Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Will You Make Money in the New Silver Bull Market ? - 13th Aug 20
Hyper-Deflation Capital Destruction And Gold & Silver - 13th Aug 20
Stock Market Correction Approaching - 13th Aug 20
Silver Took the Stairs to $21 in 2008, Took Escalator to $29 2010. Is Silver on Elevator to 120th floor today? - 13th Aug 20
President Trump Signs Additional COVID Relief – What To Expect from the Markets - 13th Aug 20
Has Gold's Upward Drive Come to an End? - 13th Aug 20
YouTuber Ads Revenue & How to Start a Career on YouTube - 13th Aug 20
Silver Notches Best Month Since 1979 - 12th Aug 20
Silver Shorts Get Squeezed Hard… What’s Next? - 12th Aug 20
A Tale of Two Precious Metal Bulls - 12th Aug 20
Stock Market Melt-Up Continues While Precious Metals Warn of Risks - 12th Aug 20
How Does the Gold Fit the Corona World? - 12th Aug 20
3 (free) ways to ride next big wave in EURUSD, USDJPY, gold, silver and more - 12th Aug 20
A Simple Way to Preserve Your Wealth Amid Uncertainty - 11th Aug 20
Precious Metals Complex Impulse Move : Where Is next Resistance? - 11th Aug 20
Gold Miners Junior Stcks Buying Spree - 11th Aug 20
Has the Fed Let the Inflation Genie Out of the Bottle? - 10th Aug 20
The Strange Food Trend That’s Making Investors Rich - 10th Aug 20
Supply & Demand For Money – The End of Inflation? - 10th Aug 20
Revisiting Our Silver and Gold Predictions – Get Ready For Higher Prices - 10th Aug 20
Storm Clouds Are Gathering for a Major Stock and Commodity Markets Downturn - 10th Aug 20
A 90-Year-Old Stock Market Investment Insight That's Relevant in 2020 - 10th Aug 20
Debt and Dollar Collapse Leading to Potential Stock Market Melt-Up, - 10th Aug 20
Coronavirus: UK Parents Demand ALL Schools OPEN September, 7 Million Children Abandoned by Teachers - 9th Aug 20
Computer GPU Fans Not Spinning Quick FIX - Sticky Fans Solution - 9th Aug 20
Find the Best Speech Converter for You - 9th Aug 20
Silver Bull Market Update - 7th Aug 20
This Inflation-Adjusted Silver Chart Tells An Interesting Story - 7th Aug 20
The Great American Housing Boom Has Begun - 7th Aug 20
NATURAL GAS BEGINS UPSIDE BREAKOUT MOVE - 7th Aug 20
Know About Lotteries With The Best Odds Of Winning - 7th Aug 20
Could Gold Price Reach $7,000 by 2030? - 6th Aug 20
Bananas for All! Keep Dancing… FOMC - 6th Aug 20
How to Do Bets During This Time - 6th Aug 20
How to develop your stock trading strategy - 6th Aug 20
Stock Investors What to do if Trump Bans TikTok - 5th Aug 20
Gold Trifecta of Key Signals for Gold Mining Stocks - 5th Aug 20
ARE YOU LOVING YOUR SERVITUDE? - 5th Aug 20
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

The Ugly Truth About the Promise of the JOBS Act

Politics / US Politics Oct 05, 2012 - 06:19 AM GMT

By: Money_Morning

Politics

Best Financial Markets Analysis ArticleShah Gilani writes: Last week I wrote about how the Jumpstart Our Business Startups Act (the JOBS Act) can be a pathway to funding brand new businesses as well as small operating companies to further American entrepreneurship and create jobs.

I even called the legislation, signed into law on April 5, 2012, a "light at the end of the tunnel" in terms of its potential to stimulate the economy.


But I also warned you there are elements of the Act that are bad, if not downright ugly.

So, let's take another look at the JOBS Act to see if that light in the tunnel is a freight train headed straight for us.

First, it's instructive to learn that the JOBS Act came into being, not as an original piece of legislation, but as an amalgamation of six House bills, four of which had strong bipartisan support.

What began as a series of bills proposed to facilitate "access to capital" and "capital formation" and incorporated those terms in their former titles, eventually were cobbled together to become the Jumpstart Our Business Startups Act, whose title highlighted this year's election mantra: it's about jobs, jobs, jobs.

Too bad there isn't anything in the JOBS Act that says anything about hiring anybody.

The Masquerade Behind the JOBS Act
Some of you might call me cynical for this, but another way to look at what the JOBS Act amounts to is to see it as a deregulatory push masquerading as a job creation scheme.

And therein lies the problem.

It's all well and good to make raising capital easier for startups and small operating businesses, but altogether disquieting to clear that path by weeding out investor protections that have been on the books for decades.

It's like déjà vu all over again.

Provisions in the Act allow for general solicitation and advertisement of securities offered by intermediaries, some registered with the SEC, most not, on behalf of business startups and operating companies, who would be the "issuers" of unregistered securities.

One can only imagine that the opportunity to enthrall wide swaths of the population with get-rich quick schemes might be a recipe for misleading advertising, if not outright fraud. There are no provisions in the Act about who monitors or substantiates claims made in general solicitation and advertising outlets.

Another problem with drawing attention to startup opportunities and distribution of their unregistered securities is, who is monitoring who the distributors are?

The SEC requires some intermediaries to register as broker-dealers; however, the Act makes it easy for just about anyone to create a "funding portal" through which potential investors can travel, via Internet express, to arrive at a station possibly named "your future millionaire status."

What's more, there are umpteen questions unanswered in the Act.

Important questions like who is responsible for doing due diligence? The issuer, the intermediary, or the investor?

The law doesn't provide exact guidelines for what has to be given to whom or when, in terms of financials; nor does it qualify what constitutes meaningful business and financial metrics.

There are other problems inherent in the ACT that subject investors in new startups to uncertainty, if not fraud. And those uncertainties only get worse when it comes time for startups to take themselves public in an IPO.

In what amounts to a frontal assault on investor protection regulations, the deregulatory push inherent in the JOBS Act creates a new category of "emerging growth companies."

Without defining exactly what an emerging growth company is, but defining it as no longer emerging once it reaches its fifth-year anniversary after going public, or if it generates over $1 billion a year in revenues (I'd call those companies long since emerged), the Act provides exemptions from certain financial disclosures.

Those include certain financial reporting requirements, governance rules, and internal controls previously required of all publically traded companies. Emerging growth companies are not burdened with these requirements until they are no longer "emerging." Mind you, these are publicly traded companies.

Buyer Beware
All I have to say about that act of stupidity is thank goodness we have the Sarbanes-Oxley laws to fall back on to ferret out some executives' propensity (think Enron and WorldCom, the reasons for the SarBox laws) to cook their books.

Unfortunately, to afford ourselves, our markets, and our economy the protections that SarBox offers, we will eventually have to get someone to enforce those laws which haven't been enforced since they were created.

Maybe the new Act is a gift to short-sellers who are supposed to unearth accounting issues, sell short the guilty company's stock and then announce to the world what they've uncovered. That's one way to get the shareholders to smarten-up -- sell their shares after the cat's out of the bag.

If the intention of the JOBS Act was really to create jobs, there should have been written provisions to mandate that users of new-fangled crowdfunding, social media groups and dancing-with-the-stars opportunities actually had to hire people to avail themselves of the Act's trap doors.

I'm not the only one skeptical of why or how the JOBS Act was written.

Barbara Roper, director of investor protection for the Consumer Federation of America has said, "My guess is the Republicans cannot believe they have suckered the Democrats into taking up their idea that deregulation is the way to promote job growth. It flies in the face of what the Democrats were arguing just a couple years ago. It completely undermines what they are trying to do to shore up our system of financial regulation."

And Arthur Levitt, former chairman of the SEC under President Bill Clinton, said of the whole affair, "The bill is a disgrace."

Is the JOBS Act a step in the right direction? Yes it is. Only it may be a slippery slope for the investors it hopes to attract to the business of creating jobs.

Here's my advice: If you're going to get involved in any of these new-age deals, never forget the ball is in your court and tape the following saying to your check book: Caveat Emptor.

Source :http://moneymorning.com/2012/10/05/the-ugly-truth-about-the-promise-of-the-jobs-act/

Money Morning/The Money Map Report

©2012 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules