Sen. Toomey Urges SEC To Implement Stalled Jobs Act
WASHINGTON, D.C. – U.S. Senators Pat Toomey (R-Pa.) and John Thune (R-S.D.), and Representatives Kevin McCarthy (R-Calif.) and Patrick McHenry (R-N.C.) have sent a letter to the Chairman of the U.S. Securities and Exchange Commission (SEC), Mary Jo White, urging the SEC to move forward with the proposed rule to implement Section 201 of the bipartisan Jumpstart Our Business Startups (JOBS) Act. The JOBS Act passed in both the House and Senate with overwhelming bipartisan support and was signed into law by President Obama in 2012.
Section 201 of the JOBS Act removes an outdated SEC provision that currently prevents small businesses from attracting capital from accredited investors nationwide. The SEC’s general solicitation prohibition has been a roadblock for small businesses looking to obtain needed capital because it currently requires them to raise capital only from investors with whom they have a pre-existing relationship. This prohibition severely hampers the ability for small companies to obtain needed capital from investors in order to grow and create jobs. The JOBS Act would remove the solicitation prohibition and allow businesses to attract capital from accredited investors nationwide. Modifying this roadblock to capital formation has been widely supported by industry stakeholders, including the SEC’s Advisory Committee on Small and Emerging Companies.
The JOBS Act mandated that the SEC complete this and other rulemakings under the Act within 270 days of enactment, but the SEC has disregarded these mandates.
“It is astounding that the Securities and Exchange Commission would deny these startups access to the capital they need to grow and create jobs,” said Sen. Toomey. “At a time when families and businesses are struggling with the weakest economic recovery since World War II, it is simply irresponsible to hold up implementation of an act that would help grow desperately-needed jobs.”
“It is critical that we implement the JOBS Act today. This important piece of legislation will reduce the burdensome regulations on our early-stage companies and will help to increase capital flow to the entrepreneurial community which is the engine of the American economy,” said Steve Welch, founding partner DreamIt Ventures. “The JOBS Act is a great demonstration of both the good and bad of Washington. The Act was passed with complete bi-partisan support. Unfortunately, while it became law in 2012, it has yet to be implemented. Our entrepreneurial community needs the JOBS Act implemented as it will reduce the burdensome regulations on our startups while at the same time increasing capital available to the American entrepreneur.”
The text of the letter is below.
May 13, 2013
The Honorable Mary Jo White
U.S. Securities and Exchange Commission
100 F Street, Northeast
Washington, D.C. 20549
Dear Chairman White:
As you settle into your new role as Chairman of the Securities and Exchange Commission (SEC), we write to urge the Commission to take prompt action in issuing a final rule to implement Section 201 of the Jumpstart Our Business Startups (JOBS) Act. As you know, it has been more than a year since Congress passed – with broad bipartisan support – and the president signed into law the JOBS Act. We were encouraged by the commitment that you demonstrated during your confirmation process to see that the Commission completes these important rulemakings and hope that you will take steps to do so expeditiously.
The overall purpose of the JOBS Act was to facilitate capital formation to help small businesses and entrepreneurs invest, expand and create jobs. As proponents of the JOBS Act, we believe that the rule proposed by the Commission last August accomplishes this goal. The proposed rule properly implements Congress’ intent to remove the general solicitation ban in a consistent manner for all types of issuers conducting private offerings under Rule 506.
Paragraph (b) of Section 201 clearly effectuates this by providing that all issuers subject to other federal securities laws will be able to conduct private offerings pursuant to amended Rule 506. The proposed rule ensures that all purchasers of securities under Rule 506 are accredited investors, and follows Congress’ policy objectives to require that issuers take reasonable steps to verify that the purchasers are accredited investors. Adding additional or more prescriptive requirements would overturn Congress’ intent and we strongly urge the Commission not to do so.
Again, we were encouraged by your demonstrated commitment to completing the JOBS Act rulemakings and respectfully urge the commission to move forward with the proposed rule and implement a final rule in the near future.
Senator Pat Toomey
Senator John Thune
Representative Kevin McCarthy
Representative Patrick McHenry