Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Friday, April 6, 2012

President Signs JOBS Act as Doubts Continue to Growth

President Obama signed the JOBS Act on Thursday.  In the signing ceremony, he stated:

Here’s what’s going to happen because of this bill.  For business owners who want to take their companies to the next level, this bill will make it easier for you to go public.  And that’s a big deal because going public is a major step towards expanding and hiring more workers.  It’s a big deal for investors as well, because public companies operate with greater oversight and greater transparency.

And for start-ups and small businesses, this bill is a potential game changer.  Right now, you can only turn to a limited group of investors -- including banks and wealthy individuals -- to get funding.  Laws that are nearly eight decades old make it impossible for others to invest.  But a lot has changed in 80 years, and it’s time our laws did as well.  Because of this bill, start-ups and small business will now have access to a big, new pool of potential investors -- namely, the American people.  For the first time, ordinary Americans will be able to go online and invest in entrepreneurs that they believe in.

Of course, to make sure Americans don’t get taken advantage of, the websites where folks will go to fund all these start-ups and small businesses will be subject to rigorous oversight.  The SEC is going to play an important role in implementing this bill.  And I’ve directed my administration to keep a close eye as this law goes into effect and to provide me with regular updates.

Meanwhile, doubts about the legislation continue to grow with careful scrutiny of its provisions.  The Wall St. Journal focused on the provisions that exempt "emerging growth companies" from the internal controls requirements and found "some support" for detractors of the bill.  It found that since 2004, 104 companies that have had issues with their accounting and audit procedures would have been exempt from the internal controls provision.  WSJ, Investors' Prying Eyes Blinded by New Law

Similarly, Peter Henning (Wayne State), in his New York Times blog, cautions investors to exercise vigilance in investing in start ups.  At Large and Small Companies, Internal Controls Matter

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