The major purpose of the JOBS Act, which went into law in 2012, was to increase the ability of startups to raise capital. It was also designed to enable retail investors to participate in startup investment opportunities. The JOBS Act also reduced the oversight and reporting requirements for a class of companies called emerging growth companies, defined by the SEC as companies with less than $1.07 billion USD in gross yearly revenue during their most recently completed fiscal year. Prior to the JOBS Act, most of the time, only accredited investors were permitted to invest in startups.
Under the JOBS Act, accredited investors and non-accredited alike can participate in a wide array of potentially higher-risk but high-profit opportunities.
Benefits to Entrepreneurs and Investors
The JOBS Act removed significant regulatory hindrances, allowing them to raise funds faster and more efficiently. One of the major changes implemented by the JOBS Act was the elimination of the solicitation ban, freeing up entrepreneurs to use the Internet for marketing their businesses to thousands of prospective investors throughout the United States. Investors have benefited as well, gaining access to more investments than ever before from any geographical location in the nation. In many cases, the opportunities apply to both accredited and non-accredited investors.
Crowdfunding
The SEC regulates crowdfunding, requiring that all transactions occur through an intermediary registered with the SEC and limiting the capital raise amount of a company in a single year to $5 million USD. It also requires certain disclosures and restricts the number of non-accredited investors who may participate.
Reg CF Offerings
Under Reg CR (or Title III) of the JOBS Act, accredited investors and non-accredited investors benefit. It lets private businesses solicit up to $5 million USD from any American within a 12-month period. Before the JOBS Act was passed, private companies were restricted to raising capital from accredited investors only. Now the door has been opened to non-accredited investors.
Title II and Rule 506(c) allow many accredited investors to invest in more opportunities than ever before, which allows for a more efficient market and lower real estate investing-related fees. Just like Title II, Title III is meant to increase capital access for companies and provide investors with many more opportunities than ever before.
