Tag Archive | "legislation"

The JOBS Act: What You Need To Know

The ink is still drying on a piece of legislation that President Obama signed today, and the new law is good news for entrepreneurs seeking capital. Here’s a rundown of what is in the law and why it matters to you and your business.

The JOBS (an acronym for Jumpstart Our Business Startups) Act is a compendium of six pieces of legislation that are all aimed at increasing the ability of small businesses to access capital and generate jobs. The following breakdown of the provisions is according to information provided by the White House and an analysis of the JOBS Act written by two corporate and capital markets attorneys, David M. Lynn and Anna T. Pinedo of Morrison & Foerster, a global law firm headquartered in San Francisco, Calif.

1. It’s now easier for you to take your company public. The Reopening American Capital Markets to Emerging Growth Companies Act provision adds a new category of stock issuer to the Securities and Exchange Commission laws. The category, among other qualifications, defines an “emerging growth company” as a business with total gross revenues of less than $1 billion in its most recent fiscal year. The law provides such businesses temporary relief from certain SEC regulations, making it easier and more feasible to go public.

When does this go into effect? This provision is effective immediately and, in fact, if you have filed for IPO since December 8, 2011, you are able to apply retroactively for status as an “emerging growth company.”

2. It will be easier for you to sell your stock to private investors. The Access to Capital for Job Creators Act removes a SEC regulatory ban that says businesses cannot use advertisements to attract investors to a non-public offering. It has been very burdensome from a practical standpoint for companies of all sizes to keep their communications about a private stock sale under wraps.

When does this go into effect? The SEC has 90 days from today to amend its rules that prohibit solicitation.

3. You will have a new way of raising money by selling a piece of your company to the “crowd.” The Entrepreneur Access to Credit Act allows business owners to sell equity in their company to anyone with the cash and the interest through crowdfunding. Previously, crowdfunding was predominantly restricted to artists and business owners accepting small donations in exchange for things like tote bags and CDs. Also, the provision says that you don’t have to be an accredited investor (i.e., a really rich person) to invest in a company.

When does this go into effect? The SEC has 270 days from today to come up with a new regulatory framework allowing businesses to sell company equity on crowdfunding platforms. If you are hoping to sell pieces of your company to investors, you will have to wait until after Thanksgiving.

4. You can raise a lot more money before having to deal with the SEC. The Small Company Capital Formation Act elevates the threshold of capital that companies can raise from the public to $50 million from $5 million in a twelve month period before they have to register with the SEC.

When does this go into effect? The SEC has to rewrite its rules. Unlike other provisions, there is not a specific deadline for the SEC to do this, according to Pinedo of Morrison Foerster.

5. You can grow twice as large as before without registering with the SEC. The Private Company Flexibility and Growth Act is expected to give small companies more time to grow by expanding the shareholder limit for registration with the SEC. As the law currently stands, companies that have 500 or more investors and total assets of more than $10 million are required to register with the SEC. Under the new law, companies have to register only when they have $10 million in total assets and either 2,000 investors or 500 non-accredited investors. (If you have investors that bought pieces of your company under the new crowdfunding law, they would be excluded from this investor count.) The company will have to register within 120 days of a company’s first fiscal year meeting the caps.

When does this go into effect? The SEC has to rewrite its rules. And like the previous provision, there is no specific deadline for the SEC to do this.

6. Your community bank will be able to grow larger. The Capital Expansion Act says that a bank or bank holding company will not have to register with the SEC until it has total assets of at least $10 billion and at least 2,000 investors, a marked increase from the previous requirement of 500 allowable shareholders. Banks will have120 days after the first fiscal year of meeting these requirements to register with the SEC. Decreasing the regulatory burden is good for small businesses, as community banks play a critical role in lending to them.

When does this go into effect? The SEC has one year from today to issue a rule to make this change.

This article was written by Catherine Clifford and published in Entrepreneur magazine.

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Obama Unveils Online Bill of Rights

WASHINGTON – The Obama Administration unveiled a proposed “Consumer Privacy Bill of Rights” in a federal report last Thursday. It’s part of a blueprint to ramp up consumer privacy protections on the internet, but it could also add additional requirements for dealers when it comes to protecting customer data.

The Privacy Bill of Rights identifies clear protections for consumers, gives internet users more control over how their personal information is used and helps businesses that collect data from consumers —whether directly or indirectly — maintain consumer trust, the report states.

The Administration said it will work with Congress to develop legislation around the rights outlined in the report to extend baseline privacy protections to commercial sectors that current privacy laws do not cover.

“American consumers can’t wait any longer for clear rules of the road that ensure their personal information is safe online,” said President Obama last week. “As the Internet evolves, consumer trust is essential for the continued growth of the digital economy. That’s why an online privacy Bill of Rights is so important. For businesses to succeed online, consumers must feel secure. By following this blueprint, companies, consumer advocates and policymakers can help protect consumers and ensure the Internet remains a platform for innovation and economic growth.”

The proposal comes at a time when automotive industry figures like Jim Ziegler are raising concerns over vendor access to customer data through dealership management systems. TrueCar Inc., a web-based marketing channel, has been at the focal point of their campaign because of its access to dealer management systems, but the group is now urging dealers to monitor what other vendors are accessing.

The Obama Administration’s announcement also follows recent buzz around Google Inc.’s new privacy policy, which is scheduled to take effect on March 1. It will allow for greater information sharing between Google’s products without providing consumers with “opt-in” or “opt-out” options in some instances, according to the National Association of Attorneys General.

In the coming weeks, the Commerce Department’s National Telecommunications and Information Administration will meet with companies, consumer advocates, technical experts and others to establish practices that implement the general principles in the Consumer Privacy Bill of Rights, according to a White House statement. Auto industry insiders said it’s too early to tell how this will affect dealers and their vendors, but said the industry is keeping a close eye on the proposal.

Under the proposed Consumer Privacy Bill of Rights, consumers are provided with rights to the following:

  • Transparency: Consumers have a right to easily understandable information about privacy and security practices.
  • Respect for Context: Consumers have a right to expect that organizations will collect, use, and disclose personal data in ways that are consistent with the context in which consumers provide the data.
  • Security: Consumers have a right to secure and responsible handling of personal data.
  • Access and Accuracy: Consumers have a right to access and correct personal data in usable formats, in a manner that is appropriate to the sensitivity of the data and the risk of adverse consequences to consumers if the data is inaccurate.
  • Focused Collection: Consumers have a right to reasonable limits on the personal data that companies collect and retain.
  • Accountability: Consumers have a right to have personal data handled by companies with appropriate measures in place to assure they adhere to the Consumer Privacy Bill of Rights.

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California Passes New Auto-Emission Rules

California regulators established new rules on Friday that require dramatic cuts in emissions from most cars and trucks by 2025.

The new “advanced clean cars” regulations, adopted in a unanimous vote by the state Air Resources Board, requires cars and light trucks sold in 2025 to emit 75 percent fewer smog-forming pollutants and reduce carbon dioxide by about a third, reported The Wall Street Journal.

The program envisions that 1.4 million, or one in seven, new cars sold in California in 2025 will run on electricity or hydrogen and produce no emissions, or run on electricity and gasoline to produce much lower emissions than conventional gasoline-fueled cars.

The rules would apply to cars and light trucks for model years 2017 and later.

Auto makers said they are already making electric and hydrogen-fueled vehicles and support the rules. But they worried about whether enough electric and hydrogen fueling stations would be widely available throughout California, which they said is a requirement for widespread consumer adoption of zero- and low-emission vehicles.

“Auto makers have invested massive sums of money to bring these vehicles to market, so we have a huge stake in trying to sell them,” said Gloria Bergquist, a spokeswoman for the Alliance of Automobile Manufacturers, a trade group. “The success depends on the fueling infrastructure being available so consumers will buy them.”

The alliance represents General Motors Co., Ford Motor Co. and other manufacturers, all of whom deferred to the trade group for comment.

Auto makers believe that since the state has mandated that their industry build and sell zero- and low-emission vehicles, it’s only fair for the state to require fuel retailers to make electricity and hydrogen widely available so that consumers will buy and drive the cars, Ms. Bergquist said.

But refiners and service station owners don’t see it that way.

Oil refiners and fuel importers oppose a rule that requires them to put hydrogen-fueling equipment at service stations, most of which are independently owned by other companies, said Cathy Reheis-Boyd, president of the Western States Petroleum Association.

“We refine gasoline and diesel and we do not believe it’s appropriate for refiners and importers to be obligated to put hydrogen infrastructure at retail gas stations that we don’t own,” Ms. Reheis-Boyd said.

Service station owners also don’t want to be required to install hydrogen-fueling equipment, over concerns that they could lose money on the investment.

Instead, both industries have proposed that the government provide subsidies to install hydrogen-fueling equipment, at least in the early years of the clean cars program.

State officials said the clean car rules would be similar to a federal proposal to boost fuel efficiency standards for most cars and trucks. The Obama administration has discussed the proposed rules, but has not formally proposed a set of regulations.

ARB Chair Mary Nichols said California’s clean-car rules would be essentially the same as the expected federal rules, with possible slight differences.

“We’re not seeing any fundamental differences with the federal government in fundamental philosophies,” Ms. Nichols told reporters on Friday. “I don’t think the delay will have a negative impact on the auto industry at all.”

The rules are the latest version of regulations originally adopted in 1990 to improve air quality in California, which has some of the nation’s dirtiest air.

This time, the clean car rules include limits on greenhouse-gas emissions, in line with the state’s 2006 plan to combat climate change.

Consumer groups, environmental groups and local government agencies that oversee air quality lauded the new rules.

“ARB’s decision is a victory for California residents, where 90 percent of the public still live in areas of unhealthy air,” Simon Mui, a scientist with the Natural Resources Defense Council, wrote in a blog post. “With all major auto makers already launching or planning to offer in total 30 to 40 plug-in electric vehicle models, these standards will help scale-up and pull forward technologies already available today.”

The regulations include a provision under which the ARB would take another look at how the rules were working and whether changes might be needed to reach the goals of the program.

The Air Resources Board has estimated that the rules will add an average of $1,900 to vehicle prices, which the agency said would be offset by savings on fuel purchases that would average about $6,000 over the life of the car.

Auto dealers have countered that the rules could boost the car prices nearly double what the ARB estimates, and hurt growth in the market.

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Calif. Legislators Seek New Rules for BHPH

SACRAMENTO — California State Assembly Member Mike Feuer (D–Los Angeles) and State Sen. Ted W. Lieu (D–Torrance) have proposed legislation that would introduce new rules designed to “rein in abusive practices” of buy here, pay here dealers statewide. The announcements followed a series of articles by Los Angeles Times reporter Ken Bensinger that sought to shed light on used-car lots and the customers who frequent them.

“This industry preys on people who have no other options for getting a car,” Feuer said. “In many parts of our state, auto travel is the only way for parents to get to work on time, or to pick their kids up from school. Instead of helping Californians get back on their feet by providing needed transportation, these dealers are promoting an endless cycle of debt and joblessness.”

Feuer’s bill, AB 1447, would require dealers to display each vehicle’s price on the vehicle itself, prohibit dealers from requiring that customers pay them in person, prohibit dealers from contacting a buyer’s references once a sale is completed, and prohibit them from installing payment assurance devices, including GPS tracking and starter interrupt devices.

A second proposal from Sen. Lieu would require dealer financiers to obtain a California Finance Lender’s license, cap auto loan interest rates at 17.25% and introduce mandatory grace periods for repossessions.

The announcements drew swift condemnation from Kenneth Shilson, founder of the National Alliance of Buy Here, Pay Here (NABD) dealers, who described Feuer’s bill as “the most intrusive proposal I have ever seen.”

“They’re looking to regulate BHPH and disallow payment devices,” Shilson said. “That runs to the perception that the transaction is abusive and the device is an invasion of the consumer’s privacy. It’s not. Lenders have the right to protect their collateral.”

Shilson said Bensinger contacted him about a year before the first article was published. He said he was dismayed to find that the series was “totally one-sided,” focusing on hard-luck stories from BHPH buyers and the high interest rates and multiple repossessions inherent to the segment. The series gave little voice to dealers, Shilson said, noting that high interest rates are a reflection of the risk each dealer is taking on when financing “unbankable” customers.

Last year, at the NABD’s first East Coast dealer conference in Atlanta, Shilson met with a senior member of the newly formed Consumer Financial Protection Bureau (CFPB). The member will be in charge of the agency’s installment lending division and attended the conference on a fact-finding mission.

“He told me that what he took away from the Times series was that BHPH is providing transportation that the government can’t,” Shilson said. “In other words, if you can’t qualify for a traditional loan, we don’t have the public transportation infrastructure to get you to work.”

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Bill to Fix California GAP Problem Moving Quickly

Legislation aimed at amending a California law that barred a key GAP feature is moving quickly through the state Legislature, raising the prospects of the issue being resolved by June.

The bill (AB 125), spearheaded by OwnerGUARD Corp., was passed by the state Assembly by a 69-0 vote. The San Diego-based F&I product provider, working closely with the California New Car Dealers Association (CNCDA), is hoping the bill will follow a similar path through the state Senate and be on Governor Jerry Brown’s desk by June, reported F&I and Showroom.

“Frankly, everything’s happened quicker than we thought,” said Michelle Dicks, the company’s general counsel. “Hopefully, it’ll get to the [Senate Banking Committee] by the middle of March. If that happens, we could see a vote on the Senate floor a week later, which means we could be done by the end of March, beginning of April.”

Based on a law that took effect on Jan. 1, California dealers are prohibited from selling deductible coverage through GAP if they have not obtained an agent’s license. The California Department of Insurance has agreed to delay enforcement of the requirement in the law to have updated agreements through March 31.

The issue stems from an Omnibus bill (AB 2782) Gov. Arnold Schwarzenegger signed last September. It packaged, among other things, a new licensing requirement for sellers of accident and health insurance. How GAP got thrown into the new requirement is a case of unintended consequences.

Less than a month before the law took effect, the CNCDA asked the state’s insurance department to clarify whether a GAP waiver would fall under the new requirement. In its review of the law, the state agency determined that GAP waivers could no longer cover a customer’s deductible.

The CNCDA and OwnerGUARD moved quickly to get the state agency to reconsider its stance. And after extensive talks, the agency agreed to work with the association and the company on fixer legislation. The two organizations also received help from various industry associations, including the Guaranteed Asset Protection Alliance, the American Financial Services Association and the Consumer Credit Industry Association.

“Initially, the department of insurance said, ‘Fine, we know it’s a problem, so we’ll give you a moratorium on enforcement of the law,” said Dicks. “We still can’t cover the deductible and we have until March 31 to get new forms printed, but we’re getting closer to a resolution.”

The end of March also became the unofficial deadline for the fixer legislation to get through the California State Legislature. If the association and OwnerGUARD are unsuccessful at capturing the attention of lawmakers – which are embroiled in a bitter fight over the state budget – Dicks said it might be until September before any action can be taken.

That’s one of the reasons why OwnerGUARD turned to John Norwood, a noted California lobbyist who specializes in the state’s insurance and financial sector.

Working closely with the CNCDA and California Financial Services Association, Norwood was instrumental in getting the Assembly Insurance Committee to place an urgency clause in the bill when it passed the legislation by a unanimous vote. With the urgency tag, the bill can become law once it receives Gov. Brown’s signature. Without it, the bill wouldn’t take effect until Jan. 1, 2012.

“A lot of it has been John’s ability to get these people to listen. He’s done a phenomenal job,” said Dicks. “We did spend a lot of time with him initially so he could understand what we were proposing, but I think assembly members were willing to help once they understood what we were trying to do.”

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Congress Sends Small-Business Bill to Obama

As expected, the House swiftly followed the Senate’s lead, approving the small-business bill on Thursday by a vote of 237-187, AOL Small Business reported.

The long-delayed bill now goes to President Obama, who previously scolded Republicans for holding up the bill. Opposition Republicans had dubbed the bill “junior TARP.”

“After months of partisan obstruction and needless delay, I’m grateful that Democrats and a few Republicans came together to support this common-sense plan to put Americans back to work,” Obama said in a statement Thursday.

The $42 billion bill aims to increase and ease loans to small businesses, primarily through a $30 billion federal fund, and cut small-business taxes by $12 billion over the next decade.

“The small-business jobs bill passed today will help provide loans and cut taxes for millions of small-business owners without adding a dime to our nation’s deficit,” Obama said. He plans to sign the bill on Monday.

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