This jointly authored Article scaffolds our respective research interests that analyze laws, rules, regulations, and policy levers that may inhibit—or exploit— a market’s ability to recognize an asset’s intrinsic value, whether in terms of social, human, or financial capital.
In particular, this Article describes recent material changes to the Securities and Exchange Commission (SEC) rules promulgated in 2013 that Congress authorized by passing 2012’s JOBS Act. Contrary to statutory timing, the SEC has delayed the implementation of these new rules that impact the ability of small and entrepreneurial businesses to attract equity capital financing via Internet platforms. By applying the Court’s historical tests for public equity offerings to the new regulatory regime, this Article analyzes what types of equity-securities offerings ought to be permitted under the new regulatory regime. This Article, however, also illustrates numerous material shortcomings of the JOBS Act and articulates the reasons underpinning those shortcomings and how they affect the U.S. economy, entrepreneurship, and job creation, thus undermining much of the purpose of the JOBS Act.
To address these deficiencies, this Article suggests several proscriptive amendments to the JOBS Act that not only would enhance equity crowdfunding for small businesses and entrepreneurs, leading to job growth in the U.S., but also preserve investor protection. This Article concludes that the current regulatory regime may very well fail not only to create jobs by crowdfunded equity financing of new businesses sought by the JOBS Act but also eliminate the jobs of the traditional equity financers—investment banks—thereby leading to a potential equity capital crunch and a reduction, rather than an increase, in employment relative to equity financing
