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The Route to Capitalization: The Transcendent Registration Exemptions for Securities Offerings as a Means to Small Business Capital Formation

Note - Volume 94 - Issue 3

After the economic downturn of 2008, Congress enacted the Jumpstart Our Business Startups Act (JOBS Act) with the purpose of improving job creation and economic growth. In this note, Paige Lager considers three significant measures that were adopted under the JOBS Act to effectuate these goals and weigh each against existing methods of capitalization currently available for small businesses. Focusing on the various elements bearing on those considerations in connection with Rule 506—the preeminent traditional option to small businesses seeking capital—and the new options to be made available under Title III and Title IV of the JOBS Act, this Note will suggest that ultimately, only Rule 506 and Title IV will prevail as useful registration exemptions. The new Regulation A+ exemption—adopted on April 20, 2015—added a new element route to capitalization that was largely unanticipated by the public. This Note argues that Regulation A+ will render the much anticipated crowdfunding exemption (Section 4(a)(6) Crowdfunding) useless.

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