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SEC Approves Amendments to Implement Provisions of the JOBS Act and FAST Act

On May 3, the Securities and Exchange Commission approved amendments to revise certain rules under the Securities Exchange Act of 1934 (Exchange Act). A detailed discussion of the proposals on which these rule amendments are based can be found in the Corporate & Financial Weekly Digest edition of January 9, 2015. These final rule amendments, which implement provisions of the Fixing America’s Surface Transportation Act (FAST Act) and the Jumpstart Our Business Startups Act (JOBS Act):

  • Amend Rules 12g-1 through 12g-4 and 12h-3 of the Exchange Act (relating to the procedures for registration and termination of registration under Section 12(g) and suspension of reporting obligations under Section 15(d)) to reflect the new thresholds established by the JOBS Act and the FAST Act. Titles V and VI of the JOBS Act raised the threshold for registration from 500 holders of record and total assets exceeding $1 million to either 2,000 holders of record or (except for banks and bank holding companies) 500 holders of record who are not accredited investors and total assets exceeding $10 million. The JOBS Act also raised the threshold at which a bank or bank holding company (but not other registrants) may terminate or suspend the registration of a class of its securities under the Exchange Act from 300 to 1,200 persons. The FAST Act raised the threshold for registration as well as termination and suspension of registration for savings and loan holding companies to match the thresholds applicable to bank and bank holding companies.

  • Apply the definition of “accredited investor” used for purposes of private placements pursuant to Regulation D under the Securities Act of 1933 (Securities Act) to determinations of which record holders are accredited investors for purposes of whether an issuer is required to register a class of securities under Section 12(g) of the Exchange Act, and provide that an issuer must make the accredited investor determination as of the last day of its fiscal year.

  • Amend the definition of “held of record” to provide that, when determining whether an issuer is required to register a class of equity securities with the SEC under Section 12(g) of the Exchange Act, an issuer may exclude securities held by persons who received such securities (1) under an employee compensation plan in transactions exempt from, or not subject to, the registration requirements of Section 5 of the Securities Act; and (2) in certain circumstances, in exchange for securities received under an employee compensation plan.

The final rule amendments also establish a non-exclusive safe harbor under Rule 12g5-1(a)(8) for determining holders of record for purposes of evaluating an issuer’s registration obligations under Section 12(g), that permits an issuer to:

  • deem a person to have received the securities under an employee compensation plan if the plan and the person who received the securities under the plan met the conditions of Securities Act Rule 701(c); and

  • solely for the purposes of Section 12(g), deem the securities to have been issued in a transaction exempt from, or not subject to, the registration requirements of Section 5 of the Securities Act if the issuer had a reasonable belief at the time of the issuance that the securities were issued in such a transaction.

The final rules will become effective 30 days following their publication in the Federal Register.

The full text of the final rules can be found here.

©2021 Katten Muchin Rosenman LLPNational Law Review, Volume VI, Number 127
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About this Author

Jonathan D. Weiner, securities, transactional lawyer, Katten Muchin Law firm
Associate

Jonathan Weiner concentrates his practice in securities, transactional and general corporate matters. He has represented investors and issuers in public and private financings (including private investments in public equity), tender offers, recapitalizations and going private transactions, as well as targets and acquirers in mergers and acquisitions. He also advises clients on a day-to-day basis regarding corporate governance, securities law compliance, disclosure and other general corporate matters. Jonathan has counseled a wide array of businesses, ranging from...

212-940-6349
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