U.S. Rep. Hensarling Says Aging Regulations Are Suffocating Startups and IPOs: It's Time to Breathe New Life Into Markets With JOBS Act 3.0

Rep. Jeb Hensarling’s op-ed in The Wall Street Journal, “To Restore U.S. Competitiveness, Pass the JOBS Act 3.0” (Monday, July 16, 2018 print edition) highlighted five initiatives of the House Financial Services Committee, of which he is the Chairman, designed to spur entrepreneurship by reinvigorating business startups and initial public offerings.

Among the 20 bills passed by the House on capital formation, known collectively as the JOBS and Investor Confidence Act of 2018, or JOBS Act 3.0, the key initiatives, according to Rep. Hensarling, are:

1. Stimulate Venture Capital Activity. JOBS Act 3.0 would provide legal certainty to angel investors and entrepreneurs by allowing them to interact without running afoul of U.S. securities laws.

2. Broaden Accredited Investor Eligibility. JOBS Act 3.0 would expand the pool of early-stage capital by broadening the definition of “accredited investors” who can participate in a non-public offering to take into account an investor’s experience and expertise.

3. Lengthen IPO Auditor Attestation Exception. JOBS Act 3.0 would specifically lengthen the “on-ramp” exception for compliance with Sarbanes-Oxley Act §404(b), which requires a public company to obtain an independent auditor’s attestation report on its internal control over financial reporting.

4. Expand Preliminary IPO Investment Indications. JOBS Act 3.0 would expand confidential filings and “testing the waters” rules to help companies time their IPOs better and communicate with accredited investors without harming retail investors.

5. Allow Creation of Venture Exchanges. JOBS Act 3.0 would encourage concentrating a small issuer’s trading into a single venture exchange to aggregate liquidity and help attract post-issuance support, including research, sales and capital commitments by market makers.

“For the sake of America’s long-term growth and competitiveness,” concluded Rep. Hensarling, “let’s hope support for the JOBS Act 3.0 will be … bipartisan [so it can become law].”  We will continue to follow these initiatives through the Senate and ultimately to the SEC for implementation.

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