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Legislation

‘JOBS Act 3.0’ passes House

A bipartisan package of legislation making it easier for small businesses to access capital markets was widely approved by the House late Tuesday by a 406-4 vote.

The package of 32 individual bills, collectively called the JOBS and Investor Confidence Act of 2018, also was welcomed by the Council of Institutional Investors for several provisions on insider trading and multiclass share structure disclosure.

Characterized by the House Financial Services Committee as the "third and largest installment" of Jumpstart Our Business Startups Act legislation, the package eases regulations on "angel investors" and expands the definition of accredited investors to allow more of them to invest in startup companies and small businesses. It would also make it easier for companies to go public by extending on-ramp exemptions for emerging growth companies and simplifying securities regulations on initial public offerings.

The National Venture Capital Association said the bill will improve the regulatory environment for startup investments. It keeps many venture capital firms from having to become registered investment advisers, and directs the Securities and Exchange Commission to make a percentage of secondary investments fit the definition of a venture capital fund and avoid triggering what the NVCA called "a significant regulatory burden."

CII Executive Director Ken Bertsch said in a statement that his organization was pleased with the two investor protection provisions on trading plans and multiclass stock structures, but wary of further amendments being added, including one that would impose a new regulatory scheme on proxy advisory firms. "With the bill now headed to the Senate, CII is hopeful that the legislation will remain bipartisan and free of amendments that would threaten fundamental shareholder protections," Mr. Bertsch said.

One CII-supported provision would require the SEC to consider certain types of amendments to Rule 10b5-1, to help ensure that corporate insiders could not indirectly engage in illegal insider trading through changes to their trading plans. A second provision would require public companies with multiclass share structures to make certain disclosures in proxy or consent solicitation materials, which CII officials said would help amend existing U.S. stock exchange listing standards to require sunset provisions for newly listed companies with those structures.

House Majority Leader Kevin McCarthy, R-Calif., co-author of the original JOBS Act, said in a statement that "the JOBS Act 3.0 is the latest evidence of this House's commitment to expanding opportunity for American workers and investors." The U.S. Chamber of Commerce applauded House Financial Services Committee Chairman Jeb Hensarling, R-Texas, and Ranking Member Maxine Waters, D-Calif., for working together to modernize securities laws and urged the Senate to quickly pass it.