Status of SEC Rulemaking Pursuant to the JOBS Act

While the JOBS Act passed back in April of this year had several provision that took immediate effect, including the IPO on-ramp and shareholder limit increase provisions, many of the changes in the law also required additional rule making on the part of the Securities and Exchange Commission in order to become effective. While the Act set deadlines on the rule making process ranging from 90 days to 270 days, SEC Chairwoman Mary Shapiro recently testified before a House Committee that some deadlines will not be met, while for other deadlines it is unclear whether the SEC will meet them.

Rules pursuant to Section 201(a) of the JOBS Act regarding general solicitation and advertising in private offerings to accredited investors or qualified institutional buyers were required by the JOBS Act to be implemented within 90 days. Chairwoman Shapiro stated that deadline was not feasible; however, the SEC has scheduled a meeting to consider rules pertaining to Section 201(a) on August 22, 2012; the SEC often adopts proposed rules at the meeting at which they are considered.

Perhaps of more importance to startups are the crowdfunding provisions of the JOBS Act. Chairwoman Shapiro stated that while the various divisions of the SEC are currently working on recommendations to the Commission, she could not definitively state whether the SEC would meet the 270-day deadline set by the JOBS Act, which expires December 31, 2012. However, many observers believe that it is highly unlikely the SEC will be able to meet the deadline, as the SEC is still behind on the rule making required by the Dodd-Frank Act passed two years ago (although many proposed Dodd-Frank rules are expected to be adopted at the same meeting as the Section 201(a) rules).