What Companies and Investors Should Expect from the JOBS Act

August 12, 2013 James Heinsman Hedge Fund News

The JOBS Act, (Jumpstart Our Business Startups) was signed into law in April, 2012 by President Barack Obama. This ground-breaking legislation removes the prohibition on general solicitation of investors for several types of investment options. Last month the Securities and Exchange Commission adopted the rules of the JOBS Act, which are scheduled to go into effect in September. Methods used to find customers such as cold calling, mass mailing, and certain types of advertising, which were previously not permitted will now be allowed to start-up companies, hedge funds, private-equity funds, and other alternative investment funds.

Whether or not the JOBS Act is a positive move which will benefit the economy, or perhaps is a misguided decision, has been the subject of much debate. Those opposed to the change say that less-than-honest people will be able to market questionable investments to the public as true investment opportunities. The SEC commissioner himself, Luis Aquilar, made this argument in his powerful dissent when the agency voted in favor of the easing of the rules in July.

“The potential risks associated with general solicitation are well understood.  Many experienced observers, including law professors, state securities regulators, and investor advocacy groups, have submitted extensive comment letters documenting their concerns,” wrote Aguilar.

Nevertheless the JOBS Act is about to be implemented, and many concerned individuals are glad for the change. D. Brooke Harlow, executive vice president and managing director of development and communications for the Managed Funds Association believes the change bodes well for the economy.

“The impact of the new rules is likely to manifest itself in less sensational, yet more meaningful way for investors. By lifting the ban on general solicitation, Congress and the SEC have opened the door to greater transparency and information sharing between funds and those qualified to invest with them,” she writes.

“This welcome, overdue change will usher in a new communications landscape where managers may need to rethink their approach to marketing and building a brand. Some, for sure will continue to do business as they always have. Other managers are likely to embrace the change and engage appropriately in the ongoing public conversation about investing,” added Brooke Harlow.

Brooke Harlow, D. Brooke Harlow, JOBS Act, Luis A. Auilar, Managed Funds Association,

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