while streamlining the process. Regulation A provides businesses with an easier way to raise capital through small public offerings, as long as they provide the investing public with certain critical disclosures about the company and the securities being offered. Congress included raising the cap on Regulation A offerings as a provision of the Jumpstart Our Business Startups (JOBS) Act, signed into law in 2012 to help address businesses' lack of access to capital but the SEC did not finalize the rules until today.

In addition to raising the cap on the amount that can be raised, the SEC made a change to Regulation A offerings that exempt businesses from registering with financial regulators in every state where prospective shareholders reside. Under current Regulation A rules, businesses interested in offering shares to potential investors must have each offering reviewed by both the SEC and regulators in each state where that business is interested in seeking investors. The rules implemented by the SEC today will streamline this lengthy and burdensome step, which many experts say have hindered the widespread use of Regulation A as a capital raising tool in years past. Under the new rules, businesses will go through one review process with the SEC.

The new rules also include investor protections, such as including additional review requirements for those raising between $20 and $50 million. And the SEC is strengthening the standards for issuer eligibility by requiring Regulation A offerers to file their paperwork with the SEC for public review several weeks before they start selling to investors, giving state regulators time to review the paperwork to spot potential problems.

As our nation's biggest job creators, small businesses are vital to our economic strength. They are looking to policymakers for long-term solutions that will make it easier for them to gain access to the capital they need to grow and thrive. These new rules are a step forward in streamlining the process for small businesses interested in gaining capital they need to fuel our economic success.