Markets

Forum Fuels Ideas, Offers Little on JOBS Act Timing

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With few exceptions, the Securities and Exchange Commission’s annual Government-Business Forum on Small Business Capital Formation has been an exercise in futility over the last several years: Participants typically recommend promising reforms to facilitate small company finance, but year after year the suggestions go nowhere. This year, however, the 31st rendition of the meeting on Thursday centered not on mere proposals but on The JOBS Act, the bipartisan piece of legislation geared toward loosening regulations on small companies and making it easier for them raise capital. Yet in one sense the forum produced the same ineffective vibe as it had in past years. JOBS Act topics discussed – including crowdfunding, Regulation A reform and the removal of the ban on general solicitation in Rule 506 offerings – are in limbo and are likely to remain in that state for some time. Commission staff gave no indication as to when it would release rules to implement the provisions, which in April were signed into law.

Deals
BFAM

Bain Bringing Bright Horizons Private to Public

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Bain Capital is working with underwriters Goldman Sachs, Barclays Capital and JPMorgan Chase to orchestrate an initial public offering for child care provider Bright Horizons Family Solutions, a company Bain took private some four years ago. The new issue will trade under the ticker BFAM. The deal initially emerged as a shadowy one earlier this month, when Reuters heard of it from unnamed sources, but now a regulatory filing confirms the IPO plans. Bright Horizons traded on Nasdaq from 1998 into May 2008, when Bain funds took it private in a deal valued at $1.3 billion. The company hopes to raise as much as $220 million in an offering where Bain will retain significant influence, the filing says.

Legal

Regulation A’s Destiny a Big Unknown

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SEC Silent on Promise of Expanded Size and Broadened Investor Eligibility
Some six months after the JOBS Act became law, the Securities and Exchange Commission has primarily focused on providing guidance for emerging growth company initial public offerings and on proposing rules to lift the ban on general solicitations for Rule 506 offerings under Regulation D. Rules specific to crowdfunding are expected to surface early next year. Yet nothing but silence surrounds rulemaking or guidance that would clear the way for issuers to sell up to $50 million in unregistered securities under Regulation A – up from $5 million today – to any investor regardless of income or net worth criteria. Unlike its mandates on other provisions in the JOBS Act, Congress didn’t give the SEC a deadline to address the exemption, which has been informally dubbed “Regulation A+.”

So even though the commission has sought comments on it, it’s unknown when the agency might take up the matter. SEC officials could not be reached. Yet how the commission crafts rules could determine whether companies actually use the financing option, observers say.

Legal
crowdfunding

Muddy Solicitation Proposal Takes Wind Out of Crowdfunders

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Judging by the glowing proclamations that the JOBS Act would revolutionize small business capital formation, equity crowdfunding proponents were one of the most eager constituencies waiting for the Securities and Exchange Commission to write rules lifting the ban on general solicitation when conducting Rule 506 offerings under Regulation D.

The commission’s blessing to advertise the sale of unregistered securities to accredited investors was considered to be the first step in a two-step process. The next step, which could occur as early as January, is supposed to open unregistered securities sales to non-accredited investors. For the most part, however, the commission delivered a gut kick to crowdfunding aspirations when in late August it issued a proposal rather than final rules – further delaying rulemaking that was supposed to be completed in July – and then decided to put the onus on issuers to determine whether an investor is in fact accredited. The vague explanation on how issuers should conduct their investigations added some sting, too. “If you want to get capital flowing to job creators, if you’re trying to solve the problem of the funding void that exists for entrepreneurs and small businesses, then undefined bureaucracy doesn’t help,” said Sherwood Neiss, a principal of Miami-based Crowdfund Capital Advisors, a strategy and technology consulting group that works with crowdfunding platforms and investors.