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Investment Companies Are Not JOBS Act Emerging Growth Companies

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  • Baker, John
    Registered investment companies do not qualify as emerging growth companies under the Jumpstart Our Business Startups Act, according to guidance on Title I
    Message 1 of 1 , May 3, 2012
      Registered investment companies do not qualify as "emerging growth companies" under the Jumpstart Our Business Startups Act, according to guidance on Title I of the JOBS Act (FAQ #20) released today by the staff of the Securities and Exchange Commission. Emerging growth companies are eligible for more beneficial treatment under the "IPO on-ramp" provisions of the JOBS Act. Many of these provisions have no application to most investment companies, but some could have been relevant. For example, emerging growth companies can submit draft registration statements for confidential nonpublic review by the SEC staff prior to public filing, and they can engage in communications with potential institutional investors to determine their interest in a contemplated securities offering. The definition of "emerging growth company" appears on its face to include many investment companies, but there had been uncertainty as to the statute's practical effect; the JOBS Act essentially amends the Securities Act of 1933 and the Securities Exchange Act of 1934, but registered investment companies are also subject to the Investment Company Act of 1940, from which the JOBS Act provides no exemption.

      The staff guidance also provides answers to a number of other questions, including the following:

      --Asset-backed securities issuers also do not qualify as emerging growth companies (FAQ #19).

      --However, business development companies, which are technically investment companies but do not register under the 1940 Act and are subject to only some of its provisions, do qualify as emerging growth companies (FAQ #21).

      --In determining whether a financial institution is an emerging growth company, a financial institution must include all gross revenues from traditional banking activities, but not gains and losses on dispositions of investment portfolio securities (FAQ #23).

      --The staff will publicly release its comment letters and issuer responses to staff comment letters on confidential draft submissions after the registration statement is effective (FAQ #25).

      The Division of Corporation Finance page on the JOBS Act, including a link to the new guidance, is at


      The JOBS Act has become law as Public Law 112-106, and its final text is at


      For my most recent post on the JOBS Act, see


      John M. Baker <JMB@...>
      Stradley Ronon Stevens & Young, LLP http://www.stradley.com
      1250 Connecticut Avenue, NW, Suite 500
      Washington, DC 20036
      202.822.0140 fax
      FundLaw Listowner http://groups.yahoo.com/group/fundlaw
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