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Blog

JOBS Act: Title II & How It Applies to Issuers & Investors

Zach Kelly

Are you looking to verify yourself or a potential purchaser as an accredited investor? Under the Jumpstart Our Business Startups Act (JOBS Act), which was signed into law on April 5, 2012 by President Obama, businesses can advertise and sell securities, so long as the eventual sales are made only to accredited investors that are verified using “reasonable steps.” Third-party reviewers conduct verification for issuers and purchasers, ensuring that companies and investors take reasonable steps to obtain validation. 

ABOUT THE JOBS ACT
The JOBS Act was created with small businesses in mind, giving them greater opportunities to raise capital under new regulations that allow general solicitation and advertising.  The U.S. Securities and Exchange Commission (SEC) implemented final rules regarding general solicitation and advertising as required by Title II of the JOBS Act.  Those rules went into effect on September 23, 2013 and allowed private startups and businesses to publicly solicit for investments –while still qualifying them as private placements. While the ban on general solicitation and advertising was lifted, investors still need to be verified as accredited in order to purchase securities. 

WHAT IS AN ACCREDITED INVESTOR?
Under Title II of the JOBS Act, companies can publicly solicit when capital raising without having to register any securities with the SEC so long as the sales of securities is made only to accredited investors. Accredited investors fall into one or more of several categories, which are outlined by the SEC in Rule 501 of Regulation D. Certain types of individuals, banks, charitable organizations, corporations, trusts, insurance companies, and employee benefit plans are all examples of accredited investors. As individuals or organizations that are compliant with the SEC's definition of accredited investors, these investors can invest in private placements of securities that are supposed to be marketed or sold only to accredited investors. 

INVESTOR VERIFICATION
When it comes to accreditation of investors for Title II of the JOBS Act and general solicitation, investor questionnaires and self-certifications are no longer SEC-compliant forms of validation. Under the new laws allowing general solicitation, before companies can issue any securities to investors, they are responsible for taking "reasonable steps" to ensure an investor is accredited. Even if they're fully confident in the fact that an investor is accredited, a company selling securities should acquire some form of verification to evidence that they took “reasonable steps.” One of the SEC-approved methods that issuers and purchases can utilize to prove accreditation is through third-party verification reviewers who are licensed professionals in good standing, such as attorneys.

For quick, affordable, and confidential verification services for issuers and investors, choose VerifyInvestor.com . Visit https://VerifyInvestor.com for more information.