"Former SEC Official Slams House JOBS Act: ‘It Won’t Create Jobs, But It Will Simplify Fraud’"
In a rare show of bipartisanship, the House of Representatives easily passed the Jumpstart Our Business Startups (JOBS) Act last week, with both parties touting it as a way to help small business startups and boost the economy. The White House supports the bill, and Senate Democrats are planning to introduce it (or something like it) in the coming days.
Regulators and business advocates, however, have a different view of the bill, which would remove or weaken regulatory hurdles for so-called “emerging growth companies” that are raising money through public offerings, exempt some companies from government audits, and make it easier for companies to use “crowd funding,” allowing them to raise money online from a large number of investors without filing disclosure forms.
Securities and Exchange Commission (SEC) Chairwoman Mary Schapiro is concerned that the bill would rollback significant investor protections, she wrote in a letter to the Senate Banking Committee last night. Former SEC chief accountant Lynn E. Turner took an even dimmer view of the bill, Bloomberg reports:
“It won’t create jobs, but it will simplify fraud,” Turner said in an interview last week. “This would be better known as the bucket-shop and penny-stock fraud reauthorization act of 2012,” he said, referring to practices banned under securities law.
The JOBS Act would “destroy safeguards dating as far back as the laws that created the” SEC, according to Turner, and would also “weaken important protections” put in place after the accounting scandals that engulfed Enron, WorldCom, and other companies in the early 2000s.
One exemption created by the bill, meant to help small businesses, is “so broad that it would eliminate important protections for investors in even very large companies,” Schapiro wrote. It’s exemption for crowd funding, meanwhile, would make it easier to organize online scam operations at a time when Americans — particularly the elderly — are more susceptible to online scams than ever.
ProPublica’s Jesse Eisinger called the bill a giveaway to lobbyists, short-sellers, Wall Street analysts, and “boiler room operations,” all groups that have been the subjects of recent scandals. “While well intentioned, the JOBS Act…sacrifices essential investor protections without offering any prospects for meaningful, sustainable job growth,” Jack Herstein, president of the North American Securities Administration Association, told the Washington Post.
The Senate still has time to strengthen the bill, though Majority Leader Harry Reid (D-NV) wants to pass it soon. The White House, for its part, says it supports efforts “to ensure that there are sufficient safeguards to prevent abuse,” though it hasn’t said what specifically it would like changed.