I’m not against this act – the JOBS ACT - I’m for it, but I do believe that lots of people (small investors) will end up on the short end of the stick, end up getting scammed.
While there are many companies (including existing companies and start-ups) that will benefit from the JOBS Act and whose management teams will do their best to earn a return for their investors, there are, unfortunately, many scam artists “out there” who will use the JOBS Act to fleece investors. Why are there so many dishonest people? I’ll never be able to answer that question, nor will any of you.
Back in 1985, we took our first company public; our stock was traded on the NASDAQ National Market System. In order to take our company public – and we were a very small company – we had to get through three years of audited (“certified”) financial statements and a TON of regulatory-required paper work. A “ton” of paperwork is putting it mildly! And, that was way before Sarbanes-Oxley. I can’t even begin to imagine how much of a pain in the neck it is today to deal with the SEC reporting required of public companies.
Okay, now with the JOBS Act, it “sounds like” one can come up with an idea for a business, post “funding” requests on an Internet site, sit back and collect checks from hundreds of investors, and, once there’s sufficient money in the pot, start the business …. and see what happens. Where there’s no risk, there’s generally no chance for reward (or however that saying goes.)
I think I’ve “just gotta try this out.” I have an idea for a business, and I don’t mind taking in investors. I guess I’d better read the JOBS Act to see all that’s involved.
Here’s the story that was released today about the JOBS Act:
House passes JOBS Act, sends bill to Obama
By Ed O'Keefe (The Washington Post)
Posted at 03:10 PM ET, 03/27/2012
The House overwhelmingly approved a measure Tuesday designed to make it easier for growing companies to attract investors and comply with securities laws. The bipartisan measure, strongly backed by both parties and the White House, passed 380 to 41.
The Jumpstart Our Business Startups Act, or JOBS Act, first passed the House earlier this month with wide bipartisan margins and the Senate approved it last week after adding amendments that provide additional safeguards on “crowdfunding” to prevent credit scams. The House needed to approve the changes before sending it to the White House for President Obama’s signature.
The legislation lifts Securities and Exchange Commission restrictions on running advertisements soliciting new investors and permits “crowdfunding” so that entrepreneurs can raise equity capital from larger pools of small investors. Small private companies also would be able to sell up to $50 million in shares as part of a public offering before having to register with the SEC, and could have as many as 1,000 shareholders, up from the current cap of 500.
House Majority Leader Eric Cantor (R-Va.) said passage of the bill was “an increasingly rare legislative victory in Washington where both sides seized the opportunity to work together, improved the bill and passed it with strong bipartisan support.”
But critics say that the changes would allow firms to avoid disclosing crucial financial information and elude government oversight, opening the door to fraud and investor abuse.
Obama’s support for the bill has put him at odds with frequent allies, including labor unions and consumer and regulatory groups. And though the Senate approved the measure, half of the chamber’s Democrats voted against passage. Congressional aides said some Democratic senators felt boxed in by the Obama’s enthusiasm for the measure.
As The Post’s Zachary A. Goldfarb reported Tuesday, the White House has worked hard since the fall to reconcile with liberal groups, adopting tougher rhetoric toward Republicans and advancing a series of policy proposals embraced by allies. But when liberals revolted over this recent legislation, the White House responded with what critics complain was only a token acknowledgment of their concerns.
Lawmakers are expected to move next to competing proposals that would provide further tax cuts to growing companies — part of a GOP strategy and Democratic counteroffensive to introduce less ambitious, but politically popular economic-themed legislation.
Cantor and House Republicans plan to vote next month on a measure that would grant 20 percent tax cuts to growing companies; a Senate Democratic proposal introduced this week would provide $26 billion in tax credits to smaller companies that either hire new workers or increase the overall size of their payroll.
Crowd funding refers to the collective cooperation, attention and trust by people who network and pool their money and other resources together, to support efforts initiated by other people or organizations. The purpose of crowd funding varies, from disaster relief to citizen journalism to artists seeking support from fans, to political campaigns. Crowd funding is also used for startup companies. It is sometimes called crowd financing or crowd sourced capital. An entrepreneur seeking to use crowd funding typically makes use of online communities to solicit pledges of small amounts of money from individuals who are typically not professional financiers.