A bill that started out as seven separate bills intended to benefit business startups and stimulate job creation has come in for so much criticism on its way to the Senate that opponents may prevail in strengthening consumer protections they say were trashed.
The House passed H.R. 3606, the Jumpstart Our Business Startups (JOBS) Act, with bipartisan support on March 8, in a vote of 390-23, but not without vocal opposition from critics that range from consumer advocates to former SEC officials. After passage, the bill was pilloried in the press, and opponents swung into action to push for changes in legislation they saw as presenting a golden opportunity for fraud and deception.
Provisions of the bill include crowdfunding and substantially lower requirements for SEC registration for companies with less than $1 billion in revenue. On March 14, Majority Whip Sen. Dick Durbin, D-Ill., called the crowdfunding language a “half-boiled concoction of ill-conceived ideas.”
Senate Democrats have said they plan to address a number of the concerns voiced by critics in their own version of the bill. The North American Securities Administrators Association (NASAA) said Wednesday that it hoped for additional legislative action in the Senate before the bill is put to a vote, with the possibility of an amendment introduced by Democrats concerned about the lower threshold of consumer protection contained in the House version of the bill.
Bloomberg had reported that Lynn E. Turner, a former SEC chief accountant, said the bill would do away with investor protections that have been in place since the formation of the agency in the 1930s.
Turner was quoted saying, “It won’t create jobs, but it will simplify fraud. This would be better known as the bucket-shop and penny-stock fraud reauthorization act of 2012.” Others have been critical of the bill as well, despite its support from the U.S. Chamber of Commerce, NYSE Euronext, Nasdaq OMX Group and Sen. Charles Schumer, D-N.Y. President Obama has supported a number of provisions in the bill.
In an opinion piece in The Washington Post, John Coates and Robert Cozen criticized the loosened regulations on crowdfunding, saying they “would make it easier for future Bernie Madoffs to create, say, 50 fake firms, steal $50 million from unsuspecting investors and retire to a tropical island.”