JOBS Act Update – Startups May Now Advertise Investment Opportunities

Published on October 9, 2013

the Securities and Exchange Commission voted in July to reverse its longstanding prohibition against start-up companies advertising publicly (general solicitation) for investors. This change, called “Title II” of the JOBS (Jumpstart our Business Startups) Act, went into effect on Monday, September 23, 2013. Now, early-stage companies that are seeking equity funding may now advertise this to a certain audience of investors.

Simply put, it allows businesses to advertise their need for capital.  A few important rules apply, and more information is available from the Small Business & Entrepreneurship Council.

• Startups seeking equity funding may only use accredited investors (as defined by the SEC)
• Entreprenuers must file Form D at least 15 days prior to beginning the fund solicitation
• They must amend Form D within 30 days of completing their funding solicitation

The enactment of this change (regarding general solicitation) serves two groups: accredited investors, who will have greater access to information about investment opportunities in private companies, either as equity or other investments; and private companies who can now advertise that they are raising these funds through expanded avenues—over the Internet, through direct mail, print ads, online ads, radio or TV spots, or via the investor-entrepreneur advertising platforms that are now forming.

Title II opens the door to a wider audience of accredited investors who wish to make equity investments, including through their self-directed retirement plans. That’s right—account holders can make angel investments in startups, as well as unsecured loans, through their self-directed IRAs. If you have any questions about making these types of alternative investments through your self-directed retirement plan, give us a call at (888) 857-8058 or send us an email and we’ll get you the answers you seek.

This infographic from the SBE on equity crowdfunding gives some more information about this new opportunity. When the full weight of the JOBS Act goes into effect there will be further changes to the crowdfunding landscape and we’ll keep you apprised when those changes become active.