JOBS Act clears Senate, one step from becoming law
Crowdfunding and relaxed rules for going public are highlights of new legislative package.
The JOBS Act has passed the Senate. In a 73 to 26 vote today, an amended version of H.R. 3606, which opens startup investing to individuals ("crowdfunding") and gives young companies more flexibility in filing to enter the public stock markets, cleared what is probably its last major hurdle before becoming law.
An amendment to increase investor protections in the crowdfunding section of the bill, Amendment 1884, passed the Senate earlier today. It increases restrictions on raising money from individuals, including a sliding scale of investment caps. And the bottom of the scale, individuals making less than $40,000 a year will only be able to invest 2 percent of their annual income in startups. Those earning more than $100,000 can invest up to 10 percent. Read more on the amendment at Crowdsourcing.org.
Since the act was amended, it has to go back to the House of Representatives for a new vote. It originally passed 390 to 23, and is expected to pass again, despite the vocal opposition saying that it will lead to increased fraud that will affect small investors the most.
President Obama has said he will sign the bill when it reaches his desk.
The JOBS (Jumpstart Our Business Startups) Act will have large impacts on the economics of startups in technology and elsewhere. Key provisions are:
- Pre-public companies will be able to advertise for investment and accept capital from small investors. Previously, only limited high-net-worth individuals, or "accredited investors," could legally be exposed to solicitation for investment, and then make investments.
- Companies will be able to stay private, and off the public stock exchanges, for longer, due to a raising of the number of private shareholders a company may have before it is forced to file with the SEC.
- The act also makes it easier for companies to go public when they decide to do so. "Emerging" businesses may now delay complying with some of the Sarbanes-Oxley regulations when filing for an IPO.
On tomorrow's Reporters' Roundtable, we will be discussing and debating the JOBS Act and its impact on technology startups. The show will be live at 10 a.m. Pacific, 1 p.m. Eastern. The live video will be on the Reporters' Roundtable channel on CNET TV.