Today, the Staff of the SEC published another study required by the JOBS Act–this one assessing whether the SEC has sufficient tools to enforce the anti-evasion provisions of Section 12g5-1(b)(3). Given that many more companies are choosing to stay private longer and defer pursuing IPOs, questions have arisen in recent years as to whether there have been more abusive practices employed to avoid triggering the Exchange Act reporting threshold, such as through the use of special vehicles to pool individual investments in private companies in order to obfuscate the number of holders of record. The JOBS Act raised the threshold triggering Exchange Act reporting, which may lead to unanticipated results in this regard, as noted in the Staff's study. The study concludes that the statutes, rules and procedures as currently formulated provide the Division of Enforcement with sufficient tools to investigate and bring a case for Section 12(g) violations based on Section 12g5-1(b)(3).
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