House Small Business Subcommittee on Investigations, Oversight and Regulations Chairman David Schweikert (R-AZ) today led the 113th Congress’ first hearing on the Jumpstart Our Business Startups (JOBS) Act. This hearing focused specifically on the sluggish implementation of ‘JOBS’ Act rule promulgation by the Securities and Exchange Commission (SEC).
“The ‘JOBS’ Act was intended to increase capital formation opportunities for small businesses,” said Chairman Schweikert. “Sadly, delays by the SEC in setting out ground rules have kept these opportunities tied up in red tape on the sidelines. I hope that through better lines of communication and increased transparency we can devise a way to ease the creation and implementation of new opportunities that our small business community so desperately needs."
Just over a year ago, the bipartisan ‘JOBS’ Act was signed into law. It was designed to reduce regulations for small businesses seeking to finance their companies through the public markets and the Internet. The ‘JOBS’ Act package included two of Schweikert’s bills, the Small Company Capital Formation Act (HR 1070) and the Private Company Flexibility and Growth Act (HR 2167). The Small Company Capital Formation Act enables small businesses to raise additional capital through private stock offerings by increasing the limitation from $5 million to $50 million. The Private Company Flexibility and Growth Act removes an impediment to capital formation for small companies by raising the shareholder threshold for mandatory registration with the SEC from 500 to 2,000 shareholders. The shareholder threshold was originally adopted in 1964, and has not been modernized since then.
To implement the ‘JOBS’ Act, the SEC is required to draft several rules. However, despite deadlines set out in the law, the SEC still has not finalized them.
Materials for the hearing are posted on the House Small Business Committee’s website HERE.
Notable Witness Quotes:
Kevin Rustagi, CEO of Evolutions of Noise in Austin, TX said, “Crowd investing through the JOBS Act will be a unique and exciting way to promote new businesses. …I have used a variety of tools in creating new ventures, both for product design and business development. My hope is that my colleagues and I can continue to create new ventures in a way that leads and inspires the world. I eagerly await the day that I can fully utilize crowd funding and crowd investing to help create successful new ventures.”
William Klehm, President and CEO of Fallbrook Technologies in San Diego, CA said, “We’ve grown from negligible revenue in 2009 to more than $43 million last year. And that is money that we are investing back into the business to grow. This is a good start, but we have an opportunity to grow faster and to drive innovation faster. The only thing preventing us from doing this is affordable capital. Our ability to access capital is one of the MOST significant challenges we face. I spend over 50 percent of my time on it.”
Jean Peters, Managing Director of Golden Seeds in Midlthian, VA said, “Angel Capital Association well understands that entrepreneurs have a desperate need for capital. Companies that once could get bank loans, or at least a small business credit card, are now shut out. So, the potential for both crowd-funding and general solicitation to fuel investment is a crucial and exciting development."