Podcast Center
Video Center
Webcasts
Resource Center
Events
March 23, 2012 at 07:14 AM
Congress and the White House are sacrificing investor protection for politics and are in danger of repeating a legislative mistake that has allowed promoters of fraudulent securities offerings to steal millions of dollars from investors since 1996.
Immediately after the Senate passed an amended version of the Jumpstart Our Business Startups (JOBS) Act, the White House issued a statement hailing the legislation and said it will be “vigilant … to ensure the overall bill achieves its goal of helping entrepreneurs while maintaining protections for investors.”
But the JOBS Act that passed the Senate is by and large the same bill that passed the House early this month and has been steadily lambasted by consumer and investor advocate, academics and the media for its rollback of critical investor protections.
Make no mistake. The JOBS Act remains the fundamentally flawed product of a rush to legislate.
This legislation will needlessly exposeMain Streetinvestors to greater risk of fraud by creating new jobs for promoters of Internet investment scams. Unfortunately, many investors may be harmed before this mistake is corrected.
I believe election-year politics have blinded Congress and the White House to the unintended consequences of their actions, which however well intentioned could open the floodgates to investment fraud.
The Senate failed to correct the oversight gap in the House-passed legislation by needlessly preempting states from reviewing crowdfunding offerings before they are sold to investors. Crowdfunding is an Internet-based fundraising technique promoted by the White House as a new tool for raising money for small and startup businesses.
Preempting state authority is a very serious step and not something that should be undertaken lightly or without careful deliberation, including a thorough examination of all available alternatives. In its quest for deregulation, the Senate rushed to judgment.
In 2004, the Bush Administration preempted numerous state consumer financial protection laws in order to facilitate greater ‘financial innovation,’ especially in mortgage lending. Most of us remember how that experiment ended, but it seems that Congress has already forgotten.
Congress made a similar mistake in 1996 with the passage of the National Securities Markets Improvement Act (NSMIA), which preempted state authority to review private offerings made under Securities and Exchange Commission Regulation D Rule 506 and created a regulatory “black-hole” by entrusting the SEC to police these offerings.
