Implications of the JOBS Act and STOCK Act on Hedge Funds
Scott R. MacLeod, Partner, James S. Crenshaw, Associate, Christopher P. McHugh, Associate and Amy R. Rigdon, Associate
Holland & Knight
In early April 2012, President Obama signed into law two separate acts that will have a profound effect on hedge funds. The implications of these two new laws, the JOBS Act and the STOCK Act, are discussed below.
The JOBS Act: allows advertising in hedge fund offerings and increases the permitted number of investors in certain funds
On April 5, 2012, President Obama signed the Jumpstart Our Business Startups Act (JOBS Act). In addition to crowdfunding and emerging company IPO rules that have little if any relevance to private fund advisors, the JOBS Act (i) removes the general solicitation and general advertising prohibition for offerings made pursuant to Rule 506 of Regulation D of the Securities Act of 1933 (Securities Act); and (ii) raises the equity holder threshold in the Securities Exchange Act of 1934 (Exchange Act) that triggers public company reporting from 500 to 2,000 persons. These amendments represent significant changes to the regulations governing the offering process for private funds and the manner in which issuers may conduct these offerings.