The SEC recently proposed rule amendments as part of its implementation of Title V and Title VI of the JOBS Act.  These proposed amendments reflect the increased registration, termination of registration and suspension of reporting thresholds provided by the JOBS Act.  The substance of these amendments are summarized below.

  • Amendments to rules adopted under Section 12(g) of the Securities Exchange Act of 1934.  Under revised Exchange Act Section 12(g), as amended by the JOBS Act:
    • an issuer that is not a bank or bank holding company is required to register a class of equity securities if it has more than $10 million of total assets and the securities are “held of record” by either 2,000 persons or 500 persons who are not accredited investors;
    • an issuer that is a bank or bank holding company is required to register a class of equity securities if it has more than $10 million of total assets and the securities are “held of record” by 2,000 persons; and
    • an issuer that is a bank or bank holding company may terminate its registration of a class of securities if that class is held of record by less than 1,200 persons, while the threshold for termination of registration and suspension of reporting for other issuers remains at 300.

The SEC proposed changes to Exchange Act Rules 12g-1, 12g-2, 12g-3, 12g-4 and 12h-3, which govern registration, termination of registration and suspension of reporting obligations, in order to conform to the new JOBS Act thresholds. The proposed revision to Rule 12g-1 would conform the rule to the asset and holder of record thresholds established by the JOBS Act; the proposed revisions to Rules 12g-2 and 12g-3 would conform the rules to the holders of record thresholds established by the JOBS Act; and the proposed revisions to Rules 12g-4 and 12h-3 would conform the rules to the suspension of reporting obligations thresholds established by the JOBS Act.

  • Amendments to Exchange Act Rules 12g-1 through 12g-4 and 12h-3 to permit savings and loan holding companies to register, terminate registration and suspend reporting using the same, higher thresholds that apply to banks and bank holding companies so that all such savings and loan holding companies are treated consistently with other depository institutions under SEC rules.
  • Applying the definition of “accredited investor” to determinations made under Exchange Act Section 12(g)(1), as amended by Section 501 of the JOBS Act, which increased the threshold that requires registration to total assets exceeding $10 million and a class of equity security held of record by either 2,000 persons or 500 persons who are not accredited investors.  Such determination of “accredited investor” status would be made on the last day of the fiscal year, and not at the time of the sale of the securities.

In addition, the SEC proposed amendments to the definition of the phrase “held of record” in Exchange Act Rule 12g5-1 to exclude certain securities with respect to the determination of whether an issuer is required to register a class of equity securities under Exchange Act Section 12(g)(1).  The proposed amendments would conform Rule 12g5-1 to the new statutory exclusion in Section 502 of the JOBS Act, which provides that the definition of “held of record” shall not include securities held by people who received such securities pursuant to an “employee compensation plan” in exempt transactions under Section 5 of the Securities Act.  Additionally, the SEC proposed an amendment to Rule 12g5-1(a)(7) that would provide that a person is deemed to have received the securities pursuant to an “employee compensation plan” if the securities were received pursuant to a compensatory benefit plan in transactions meeting the conditions of Securities Act Rule 701(c).

While the Exchange Act sections under which these rules are issued were amended as of the effective date of the JOBS Act (April 5, 2012), the rules issued under that act still reflected the pre-JOBS Act statutory thresholds.

The SEC has requested comments on the proposals, which must be submitted no later than 60 days after the publishing of the proposals in the Federal Register.