This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Obama's JOBS Act Is Actually Hurting Smaller Companies

NEW YORK ( TheStreet) -- The "Jumpstart Our Business Startups Act," aka the "JOBS Act," aka the "Let's Encourage Stock Fraud Act," is finally showing its true colors -- as an obstacle to companies seeking to raise money from investors.

That's not just my opinion; it's a fact. To be exact, 49 potential beneficiaries of this atrocious law say that the JOBS Act may actually hurt them by making them less attractive to investors. They've said so in filings with the Securities and Exchange Commission.

How did America's emerging growth companies get into this mess? Thank Congress and President Obama. As we all recall, the JOBS Act sailed through Congress with bipartisan support, at the behest of the president, for the ostensible purpose of encouraging job growth. But it sought to carry out that goal not by doing something constructive -- such as increasing spending in the public sector or repairing the nation's decaying infrastructure -- but by removing regulatory oversight from the capital-raising process for the smallest companies, where fraud has been a nagging problem.

I was part of the chorus of voices that decried the JOBS Act as a giveaway for stock fraud. The law gave its blessing to "crowd-funding," which basically lets small investors gather on the Internet and finance small business. Sort of the investment equivalent of one of those Mickey Rooney-Judy Garland musicals where the kids get together to put on a show. But the wholesome facade is phony. As I explained when that terrible idea reared its head in September, crowd-funding can be used as a cover for fraud in the private placement of securities. The JOBS Act also carved out exemptions for small "emerging" companies from the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, and rules goverrning executive compensation disclosure.

From almost the moment the ink dried on the law, which took effect on April 5, dozens of companies that "benefit" from the JOBS Act have in their SEC filings been quietly listing that blessing as among the "risk factors" that weigh upon them.

A search of SEC records on the agency's Edgar Web site shows that identical language, raising the possibility of the JOBS Act actually hurting the companies' ability to raise money. It's appeared in 74 SEC disclosures filed by 49 companies since April, beginning on April 20 with the prospectus of a software developer called Splunk Inc., and continuing through the present day. Most recently (at least, as of this writing), this stern-sounding language could be found in the registration statement filed on Monday by Natural Grocers by Vitamin Cottage Inc., a Colorado-based natural foods and nutritional supplements retailing chain.
1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $93.74 0.00%
FB $117.58 0.00%
GOOG $693.01 0.00%
TSLA $240.76 0.00%
YHOO $36.60 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs