The SEC has a very large task ahead of it in order to complete adoption of the regulations required under the JOBS Act.
One provision of the JOBS Act permits general solicitation of investors by a company if only accredited investors are allowed to invest. This will permit the use of a web portal or other electronic platform for the solicitation of accredited investors. Congress gave the SEC a deadline of July 4, 2012 to adopt regulations specifying the steps a company is required to take in order to clearly establish that each investor is accredited. The SEC proposed these regulations on August 29, 2012. Because the SEC had invited comments before the proposed regulations were issued and those comments were factored into the proposed regulations, we had anticipated that final regulations would issue soon after expiration of the comment period.
We were wrong. At an American Bar Association meeting on November 16, 2012, a panel of Senior Staff from the SEC’s Division of Corporate Finance indicated that they received a large number of helpful, but complicated comments. The comment period has closed. The panelists expressed that they are finding it difficult to finalize this regulation. They are actively working on it, but are unable to provide a time frame within which the regulation will become final.
In the meantime, the SEC is working on regulations for the crowdfunding title of the JOBS Act. They are finding that there is a lot of interest in, and passion about, crowdfunding. They recognize that complicated regulations will make crowdfunding hard to use, and they are seeking to avoid this. However, they are required to work within the statutory framework, as well as stay consistent with the SEC’s mission. The Staff has stated that it will be very difficult for the SEC to meet the statutory deadline of December 31, 2012 for the promulgation of the crowdfunding regulations.
As a practical matter, it is already too late for the SEC to meet the statutory deadline for crowdfunding regulations. The law requires that proposed regulations be published and a 30 day comment period be provided before regulations can become final. Since proposed regulations have not yet been published, it is no longer possible for the crowdfunding regulations to be finalized by the end of the year.