The JOBS ACT: SEC Guidance On The Changes To The Registration And Deregistration Requirements Under The Exchange Act

Author:Mr Ralph De Martino, Cavas S. Pavri and Eileen T. Salimbene
Profession:Cozen O'Connor
 
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H.R. 3606, also known as the Jumpstart Our Business Startups Act (JOBS Act), was signed into law on April 5, 2012. Since its enactment, the Division of Corporate Finance (the Division) of the Securities and Exchange Commission (the Commission) has provided guidance on the implementation and application of the JOBS Act in light of its existing rules, regulations and procedures. This alert is the second in a series summarizing such guidance (To read the first Alert in this series, click here).

On April 11, 2012, the Division addressed frequently asked questions related to how the JOBS Act will affect an issuer's obligation (including bank holding companies) to register a class of equity securities under Section 12(g) of the Securities and Exchange Act of 1934 (the Exchange Act) and the ability of bank holding companies to deregister a class of equity securities under Section 12(g) or to suspend a reporting obligation under Section 15(d) of the Exchange Act. The JOBS Act amends Section 12(g) and Section 15(d) of the Exchange Act, which require issuers to register certain classes of securities and file periodic reports with the Commission, by raising the thresholds triggering registration and deregistration. Previously, Section 12(g) required issuers with more than $10 million in total assets to register a class of equity securities that were issued to 500 or more shareholders of record. The JOBS Act amended Section 12(g) to increase this threshold to 2,000 shareholders of record (or 500 shareholders of record who are not accredited investors) and exclude employees who obtained company securities under an employee compensation plan from the shareholder of record calculation. As a result, companies that wish to stay private can accept more investors in pre-IPO offerings without fear that they will accidentally trigger the registration requirements under Section 12(g).

The following is the a summary of the Division's current understanding of how the amendments to Section 12(g) and Section 15(d) will affect the registration and deregistration requirements under the Exchange Act:

Registration Obligations

If an issuer that is not a bank holding company would have been required to register a class of equity securities under Section 12(g) as of a fiscal year ending before the enactment of the JOBS Act, but such registration obligation would not be triggered under the amended shareholders of record threshold, then the issuer is not required to register those securities...

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