One way to remind ourselves how much is at stake in JOBS Act rulemaking - even though the JOBS Act itself has already passed - is to remember what happened to the net worth standard under the accredited investor definition of Regulation D, following the passage of Dodd-Frank.
Two years ago, Section 413 of Dodd-Frank changed the accredited investor net worth standard, mandating that "during the 4-year period that begins on the date of enactment of this Act, any net worth standard shall be $1,000,000, excluding the value of the primary residence of [a] natural person."
This is how "excluding the value of the primary residence" was expressed in a subsequent SEC rule:
" …for purposes of calculating net worth … :
"(A) The person's primary residence shall not be included as an asset;
"(B) Indebtedness that is secured by the person's primary residence, up to the estimated fair market value of the primary residence at the time of the sale of securities, shall not be included as a liability (except that if the amount of such indebtedness outstanding at the time of sale of securities exceeds the amount outstanding 60 days before such time, other than as a result of the acquisition of the primary residence, the amount of such excess shall be included as a liability); and
"(C) Indebtedness that is secured by the person's primary residence in excess of the estimated fair market value of the primary residence at the time of the sale of securities shall be included as a liability;"
It took me several days to come to terms with the reality that the rule was not going to let you simply take the principal residence out of the equation. No, the rule says something quite different: ding yourself for an underwater mortgage (even if you live in a state that says you can't be liable for the deficiency), and also ding yourself for any home equity line of credit you draw upon within 60 days of investing in a startup, regardless of how much equity you might have in the property.
Where again was that last bit in Dodd-Frank? That's right, it wasn't there.
All levity aside, entrepreneurs and the angel community should keep a close eye on upcoming rulemaking to implement Article II of the JOBS Act. Article II, a/k/a Section 201, is the provision that (a) lifts the prohibition on general solicitation and general advertising for a Rule 506 offering, as long as all of the purchasers in the offering end up being accredited, and (b) provides a safe harbor for online platforms and incubators that facilitate angel investment. Unlike Section 413 of Dodd-Frank, Article II of the JOBS Act affirmatively asks the SEC to fill in a number of blanks, so expect the proposed rules to be longer and more complicated.