Slower Than Expected: A Look Into the Timeline for Implementing the JOBS Act

by gavin.n.johnson on January 9, 2013

in Business Financing, Crowdfunding, Raising Capital, Securities Regulation

Flashback to April 5, 2012: President Obama puts pen to paper and signs the Jumpstart Our Business Startups Act (the JOBS Act). The President declares that startups and small businesses will “now have access to a big new pool of American investors—namely the American people.” Entrepreneurs rejoice as the potential impacts of this bill could be huge for startups and small businesses. The bill provided a framework and the SEC was handed the reins to draft rules that would govern much of new legislation. The SEC was given a 90-day deadline to implement the JOBS Act.

Flash forward more than 9 months (roughly 270 days later) to January 9, 2013: The SEC has yet to finalize the rules governing the JOBS Act. The closest thing to a final set of rules that we’ve received is proposed rules, which were discussed in the SEC’s August 29 meeting last year. Here’s a rundown of the timeline of events since the JOBS Act was signed into law:

  • April 5, 2012: President Obama signs the JOBS Act; Crowdfunding Enthusiasts Celebrate; SEC given 90-day “deadline” to implement rules
  • June 28, 2012: SEC Chairwoman, Mary Schapiro, admits the deadline is “not feasible” and states that a more realistic deadline is December 31, 2012.
  • July 4, 2012: the 90-day deadline passes without any rules passed by the SEC.
  • August 29, 2012: The SEC issues proposed rules for Title II of the JOBS Act (the lift of the ban on general solicitation)

Since August 29, the SEC has been fairly silent on implementing the JOBS Act. Recently, the FINRA Board of Governors met and discussed creating a form for potential funding portals to fill out and submit information to FINRA. This at least signals that crowdfunding, and online funding in general, is on the radar of financial industry regulators.

So who’s to blame here? Well, there’s plenty of blame to go around. The SEC failed to meet its deadlines. Congress passed a law that requires an already busy government agency to implement rules. Perhaps the SEC could have moved quicker on implementing rules. On the other hand, if Congress was deeply concerned with an expedited time frame for the JOBS Act, it could have written a more robust, self-executing, i.e. effective once the President signed the bill, piece of legislation. We know that passing legislation or rule-making is never easy (or fast). But we’re still hopeful that progress will be made and we will see the JOBS Act implemented sooner rather than later.

  • http://wac6.com/ William Carleton

    Gavin, I know my view in this regard is contrarian, but the startup community didn’t do itself any favors by dumping on the proposed rules to lift the ban on general solicitation. They may have been issued late, they may have been in proposed rather than final form, but, dammit, they were out there, and in my judgment they were fine. Better than fine, in that the SEC went out of its way to propose that the existing Rule 506 be preserved, to run alongside the brave new noisy 506. Had we all embraced the proposed rules, they might have been final now! (Granted, the opposition of the state securities regulators alone could have delayed the final rules.)

    • Anonymous

      Thanks for the comment Bill. I can’t help but agree that things may have played out differently had there been a more positive reaction to the proposed rules. I also agree that the proposed rules were (for the most part) just fine. I’m curious when you think we’ll see any further action on this subject?

      • http://wac6.com/ William Carleton

        Gosh, I wish I knew! There is so much turnover at the agency at the highest levels, it is hard to know.

        • Anonymous

          Hopefully the turnover doesn’t mean we’re taking steps backward instead of forward, i.e. the replacements should be up to speed and ready  to make decisions (ideally).

          • http://wac6.com/ William Carleton

            I don’t know! Let’s recall this statement that Elisse B. Walter issued when the proposed rules on lifting the ban on general solicitation were released: http://www.sec.gov/news/speech/2012/spch082912ebw.htm. Walter is now SEC Chairman, replacing Mary Schapiro. Stuff in the Walter release to be worried about. –Bill

  • http://www.themusingsofthebigredcar.com/ JLM

    .
    This is typical of why the government is rarely the right answer when it comes to creating jobs.

    Right this second — contrary to all the background noise on taxes, cliffs fiscal, fairness, gun control, immigration, vacations — what we really need is jobs.  J O B S  jobs  J O B S

    Jobs will inject new taxpayers into the economy, will generate more revenue than raising taxes and will cut the expense of unemployment as a full time career.

    What is missing?

    LEADERSHIP

    A group of dedicated folks could have fast tracked this into reality in 6 weeks.
    .

    • Anonymous

      You’re right, JLM. We need jobs. We also need to increase access to capital for startups and small businesses. The JOBS Act aimed to do this. The potential effects of this law could be monumental for both access to capital and job creation. Unfortunately, we’re left waiting for the final rules right now. Keep those fingers crossed that we see final rules soon!

      • Anonymous

        I don’t want to be too much of a pessimist, but I think we are going backwards unless Congress acts.

        • http://www.themusingsofthebigredcar.com/ JLM

          .
          There is no question that 2013 is another rung down the ladder.

          The collective impact of every worker in America being $25-50 per pay period short because of the impact of payroll taxes is going to be felt in the manner in which the collective impact of every Chinaman buying a Pepsi would be felt.

          Worse still is that whenever someone actually does decide to light the fire of job creation it is a process — a slow process — to build critical mass.

          I am looking for a very weak 2013.

          But we will likely have a lot of nonsense on debt ceilings, gun control and immigration.

          Focus and adult leadership — where have you gone, my friends?
          .

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