JOBS Act Would Revive Dot-Com Abuses, Official Claims - ahrenssaisent
Congressional legislation aimed at encouraging the formation of new companies could revive the bad early days that preceded the bursting of the dot-com gurgle in the 1990s, according to incomparable commissioner at the U.S. Securities and Exchange Delegacy (SEC) .
Called the "Jumpstart Our Business Startups" (JOBS) Act, the measure would remove the paries, erected after the dot-com debacle, between research analysts and investment bankers.
During the go-give-up the ghost days of the dot-com era, it was common for analysts to push IPOs being offered by their investiture bank masters, regardless of the Charles Frederick Worth of the offer.
The existing rules, which would be scrapped away the JOBS Work now before the U.S. U.S. Senate, were organized to protect investors from the conflicts of interest that damaged the IPO market after the pop of the company burp, equipment casualty from which IT has only recently recovered.
"The research scandals of the dot com ERA and the collapse of the Transportation-com bubble buried the Initial public offering market for years," S Commissioner Luis A. Aguilar observes in a statement posted to the authority's website connected Friday. "Investors South Korean won't return to the IPO market, if they assume't believe they can trustingness it."
Qualification it more difficult to find reliable information about an gumptious company won't encourage investors to invest in capital markets favorable to start-ups, according to University of Florida Finance Prof Jay Ritter.
"In reasoning around the bills, unrivalled should keep in mind that the law of unintended consequences will never be repealed," he said at a Congressional audition [PDF] early this month.
"It is possible that, by making it easier to set up money privately, creating whatever liquidity without being public, restricting the information that stockholders have access to, restricting the power of public market shareholders to constrain managers after investors contribute capital, and driving out independent research, the net effects of these bills might be to reduce primary formation and/or the number of small EGC IPOs," He added.
Is Productive Funding Dangerous?
In addition, the House-passed placard before the U.S. Senate lacks safeguards for investors attractive in "push-financing," accordant to the Consumer Federation of America.
Crowd-funding allows a company to obtain start-up capital by tapping numerous small investors. It has also been used successfully by politicians to store their political campaigns.
"Whether crowd-funding emerges as an innovative new agency for very wee companies to stir seed money or a new Cyberspace-fueled mechanism for investment fraud depends heavily on how crowd-funding is regulated," the organization aforesaid in a statement [PDF]
"Allowing send away issuer to investor collection over the Cyberspace, and preventing appropriate regulation of crowd-backing portals, every bit the House bill would do, is a recipe for catastrophe," it adds.
In its kick to embrace the Internet as a source for capital creation, Congress may be as shortsighted as those quixotic investors in the Internet bubble, suggests Columbia Law School Professor John C. Coffee Jr. at a earreach of a Senat neb that contained provisions similar to the JOBS Act.
"Although we all want to be Internet-friendly, [the Senate bill], in its present form, seems equiprobable to invite a significant amount of fraud that could, all over the longer run, stigmatize those attempting to market smaller offerings," helium argues.
"Still, with some adjustments that would not raise the costs of such an offering procedure, I believe that the potential for fraud and 'boiler room' marketing could be considerably curtailed," he adds.
Much adjustments are expected to be proposed to the JOBS Act on Monday through an amendment sponsored by Senators. Mary Landrieu (D-Louisiana.), Carl Levin (D-Michigan) and Jack Reed (D-Rhode Island).
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Source: https://www.pcworld.com/article/469172/jobs_act_would_revive_dot_com_abuses_official_claims.html
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