Business Compliance Partners Discusses Emerging Growth Company Legislation

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The Securities and Exchange Commission (SEC) recently announced that it will begin accepting public comments before creating rules in response to the passage of the Jumpstart Our Business Startups (JOBS) Act.

The SEC is required to implement the “emerging growth company” initiatives; the objective is to make it easier and cheaper for smaller companies to sell their shares to the public. An emerging growth company is defined as one with total annual gross revenues of less than $1 billion in its most recent fiscal year.

Key Features

  •     Emerging growth companies won’t have to provide more than 2 years of audited financial statements with their registration statement in an initial public offering of their common stock.
  •     The compliance date for new financial accounting standards or revisions can be extended.
  •     Emerging growth companies will be exempt from audit firm rotation and financial statement auditor discussion and analysis requirements.
  •     Emerging growth companies will be exempt from the proxy voting executive compensation versus performance disclosure requirement.
  •     A broker-dealer will be allowed to publish or distribute a research report about a company even if both are participating in a proposed initial public offering.
  •     Restrictions regarding which broker-dealer representatives can establish communication between securities analysts and potential investors will be eliminated.
  •     There will be no restrictions regarding securities analyst and emerging growth company management communicating in the presence of other broker-dealer representatives.
  •     After an initial public offering, a broker-dealer may make public appearances and publish or distribute research reports about the securities of an emerging growth company without any time period restrictions enforced by regulation.
  •     Emerging growth companies and their representatives will be allowed to communicate with potential investors that are qualified institutional buyers or institutions that are accredited investors.
  •     The SEC may allow emerging growth company stocks to be quoted in increments that are greater than one penny.
  •     Emerging growth companies may submit confidential draft registration statements to the SEC before public filings. However, a public filing is required no later than 21 days prior to a “road show” (series of presentations to potential distributors and investors).

The SEC will also be required to conduct a comprehensive analysis of current registration requirements for additional opportunities to reduce the costs and simplify the process for emerging growth companies.

Use the following link to access the SEC’s JOBS Act rules public comment page.

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Paul Cox

Chris Kosifas
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