The U.S. Senate granted approval March 22nd; while the House of Representatives approved March 27th. The Act was signed into law by the President on April 5th. This law creates a category of companies called “emerging growth companies” that stay under the radar of the Securities and Exchange Commission (SEC), for up to five years. This class of companies includes entities with gross revenues of less than $1 billion in the most recent fiscal year. Reportedly, this population includes 14% of companies.
The logic – relax rules that limit the ability of small businesses to garner capital, thereby assisting their growth. As these businesses thrive, hiring increases.
Benefits afforded to emerging growth companies by this law include –
-Exempt from the requirement of separate shareholder approval of executive compensation;
-Need only to provide audited financial statements for two years, as part of their IPO registration;
-Exempts external auditors from attesting to the assessment of internal controls provided by management;
-Exempt from any firm rotation requirement being considered by the Public Company Accounting Oversight Board;
-Raises the number of investors to 2,000 and investment value to $50 million, prior to SEC registration;
-Eases certain conflict-of-interest restrictions between the analysis and investment banking sides of a firm with respect to offerings; and,
-Exempt from soliciting investment from only sophisticated investors. Reportedly, this provision will allow companies to seek funds over the internet, i.e. crowdfunding.
But don’t expect any sudden changes on Monday (4/9). The SEC has 270 days to review the law and revise current regulations. Items of this law alter elements of the following laws – Securities Act of 1933; Securities Exchange Act of 1934; Investor Protection and Securities Reform Act of 2010 (title IX of the Dodd-Frank Wall Street Reform and Consumer; Sarbanes-Oxley Act of 2002; Reg D; Rule 144A…
Detractors believe that loosening regulations will only lead to abuse and fraud. According to the final version, the SEC will report to Congress every two years, tracking the incidence of fraud associated with these changes.© Copyright 2012 Regis Quirin, All rights Reserved. Written For: CFO Tips - What you need to know, to be a CFO TODAY!