Financial Institutions Services Advisory - JOBS Act Could Help Some Banks Add Investors and Cut Compliance Costs
Wednesday, May 02, 2012 - Frank Gonzalez, CPA / CFF
The recently enacted Jumpstart Our Business Startups Act (JOBS Act) contains important changes for banks that are seeking to add investors and capital and for banks that are seeking to reduce their costs of regulatory compliance.
Under that law, which President Obama signed on April 5, 2012, banks with $10 million or more in assets could have up to 2,000 shareholders rather than the current maximum of 500 before being required to register with the Securities and Exchange Commission.
Of the 2,000 shareholders, a maximum of 499 could be accredited investors who have incomes and net worth above thresholds designated by the SEC.
The JOBS Act also would raise the threshold from 300 to 1,200 shareholders for banks and bank holding companies to be eligible to de-register their stock with the SEC.
Some banks that de-register from SEC compliance can save significant amounts, often $100,000 or more a year. De-registration eliminates the requirements to prepare and file annual and quarterly reports and certain other documents, such as a Form 8-K for material events.
For some banks that have just under 500 shareholders, the prospect of having to register with the SEC has been a deterrent to seeking additional capital and investors through means such as private placements.
The SEC has a deadline of April 5, 2013 for issuing final rules on de-registration. The JOBS Act does not set a specific deadline for the SEC to issue final rules on raising the registration requirement from 500 to 2,000 investors.
On April 11, the SEC issued a list of Frequently Asked Questions on the bank-related sections of the JOBS Act.
The JOBS Act also reduces some of the regulatory requirements for many small businesses, including banks, to raise capital through initial public offerings (IPOs). It creates a new category called "emerging growth companies" that would be exempt from certain regulatory and disclosure requirements for up to five years after filing an IPO.
If you would like additional information about the JOBS Act and how its rule changes might be beneficial for your bank, do not hesitate to contact our Financial Institutions specialists or call us at 1-800-239-1474.