April 05, 2012, 3:55 PM — U.S. President Barack Obama has signed legislation that eliminates restrictions preventing entrepreneurs from seeking crowdsourced funding online and removes some other financial regulations for small businesses.
The Jumpstart Our Business Startups, or JOBS, Act delays some U.S. Securities and Exchange Commission regulations for some companies going public, and it removes an SEC ban preventing small businesses from advertising to solicit investors. The bill had bipartisan support in the U.S. Congress, passing on a 390-23 vote in the House of Representatives in early March and a 73-26 vote in the Senate on March 22.
Obama, in a bill-signing ceremony Thursday, focused on the provision in the bill that removes SEC restrictions on crowdsourced investments. The bill allows companies to receive up to US$1 million in funding from investors without registering with the SEC, or $2 million if the company provides investors with audited financial statements.
Individual investments are limited to $10,000 or 10 percent of an investor's annual income, whichever is less.
"The last few years have been tough on entrepreneurs," Obama said. "Credit's been tight."
The JOBS Act is an important step toward new business funding, beyond traditional funding from banks and wealthy individuals, he added. "For startups and small businesses, this bill is a potential game-changer," Obama said. "Because of this bill, startups and small business will now have access to a big new pool of potential investors, namely the American people."
U.S. residents will be able to invest online in new businesses, he said.
Several tech trade groups, including TechAmerica, the Consumer Electronics Association and the Computing Technology Industry Association (CompTIA), supported the JOBS Act. The lead sponsor of the bill was Stephen Fincher, a Tennessee Republican.
"The JOBS Act is an important way to help jump-start small businesses that need a boost in this uncertain economy," Todd Thibodeau, CompTIA's president and CEO, said in a statement. "The law opens up a new channel of vital equity capital for technology firms seeking funding to expand their operations. Of course, making it easier for small businesses to grow means new jobs for the economy as a whole."
The new law also increases the number of shareholders allowed to invest in a community bank from 500 to 2,000, and it raises some thresholds for the size of companies that have to register with the SEC.
Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is firstname.lastname@example.org.