On October 23, 2018, the Heritage Foundation hosted a discussion entitled, “Problems with the JOBS Act and How They Can Be Fixed” that featured University of Kentucky College of Law Professor Rutherford B. Campbell. The discussion centered on the impact of the 2012 Jumpstart Our Business Startups Act (the “JOBS Act”), its benefits, its shortcomings, and recommendations on how to address those shortcomings related to Titles II, III and IV.
The JOBS Act was enacted to reduce the regulatory burden on small businesses seeking to raise capital to launch or grow their business. Campbell praised Title II’s elimination of the prohibition against general solicitation and general advertising under Rule 506(c). However, he lamented that Rule 506(c) was still limited to sales to accredited investors. Campbell discussed Title III and argued that small businesses are simply not utilizing Regulation Crowdfunding. Campbell noted the mere $49 million in funds that was raised through Regulation Crowdfunding in 2017. He asserted that the limitations and concerns regarding integration “make no sense at all.” As an alternative, Campbell recommends a two-way regulatory integration safe harbor that allows for crowdfunding and permits traditional advertising while conducting a campaign. Additionally, Campbell recommends rethinking the periodic reporting requirement under Regulation Crowdfunding. By doing so, Campbell believes more small businesses will utilize Regulation Crowdfunding. Campbell then examined Regulation A+ under Title IV, noting there are still compliance, accounting and legal hindrances. As a solution, Campbell proposes federal preemption for Tier 1 offerings. Overall, Campbell advocates for the implementation of these recommendations to enhance the current regulatory framework for small business capital formation.