Titles II or III: Where Will the Wisdom of the Crowd Take Investors?

Many small to moderate-sized businesses simply cannot afford the costs of the specialized accountants, underwriters, and attorneys necessary to meet the obligations that come with being a public company. To minimize these burdens recently approved regulations permit securities-based crowdfunding by certain private companies without registering the offering with the Securities and Exchange Commission. On April 5, 2012, Congress passed, and President Barack Obama signed, the Jumpstart Our Business Startups Act (JOBS Act) into law. The goal of the JOBS Act was to increase job creation and economic growth by improving access to the markets. Along with other provisions, the JOBS Act required the SEC to eliminate the general solicitation ban and general advertising prohibition for certain private securities offerings, and fashion an exemption allowing equity crowdfunding. This Note examines Titles II and III of the JOBS Act and explores whether these new additions to securities regulations will meet their objectives. In examining selected laws and regulations surrounding capital formation for public and private offerings, this Note analyzes whether the new additions to securities regulations, Titles II (Rule 506(c)) and III (Crowdfunding), will result in Congress’s intended goals. In its conclusion, this Note determines that while Title II is already widely used, Title III is unlikely to receive significant use and certainly not to the extent that was expected