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Dear SEC: Please Don't Abdicate Your Jobs Act Responsibility to Make Forthcoming "Regulation A+" Exemption from Registration Available to Small Businesses
  • Rutheford B Campbell, Jr., University of Kentucky
Title IV of the Jobs Act amends Section 3(b) of the Securities Act of 1933 by adding a new Section 3(b)(2). This new statute requires the Commission to adopt regulations (“Section 3(b)(2) Regulations”) that provide an exemption from registration for offerings of up to $50 million. The anticipated Section 3(b)(2) Regulations are often referred to as “Regulation A+”. The name used for Title IV of the Jobs Act – “Small Company Capital Formation” – indicates that the purpose of the legislation is to provide small businesses an efficient access external capital. The provisions of Title IV also suggest Regulation A as an appropriate model for the new Section 3(b)(2) Regulations (thus the popular moniker, “Regulation A+”). In order for the new Section 3(b)(2) Regulations to provide an efficient access to external capital for small businesses, the new Regulations must solve two problems that have destroyed Regulation A, causing it to fall into essentially total disuse. The first problem for Regulation A is that it is somewhat out of balance, requiring filing and disclosure requirements that may be overly burdensome and that unnecessarily drive up the offering costs of meeting the requirements for the exemption. The second problem – and one that is much more important regarding the non-use of Regulation A – is the effect of registration requirements under state blue sky laws. Meeting the state registration requirements drives the costs of Regulation A offerings to levels that price Regulation A out of the market for exemptions from registration. New Section 3(b)(2) provides the Commission with ample authority to construct new Section 3(b)(2) Regulations that remedy these problems for small businesses attempting to access external capital. The Commission is fully empowered to enact Section 3(b)(2) Regulations that properly balance investor protection and capital formation by requiring efficient levels of disclosures for Section 3(b)(2) offerings. The Commission is also fully empowered to preempt completely state authority over offerings under Section 3(b)(2) Regulations. Unfortunately, history demonstrates that the Commission is unwilling to use its delegated authority to expand the preemption of state authority over state blue sky registration requirements. Without complete preemption of state authority, the Section 3(b)(2) Regulations will be worthless to small businesses, wrecking the apparent purpose of Title IV of the Jobs Act, which is to provide small businesses with an efficient and balanced access to external capital.
  • Title IV,
  • Job Acts,
  • SEC,
  • Securities Act of 1933,
  • Securities and Exchange Commission,
  • Regulation A,
  • Regulation A,
  • small business,
  • small companies,
  • securities,
  • external capital,
  • capital. Section 3(b)(2)
Publication Date
November 13, 2012
Citation Information
Rutheford B Campbell. "Dear SEC: Please Don't Abdicate Your Jobs Act Responsibility to Make Forthcoming "Regulation A+" Exemption from Registration Available to Small Businesses" (2012)
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