Beware congressional legislation bearing a sunny name. The “Mom and Apple Pie” bill will invariably include a provision allowing power plants to pollute drinking water, and a clause that makes us drop our pants in the airport security line.
Now here comes the JOBS act.
According to regulators, it’s a doozy. The New York Times reports that Wall Street firms are poring over the legislation to determine whether it loosens some of the restrictions enacted to protect investors from financial abuses at the beginning of the 2000′s. In particular the act could allow big banks to breach the Chinese wall that has separated investment bankers working with public companies and the analysts who are covering those companies. Goldman Sachs (GS) and others are already reportedly exploring how to change their business practices once the bill is passed. President Obama is expected to sign it today.
Former New York governor Eliot Spitzer told the Times “It shouldnÂt be called the JOBS Act, it should be called the Bring Fraud Back to Wall Street Act.”
Under the JOBS act, regulations could be loosened for emerging growth companies, potentially allowing analysts to pump up interest in the stock even as their firms stand to make millions underwriting the equity offer.
The act could also allow entrepreneurs to sell some stock on the Internet without registering with regulators. And it could allow hedge funds and private equity firms to market themselves more aggressively to the public, a practice that’s now heavily restricted.
Of course, some would argue that these kinds of changes are long overdue — and yes, Eliot Spitzer might not be the best messenger to preach restraint. But investors should at least take note of the potential conflict in the advice they’re being given.
