The 2012 JOBS Act (short for “Jumpstart Our Business Startups Act”) was a sweeping law intended primarily to overhaul financing options for small businesses, as well as make it easier for private companies to go public (if they wanted to), and to create new intermediate options between staying private and going public for those that sought to stay private longer (aka, “mini-IPOs”).
The Act was divided into the seven sections (referred to as “Titles”):
- TITLE I - REOPENING AMERICAN CAPITAL MARKETS TO EMERGING GROWTH COMPANIES
- TITLE II - ACCESS TO CAPITAL FOR JOB CREATORS
- TITLE III - CROWDFUNDING
- TITLE IV - SMALL COMPANY CAPITAL FORMATION
- TITLE V - PRIVATE COMPANY FLEXIBILITY AND GROWTH
- TITLE VI - CAPITAL EXPANSION
- TITLE VII - OUTREACH ON CHANGES TO THE LAW OR COMMISSION
In the context of crowdfunding and online alternative investing, Titles II, III, and IV are the most relevant:
- Title II changed the rules about “public solicitation” to accredited investors for certain types of investments (like traditional angel investments and commercial real estate syndicates). These are covered by SEC Reg D.
- Title III created a new way for businesses to raise money from any investor, even ones that don’t qualify as “accredited investors”. The SEC regulations that implemented this part of law are known as Reg CF.
- Title IV includes two separate tiers (Tier 1 and Tier 2, natch). While Title III suits genuine “startup” companies (the proverbial guys or gals in a garage), Title IV is actually geared more toward companies a bit further along, who want to raise money from the general public (including non-accredited investors), but are not yet ready for a true IPO and listing on a stock market. (Some even refer to Title IV offerings as “mini-IPOs”.)
You can read more about the gory details of crowdfunding regulations on our blog.