Archive for March 2012
Published March 27, 2012, Dow Jones Newswires - In a rare display of bipartisanship, the House passed a bill Tuesday aimed at boosting jobs by easing an array of business regulations, the measure’s last step before it can be signed by the president.
The vote was 380-41.
Backed by the Obama administration and the Democrat-controlled Senate, the bill reflects a desire by both parties during an election year to show they are doing all they can to eliminate red-tape for startups and small businesses.
But regulators, investor groups and a small number of Democrats have charged that the Jumpstart Our Business Startups, or JOBS act, is unlikely to succeed in boosting employment and would likely lead to more financial fraud.
Specifically, the bill eases corporate governance and financial reporting requirements for initial public offerings, while also loosening a variety of other rules designed to make it easier for private companies to raise capital without an IPO.
Newly public companies with annual revenues of as much as $1 billion — a threshold that covers the bulk of recent IPOs — would be excused from new or revised national accounting and auditing standards and wouldn’t have to hire an auditor to make sure systems are up to snuff for up to five years.
The bill also would allow research analysts to write reports about companies just before an IPO even if bankers at their firm are underwriting the offering, which currently isn’t allowed. The rules were put in place to prevent investment bankers from promising potential clients favorable research in return for underwriting assignments.
The changes represent one of the biggest rollbacks of the 2002 Sarbanes-Oxley law, the revamp of accounting rules enacted in response to the Enron and WorldCom scandals, and the first major slackening of securities laws since the Dodd-Frank financial overhaul.
The House had already signed off on an earlier version of the jobs bill earlier this month, by a vote of 390-23, but had to vote on it again after the Senate amended the bill. The Senate’s additions are aimed at protecting investors in start-ups that use so-called crowdfunding techniques, in which entrepreneurs tap thousands of investors who are given very small shares of stock.
Specifically, the Senate changes would require more thorough disclosure to investors of crowdfunding initiatives — including the risks of such investments — as well as scaled annual limitations on the overall amount of money individuals can invest in such startups based on their income. The SEC also would oversee crowdfunding websites that function as “funding portals” for such startups.
The bill also would make it easier for startups to pitch investments to wealthy individuals and would quadruple to 2,000 the number of shareholders closely held companies and community banks can have before they must open their books to the Securities & Exchange Commission.
WASHINGTON – March 6, 2011 – Senate Banking Committee Chairman Tim Johnson (D-SD) held a hearing on capital formation proposals to spur job creation and protect investors.
Below is Chairman Johnson’s statement as prepared for delivery:
Today we will have our second full Committee hearing on “Spurring Job Growth through Capital Formation While Protecting Investors.”
It is our fourth hearing overall on capital formation, following Senators Reed and Crapo’s Securities Subcommittee hearing on “Examining Investor Risks in Capital Raising” and Senators Tester and Vitter’s Economic Policy Subcommittee hearing on “Access to Capital: Fostering Job Creation and Innovation Through High Growth Startups.”
Growing small businesses is critical to building a stronger American economy, and today we meet to consider how to help small business and entrepreneurs access the capital they need through stock markets. The intent is to help them grow and create new jobs, while having suitable protections so investors are assured they will not be taken advantage of if they put their money at risk.
Businesses may attempt to raise more capital if the process of selling stock is made easier and less costly. At the same time, investors are more likely to buy stock when they have adequate reliable information and fair trading markets. Last week in the Committee, in response to my question, Fed Chairman Bernanke said, “Startup companies – companies under 5 years old – create a very substantial part of jobs added to the economy,” and he encouraged assisting startups. SEC Chairman Schapiro has said, “Companies seeking access to capital should not be overburdened by unnecessary or superfluous regulations. At the same time . . . we must balance that responsibility with our obligation to protect investors and our markets.”
In previous hearings, witnesses have discussed how public markets allocate capital and help create jobs, SEC requirements for a company to go public, why some firms prefer to remain private, how investors may be solicited to buy stock, how institutional investors decide whether to buy a company’s IPO shares, the importance of liquidity in the secondary markets, the importance of investor protections, measures to reduce the cost of selling stock and their potential impact on the cost of capital and other considerations.
Today, we will hear testimony from experts analyzing the history and state of the IPO market, the needs of start-up and small businesses, why investors buy IPOs, the role of accounting and other disclosures, analyst conflicts of interest and other matters.
Members of this Committee on both sides of the aisle including Senators Schumer, Crapo, Tester, Reed, Vitter, Merkley, Toomey, Bennet and Johanns have been working hard on bipartisan proposals and I welcome our witnesses to provide their insights on these measures and others on the topic.
I look forward to working with the entire Committee and with Senate Leadership to quickly move bipartisan legislation forward.