Thursday, July 5, 2012

A July 4th Perspective on JOBS Act Timing

I recently learned that July 4th wasn’t the actual date that the Declaration of Independence was signed (that was August 2). I guess the issues government officials are having with the calendar enacting rules under the JOBS Act just continues a trend that was established well over 200 years ago!
If you have been following our coverage of the JOBS Act, (Dan Tenenbaum  has been tracking the legislation’s progress particularly closely), we’ve been trying to provide insights into how this might impact our typical entrepreneurial clients. Dan’s most recent post on the topic can be viewed here.
Like our very own version of Nostradamus, Dan predicted in this much earlier post that the SEC would miss deadlines established in the law. Last week the SEC Chairman, in remarks before a House committee, acknowledged that the SEC will not meet the initial deadline for required rulemaking related to general solicitation. As you’ll recall, one of the more significant aspects of the legislation (perhaps the most significant for our typical clients) is that general solicitation will now be permitted in Rule 506 offerings, so long as all purchasers are accredited investors.
The SEC was to revise Rule 506 for this change regarding general solicitation within 90 days of the legislation’s enactment, which was on April 5, 2012. For those of you (like me) who aren’t so good at math, that deadline would expire just about the 4th of July. As Chairman Shapiro noted in her remarks, however, “the 90 day deadline does not provide a realistic timeframe for the drafting of the new rule, the preparation of an accompanying economic analysis, the proper review by the Commission, and an opportunity for public input. Although we will not meet this deadline, the staff has made significant progress on a recommendation and economic analysis, and it is my belief that the Commission will be in a position to act on a staff proposal in the very near future.”
I have no idea what it means when the SEC says that they will be in a position to act on the proposal “in the very near future,” but I wouldn’t put your weekend after the holiday plans on hold pending a release (not sure about your Labor Day plans).
Notwithstanding the not-so-shocking news that this initial deadline will be missed, and perhaps other deadlines to follow, the remarks provide a good summary of the JOBS Act and the changes that are likely to result once the SEC is able to implement the rules.
We’ll continue to track this legislation and provides updates when warranted.

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