Monday, March 4, 2013

We Need Acronym Reform: The Jobs Act

We Need Acronym Reform: The Jobs Act

I've been critical of Steven Rattner on a couple of occasions, but I must say that he does a terrific job of critiquing the JOBS Act in an Op Ed piece entitled "A Sneaky Way to Deregulate."[1]  The JOBS Act, pushed by Congressional Republicans and signed by President Obama does several bad things.  First, it allows would-be entrepreneurs to "crowd-source" investment capital.  Second, it allows alternative investment managers to advertise.  Third, it relaxes the SEC regulatory filing requirements for smaller companies.   There’s not a whole lot to add to Mr. Rattner’s cogent dissection of the act.

I’ve made a bunch of seed capital investments over the years, and learned the hard way that start-up investing is very difficult.  Moreover, there isn’t a shortage of capital for good ideas.  Every entrepreneur with an unfunded business plan is going to disagree, because he believes passionately in his idea.   He has to conclude it's a simple lack of money that stands between him and success.  Crowd sourcing is going to fund serial charlatans rather than serial entrepreneurs.

As for the alternative investment industry, there’s no good reason to advertise.  The skilled managers don’t need to advertise; they have plenty of clients.  Advertising will simply provide weak and unscrupulous managers with the means of attracting unsuspecting investors.

As for the relaxed reporting and filing standards, we can look forward to the next generation of Sarbanes-Oxley. In due course, we'll have a series of irregularities and the very politicians who pushed the JOBS Act will call the SEC on the carpet in televised hearings, and then pass legislation with all kinds of new filing and reporting provisions.

Perhaps, we need some type of acronym reform law, so our politicians can't put ill-conceived reforms in appealing packages.


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