Congress Passed JOBS Act

March 27, 2012

The House of Representatives voted overwhelmingly on Tuesday to pass a bill to boost small business growth, despite concerns from financial watchdogs the legislation will dangerously erode investor protections.

The bill, which passed the House by a vote of 380 to 41, was approved by the Senate last week in an unusual show of election-year bipartisanship.

It now goes to President Barack Obama's desk to be signed.

The White House has expressed support for the bill, known as the JOBS Act.

The bill would make it easier for small companies to raise capital and make initial public offerings.

It has made unusually quick progress through a generally gridlocked Congress, with both Democrats and Republicans eager to be seen backing business growth in an election year with unemployment still above 8 percent.

But a group of Senate Democrats, regulators, and investor advocates appeared poised to derail the bill earlier this month, warning it left investors too exposed to securities fraud.

"It's been criticized here and there by people who I think are of the mindset that any retreat, any revisiting, any amendment to our current regulatory structure is a bad idea," said Jim Himes, a Connecticut Democrat who sponsored one of the bill's underlying provisions.

"Regulation, like anything else, has to adapt to change with the times."

The bill would make it easier for companies to solicit private investors and relax filing requirements associated with initial public offerings. It would also allow startup companies to engage in crowdfunding, in which investors take small stakes in companies over the Internet.

The Senate added an amendment to bolster investor protection by limiting the amount of money less wealthy investors could pledge to crowdfunding ventures.

The amendment would also require "crowdfunders" to post their offerings on third-party websites, which would in turn have to register with the U.S. Securities and Exchange Commission.

SEC Chairman Mary Schapiro had expressed concern that the original House version eroded too many critical investor protections. The Senate fixes, which she welcomed, do not address all of her issues with the legislation.

George Canellos, director of the SEC's New York office, told a compliance industry conference sponsored by Dow Jones on Tuesday that he is also worried about the legislation's impact.

"I have acute concern about the fraud risk," he said, noting that his views were his own. There is "example after example of micro-cap non-reporting companies that are more vehicles for fraud than they are for entrepreneurship."

Posted on April 2, 2012 in Business and Legislative.