Let Sleeping Regs Lie: A Diatribe on Regulation A's Futility Before and After the J.O.B.S. Act
University of Pennsylvania Journal of Business Law, Vol. 18, Iss. 1, pp. 65-120 (2016)
57 Pages Posted: 3 Feb 2016 Last revised: 15 Aug 2016
Date Written: February 2, 2016
Did Congress do the right thing when it attempted to revise Regulation A through Title IV of the J.O.B.S. Act or was their legislative effort an exercise in futility?
On April 4 2012, President Obama signed into law the J.O.B.S. (Jumpstart Our Business Startups) Act. The Act’s intent is to ease the regulatory burden on smaller companies when issuing securities in both private and public offerings. This paper’s specific focus is on the Act’s Title IV. Title IV makes revisions to Regulation A, a private securities offering exemption promulgated under the Securities Act of 1933.
A big problem with Regulation A historically is that the provisions were burdensome, costly, and time consuming. In addition to a Federal component that required the issuer to file an offering statement with the Securities and Exchange Commission, Regulation A also requires that the issuer meet filing requirements within each state jurisdiction in which the issuer planned on offering its securities. The heavy compliance burden was coupled with the fact that the most you could raise through a Regulation A offering was $5 million. As a result, Regulation A has historically been all but dormant in use.
The J.O.B.S. Act’s Title IV has sought to remedy this by making several changes to Regulation A; the most noteworthy of which involves raising the offering ceiling from $5 million to $50 million. The question then is will this be enough to offset the compliance burdens that historically have kept issuers from using Regulation A. This paper takes a critical look at the changes to Regulation A mandated under the J.O.B.S. Act and concludes that Congress missed the mark yet again with its Regulation A revisions.
Congress should have left Regulation A alone as a poorly conceived regulation that was flawed at its initial inception. Not quite an exposé, this paper calls to task Congress’ legislative thought process in the area of securities offering exemptions and seeks to hold them accountable for creating a revised offering exemption without regard for its potential end users.
Keywords: securities, Regulation A, JOBS Act, offerings, Securities Act
JEL Classification: K22
Suggested Citation: Suggested Citation