Jump Start Our Small Businesses Act or the JOBS Act was passed by the U.S Senate, 73 to 26 on March 22 2012. The Bill was amended before its vote.

The highlights of the ACT include:

• A company can now have a higher number of stock holders before it is required to go public and therefore register with the SEC. The company can now do this when it has a total of 2000 shareholders, of which 500 can be unaccredited as against the earlier total of 500 shareholders and $10million in assets.
• This exemption from registering with the SEC would mean the use of government registered internet funding portals. It also limits investment to a limit of 2% of income of people earning up to $40,000 to 10% for those earning or worth up to $100,000. This is being done to enable crowd funding (start-ups seek up to $1 million per year on the Internet, in increments of up to $10,000 per investor). To prevent fraud the revised bill requires basic personnel and financial disclosures, and, for firms raising more than $500,000, an audited financial statement. Before the Act this option was available only to accredited investors.
• Emerging growth companies ($1 billion or less in annual revenue) will now not have to make earlier mandatory disclosures immediately on going public, but only five years after that. The Sarbanes Oxley Act earlier stated that this period should be two years.
• Permission to solicit funds across different medias for private placement, which was earlier restricted.
• To raise the limit for securities offerings exempted under Rule 505 of Regulation D from $5 million to $50 million, allowing for fundraising with lesser restrictions.
• Increase in number of shareholders in community banks from 500 to 2000.

Organisations opposing this ACT include members of the Securities and Exchange Commission, AARP, the association of state securities regulators, AARP, the Consumer Federation of America, the A.F.L.-C.I.O. labor federation and unions, big pension funds and securities experts. They all argue that this Act does not protect investor interests, by helping fraudulent players. This in turn will lead to diminished faith in genuine start-ups. Many believe this bi-partisan support for the bill comes from legislators seeking support from their big tech contributors, like Google, who have been pushing the ACT forward.

Many fear this will open the doors for small business fraud, the big ones having done the damage they could. They believe the ones out to scam will roll out marketing spiel, which cannot be resisted; they also fear that when the time comes to make public disclosures all they will find are cooked up books in many cases.

Crowd funders like IndieGoGo, Kickstarter, Spot.Us, Biracy, Kapipal, Kiva, InvestedIn, Rockethub, and FundBreak all have a different take on the JOBS Act. They counter by saying that businesses with not very large funding needs, need not drown in regulation compliance, but raise money from family, friends and community that knows them and are willing to invest in them.

A cutting edge start-up on oncology may need 3-4 years to get off the ground from research to implementation, needing funding along the way. While they do not want to break rules they do not want to get lost in red tape.

Finance Train, for instance, while offering free content, needs funding, while we attract more interested subscribers. The idea that crowd funding can help us tide these starter years is extremely appealing to us. Prospective funders will invest amounts that will not hurt them,  even if we go bust (God forbid). Availing a bank loan without collateral is next to impossible. With slow, small and steady revenue stream, crowd funding would help us give more, grow more and get that team in place, thus generating jobs.

Even if there are some cases of fraud, potential investors of crowd funding will get savvier and put their dollar where more information is either available or provided. Small businesses are the lifeline of the economy, the government perhaps recognizes that there are electoral gains to be made, by helping small but job driving efforts off the ground.