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Copyright (c) 2012 Hastings Business Law Journal
Hastings Business Law Journal

STUDENT NOTE: The JOBS Act: Unintended Consequences of the "Facebook Bill"

Fall, 2012

Hastings Business Law Journal

9 Hastings Bus. L.J. 99


Tyler Adam*


On April 5, 2012, President Barack Obama signed the Jumpstart Our Business Startups Act ("JOBS Act"). The JOBS Act is intended to stimulate job creation and economic growth by improving the ability of emerging growth companies to gain access to the public capital markets. 1 In part, the JOBS Act amended 12(g) of the Securities Exchange Act of 1934 2 ("1934 Act").

Prior to the JOBS Act, 12(g) required any securities issuer with total assets exceeding $ 10 million 3 and a class of nonexempted securities held of record by five hundred or more to file a registration statement with the Securities Exchange Commission ("SEC"). 4 Although 12(g) does not require companies to list shares on the public markets, once a company is required to register with the SEC, it may be induced to go public to benefit from being able to raise capital on the public markets. 5 Therefore, the rule effectively forces companies meeting its requirement to initiate an initial public offering ("IPO"). 6

The JOBS Act amended 12(g), first, by raising the shareholders of record threshold from 500 to either 2,000 persons, or 500 persons who are not accredited investors (the "Threshold Provision"). 7 Second, the Act further expanded the 12(g) mandatory registration threshold by excluding persons who received securities pursuant to employee compensation plans in transactions exempted from the registration requirements of 5 of the Securities Act of 1933 ("1933 Act"). 8
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