• Impact of JOBS Act on Banks and Bank Holding Companies
  • April 10, 2012 | Authors: David W. Ghegan; Mark Windon Jones; Jacob "Jake" A. Lutz; Matthew W. Marzetti; Thomas "Tom" O. Powell
  • Law Firms: Troutman Sanders LLP - Atlanta Office ; Troutman Sanders LLP - Richmond Office ; Troutman Sanders LLP - Atlanta Office
  • President Obama today signed into law the “Jumpstart Our Business Startups Act” (JOBS Act), which includes provisions easing the regulatory burden on banks and bank holding companies by increasing the holders of record thresholds for registration and deregistration under the Securities Exchange Act of 1934, as amended (Exchange Act), and thereby eliminating expensive and time-consuming registration and periodic reporting requirements under the Exchange Act.    

    Registration and Deregistration Thresholds

    Title VI of the JOBS Act amends Section 12(g)(1)(B) of the Exchange Act to increase the holders of record threshold for registration by banks and bank holdings companies from 500 to 2,000, thus providing more flexibility for banks and bank holding companies to seek additional capital from new shareholders without triggering registration.  Even though Title VI of the JOBS Act requires the Securities and Exchange Commission (SEC) to issue final regulations to implement the revised threshold within one year from today, it appears that, without any specific guidance from the JOBS Act, the new threshold is effective immediately for unregistered banks and bank holding companies because no regulatory action would need to be taken by the SEC to implement this new threshold.

    In addition, Title VI of the JOBS Act amends Section 12(g)(4) of the Exchange Act to raise the threshold for triggering deregistration for banks and bank holding companies from 300 to 1,200 holders of record.  The higher deregistration threshold may lead community banks to determine that the costs associated with SEC registration compliance outweigh the benefits and, therefore, terminate their registration. However, banks and bank holding companies will likely not be able to take advantage of the higher deregistration threshold until the SEC amends its regulatory requirements to account for the new threshold, which may not occur prior to the deadline for filing next year’s Form 10-Ks.

    Holders of Record

    The JOBS Act also provides for a new exemption excluding new crowdfunding shareholders from the count of holders of record.  Additionally, the JOBS Act amends Section 12(g)(5) of the Exchange Act to include a statement clarifying that the definition of “held of record” shall not include securities held by persons who received the securities pursuant to an employee compensation plan in transactions exempted from the registration requirements of Section 5 of the Securities Act of 1933, as amended (Securities Act).

    Banks and Bank Holding Companies Listed on National Securities Exchanges

    The requirement of national securities exchanges for issuers, including banks and bank holding companies, to register their shares under the Exchange Act (and, therefore, be subject to the reporting obligations under the Exchange Act) was not changed by the JOBS Act.