JOBS Act Interview: Congressman David Schweikert

Henry Truc |

David Schweikert, U.S. Representative for Arizona's 5th Congressional DistrictThe Jumpstart Our Business Startups Act, or more commonly known as the JOBS Act, was officially signed into law by President Barack Obama on April 5, 2012. The act is designed to help provide more efficient access to the capital markets for those who need it most: small and growing businesses. Small businesses account for as much as 80 percent of all jobs in the United States and has long been the backbone of the world's largest economy, and a primary source of innovation and ingenuity that embodies the American Dream. Yet, over a decade of unintended consequences stemmed partly through the passage of strict regulations designed to protect the American public, this vital area of the economy's growth has stalled significantly. That, perhaps, is why during one of the most polarizing periods in U.S. government history, the JOBS Act was a unique example of lawmakers on Capitol Hill setting aside their ideological differences to give bipartisan support.

One of the key figures of the JOBS Act is Congressman David Schweikert (R-AZ), who sponsored two major provisions of the new law that is designed to help ease some of the previous limitations on emerging private companies. In only his first term in Congress, Schweikert has already established himself as a prominent voice and spirited advocate for addressing the U.S. economy's current challenges and future growth. had the privilege to speak with Congressman Schweikert regarding his role on the JOBS Act, the state of the current economy, how the new laws will impact emerging companies and small businesses, and what more needs to be done to help grow jobs in America again. Schweikert is one of four esteemed panelist of experts participating in an upcoming webcast that will discuss how the JOBS Act will affect business and the financial services industry.

EQ: You authored two major bills on the JOBS Act (Title IV and V) that was signed in April and was amazingly one of the few things in Washington that received bipartisan support during a crucial time. That’s certainly a strong showing for your freshman term. What inspired you to advocate so hard for the JOBS Act?

Schweikert: Well first, I have a passion on the concept of getting capital to small businesses and reaching people with ideas. What is the next generation of businesses going to be? Who will be the next winner out there with the business ideas? In today’s world, you can’t just walk into your community bank and you can’t do a lot of other things to find money to help your ideas grow. So you have to solve that bottleneck. It’s important to understand that the JOBS Act was a pulling together of several of these capital formation theses into the legislation, but they didn’t just happen overnight. A couple of my bills literally took a year of going around and visiting Democrat and Republican members and Senators to convince them on the ideas. There’s a lot of dancing that goes into moving legislation like this.

EQ: There are many layers to the JOBS Act that will take time to play out. With that said, how does the JOBS Act as a whole help to change regulations that will better reflect today’s economic and market climate?

Schweikert: This would be a really long answer if we covered everything, but there are parts in there that will help change some of the ways that growing companies can solicit investors. Parts of it will change some of the existing shareholder rules so that a company that’s growing can give out ownership to its employees. Another one was to deal with the crisis we actually have in this country. You realize that today we actually have one-third fewer publicly traded companies than we had a decade ago, so we’re trying to create a simplified onramp for companies to go public. Then there’s the big one, which is the whole concept of crowdfunding. It’s going to need more work, but it’s all about using today’s internet technology to reach out to lots of people in the investor class.

EQ: The two provisions that you authored were The Small Company Capital Formation Act, which raises the SEC’s limit for Regulation A offerings from $5 million to $50 million, and The Private Company Flexibility and Growth provision, which raises the shareholder threshold for private companies from 500 to 2,000 shareholders before having to file with the SEC. Can you discuss the importance of these changes for emerging companies? Why are these issues critical for growing companies and businesses in today’s economy?

Schweikert: What I do is sort of like the yin and yang of the legislative route. One was the concept of the shareholder cap, which was a max of 500. So what happens when a company keeps growing and growing but then all of a sudden hits the shareholder cap? If you are able to go out there and get private investors to finance your growth, this has become a real barrier that has been freezing a lot of organizations because they weren't big enough or profitable enough yet to actually go public, but at the same time, they couldn't reach out to bring in more private equity investors. So the idea of raising that shareholder cap up to a couple thousand and lifting the cap on employees was meant to continue that growth cycle for companies in that situation.

The other side was to address how a company can go public. In today’s world, to go public is incredibly expensive because of Sarbanes Oxley. So we created this cap of up to $50 million, which is the minimum threshold to be on the big exchanges, and the hope is sort of a “holding the door” methodology. So companies can go public, start to get covered, then people know they exist and then they can do future offerings.

EQ: Small businesses and emerging growth companies seem to be one area of the economy that has been neglected in recent years. Can you discuss the importance of nurturing this area of the market and how it will help everyday Americans?

Schweikert: Actually, in many ways it is a crisis. If you can have a society that has a multiplier of ideas coming to market and shares being sold, some win and some lose, but there’s a movement constantly in the market. So what happens when the Sarbanes Oxleys of the world and things we did regulatorily over the last 15 years that were meant to make us safer start to diminish that philosophy in our economy? The reality is when you have one-third fewer publicly traded companies today, your options—whether you’re working on your savings for your retirement or investing your pension money or anything—have shrunk dramatically, and that also means that the velocity in the economy is shrinking.

EQ: While some aspects of the JOBS Act were designed to take effect immediately, others still needed to be worked through after it was signed into law. What is the current status of the JOBS Act? When can people begin to feel the effects of the law?

Schweikert: There are certain parts that are already up and running, but there’s a handful of the rule-making set that we’re still waiting for the SEC to finish promulgating. Some of that was already supposed to be done and they’re missing some of the deadlines, but they really want to get it correct. There are some of the solicitation rules that are very sensitive, and you start to get into a bit of the push and shove of the consumer groups and investor protection groups that want to make it safe. At the same time, you also have to think about how to you get opportunities to lots of folks who may not be rich but want to participate in the growth of a company. I know the SEC is trying to thread that needle. We’ve actually been holding some hearings to try to push along the rule making so that everyone out there will know what the sets of rules are for crowdfunding and some of the solicitations and options that are parts of the JOBS Act.

EQ: Regarding investor protection, risk and reward is essential to the way markets function. With that in mind, is it the government’s role to protect investors from risk in the market, as opposed to regulating fraud and misinformation?

Schweikert: This is a terrific topic because it hits one of the philosophical splits in Congress and much of society in the regulatory world. Do you try to create a society that’s risk free? First of all, that’s impossible. Secondly, as you head down that path, you destroy entrepreneurship and risk-taking because risk and the price of that risk are reflective in rates of return and interest rates. In today’s world, we almost make it illegal to take risk. There’s the flip side. There are people like me who believe that information is the ultimate regulator. It’s about helping people understand where things are going. If we can do it in a much simpler, less complex and verbose fashion, then I believe we can use the internet and this access to information to treat the public like adults and allow them to make their own investment decisions.

EQ: The impact of the new laws and regulations may not be fully understood yet, partially because the JOBS Act is still relatively new and partly because several key aspects are still ongoing. How do you communicate to small business owners and entrepreneurs of the changes that may be very helpful to them?

Schweikert: It’s not only about understanding all the new options that are out there, but it’s also about understanding that this brings you some new ways to find the capital to grow your business. If you went to business school, your professor told you about angel investing, finding venture capital, then one day going public. But if we can continue to move forward on the steam that we’ve started with the JOBS Act, then the reality of the future in capital formation is going to look very different in a year and substantially different by the end of the decade. It’s going to provide lots of different silos for entrepreneurs to be able to grow their concerns, and that’s actually one of the things that are really exciting. There may be different types of risk profiles and different types of businesses that need to matchup. I believe the options that we’re creating for the capital markets are going to marry those up well.

EQ: You’re participating as a panelist in an upcoming webcast with several key industry figures that have been very instrumental in regards to the JOBS Act and small cap markets. Can you tell us about this?

Schweikert: Part of the process here is laying out the options that are coming out very soon. This is already the law, and we’re waiting for some of the final rules to be written by the SEC. But as you’re growing your business, or starting one or considering in investing, we’ll discuss what some of the new options you have as well as traditional ways you’ve invested. If you are like I am, then you believe information is the ultimate regulator, but it’s also the ultimate power for you as an individual as an investor. So we need to pump that information through our country and this helps to do that.

EQ: The webcast serves a great forum to bring together some of the leading minds in the financial industry with lawmakers such as yourself. How important is it to keep that dialogue going between the two sides?

Schweikert: My fear is that Washington sometimes becomes very much of a bubble, and they’re often fighting the war of a couple of years ago. The financial disaster of 2008 had a major impact on the economy, but in many ways, we’re still looking backwards instead of looking at our future. Many of these ideas that are in the JOBS Act were brought to us by both investors and small businesses, saying “Look, here is my problem and here are some ways you can solve it. We can still keep the public safe and still have the information out there to make people educated investors.” So we need to break down some of those barriers and make sure those of us who are writing the law are listening to those who have to live under them.

EQ: We’ve discussed your past and ongoing contribution to the current JOBS Act. However, there are still a lot of areas you feel that still need to be addressed. Where are you currently focusing your efforts?

Schweikert: Part of this is every time you start to head down one of these paths, you realize that there are parts that are more complicated than you originally thought. Some of this goes all the way from how you securitize debt, whether it be the mortgage market or CMBS or many of these other types of financial instruments, all the way down to how solicitation is allowed to be done for folks who aren’t necessarily qualified investors but have savings that they are willing use as risk capital.

So I’m looking at what the future is for the JOBS Act, but more specifically as it pertains to capital formation. We sort of hit this path where we get something done, then get feedback on how it’s working, and then step into the next level and the next level, and so on. We’re desperate in this country to grow this economy. We need some velocity in economic growth, and my goal here is to find paths that put investors and entrepreneurs together to get them moving again. The reality of it is, this is a serious area and incredibly important for our economy and our offices are always open anyone out there that has ideas of what they think would help grow this economy.

For more on the JOBS Act, be sure to visit's JOBS Act Section: JOBS Act Section

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to:


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