Title I: Reopening American Capital Markets to Emerging Growth Companies
Title I of the JOBS Act contemplates those businesses that are at the stage where they are preparing to become publicly-traded and owned. If these businesses have less than $1B in revenues over the previous fiscal year, they are classified as “emerging growth companies” (EGCs) and gain a number of privileges and exemptions under the JOBS Act. These changes are designed to make the process of an initial public offering (IPO) less arduous from a regulatory standpoint. For example, the SEC now requires two years of audited financial statements, instead of the previous three years, for a business’ IPO registration statement if that business qualifies as as EGC. The same relaxed two-year requirement applies to management discussion and analysis disclosures that are also required by the SEC. Producing these disclosures is both time-intensive and costly so decreasing the requirement from three years to two years is helpful to businesses at this stage.
Other areas with relaxed requirements include executive compensation disclosures; auditor attestation reports (under the Sarbanes-Oxley Act); compliance with new accounting standards; submission and review of SEC registration requirements; restrictions on the publication of analyst research and communications; and, pre-filing communications with qualified institutional buyers.