Title III of the JOBS Act

Title III of the JOBS act will enable companies to raise money from unaccredited investors.  Title III is still pending, but is expected to pass sometime in 2016. The Act adds a new exemption from registration under the Securities Act of 1933, Section 4(6). The new exemption is subject to the following conditions: 
 
(1) The aggregate amount sold to “all investors”, including any amount sold in reliance on the new exemption, may not exceed $1 million in any 12-month period. The language of the statute suggests that offerings made under other exemptions (Regulation D, for example) might count towards the $1 million limit, but discussions with Commission Staff suggest that the best view is currently that the limit applies solely to a crowdfunding round (possibly only to retail investors), and that amounts sold under other exemptions (or possibly to accredited investors under the 4(6) exemption) will not affect the limit. 
 
(2) An investor is limited in the amount he or she may invest in crowdfunding securities in any 12-month period: 

If either the annual income or the net worth of the investor is less than $100,000, the investor is limited to the greater of $2,000 or 5% of his or her annual income or net worth. 

If the annual income or net worth of the investor is $100,000 or more, the investor is limited to 10% of his or her annual income or net worth, to a maximum of $100,000. 

(3) The transaction must be made through a broker or through a “funding portal” (a new designation under the Securities Exchange Act of 1934).

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