Risk and reward are the yin and yang of investing.
Increase the reward, money will pour into the market. Increase the risk, and the money will sit to the side. Although this basic concept is known well by investors, it seems to have escaped Congress and the SEC. At issue is the Jumpstart Our Business Startups (JOBS) Act. The JOBS Act is a rare instance of Washington bipartisanship, receiving the support of 380 representatives and 73 senators. At the April 2012 bill signing, President Obama touted the act as “exactly the kind of bipartisan action we should be taking in Washington to help our economy” and a potential game changer.”
What was this game changer? The JOBS Act gave the SEC 90 days to eliminate an 80-year-old ban on public solicitation of the most common type of Regulation D, or Reg D, offerings. Under the Securities Act of 1933, any off er to sell securities must be registered with the SEC. Reg D contains three exemptions to the registration requirement, allowing companies (or issuers) to off er and sell securities without the same onerous reporting requirements on registered securities. Entrepreneurs often use Reg D to raise signifi cant capital for their startup companies. In 2012, more than four times as much capital was raised through Reg D offerings than through IPOs.
