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What doesn’t work in the JOBS Act

Nancy Marshall-Genzer Apr 5, 2012

Stacey Vanek Smith: Today, President Obama is scheduled to sign the JOBS Act — that’s the Jumpstart Our Business Startups Act. The legislation is being billed as a way to ease regulation on small businesses and help them attract investors so they can create more jobs. But some complain it erases too many hard-fought financial regulations.

Marketplace’s Nancy Marshall-Genzer reports.

Nancy Marshall-Genzer: After the dot-com bust, Wall Street had to play by new rules. A firewall was set up between stock analysts and investment bankers in the same firm. So when the bankers met with a company going public, they couldn’t say, hire us and our analysts will say good things about you.

Now, for some companies, that’s changing. Jay Ritter teaches finance at the University of Florida.

Jay Ritter: This could result in more pressure on the analyst to promise that I’ll put out a buy recommendation when the company goes public.

Other companies will no longer have to file quarterly reports, with details like how much money they made — or lost.

Jack Coffee teaches law at Columbia University.

Jack Coffee: And I think that is probably the largest retreat from transparency since the original passage of the securities laws back in the 1930s.

The JOBS Act also rolls back parts of the new Dodd-Frank financial reform bill. Now, some companies won’t have to disclose executive compensation, or let shareholders vote on it.

In Washington, I’m Nancy Marshall-Genzer for Marketplace.

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