After the Pebble’s huge success on Kickstarter, every startup in the country realized that the crowdfunding provision in the JOBS Act might actually create a viable new method for raising capital.
The crowdfunding provision of the JOBS Act (Title III), however, has eclipsed a potentially more significant section of the JOBS Act, Title II. That section eliminates the prohibition against public solicitation and advertising in private placements involving accredited investors. Currently, the founders of a startup are prohibited from pitching an investment round to anyone other than people with whom the founders have a preexisting relationship. “Public solicitation and advertising,” such as asking for investments over the internet, on billboards, through radio spots or on country club billboards, is strictly prohibited. The JOBS Act removed that restriction.
So you’re probably asking, “Why does the restriction still exist if President Obama signed the JOBS Act on April 5, 2012?” Because the Act required the Securities and Exchange Commission to come up with regulations to enact the lifting of the restriction. So if you knew that, you’re probably asking, “Didn’t the JOBS Act require the SEC to enact those regulations within 90 days after the signing of the JOBS Act?” Yes, it did. The SEC, however, has said that it’s taking longer to figure things out.
The SEC has an open meeting scheduled for August 29 to discuss the Title II regulations. We’ll see what happens then.