iOS app Android app More

New Jobs Bill Could Open The Door To Financial Fraud, Say Regulators

The Huffington Post  |  By Posted: 03/15/2012 5:17 pm Updated: 03/15/2012 5:17 pm

Jobs Act

Congress might soon pass a bill aimed at creating jobs. But there's a catch.

Regulators say the bill -- known as the Jumpstart Our Business Startups (or JOBS) Act -- could strip consumer protections meant to prevent costly cases of financial fraud. There's a growing pushback against the bill, which sailed through a House of Representatives vote last week and is now bound, in some version, for the Senate.

Critics of the JOBS Act -- among them Securities and Exchange Commission chairwoman Mary Schapiro and former SEC chief accountant Lynn Turner -- have expressed concern over the way the bill relaxes regulatory criteria for businesses. The JOBS Act would make it easier for companies to go public, allowing them to sidestep audits for up to five years, and would permit companies to raise as much as $2 million from online investors without going through the usual disclosure process.

Schapiro, Turner and other critics have said these policies could enable fraud of the kind practiced at Enron and Worldcom during the dot-com boom.

Meanwhile, supporters of the bill -- and it has many, according to Bloomberg, including Congressional Democrats, Congressional Republicans and President Barack Obama -- say that the bill will be a crucial step toward stimulating small business activity.

But as the Washington Post reports, the bill would grant regulatory exemptions for companies with as much as $1 billion in annual revenue -- meaning that it's a stretch to say it only applies to "small" businesses.

Some lawmakers have also expressed skepticism that the JOBS Act would provide the kind of large-scale fix the economy needs. Last week, House Minority Leader Nancy Pelosi called the legislation a "jobs bill light" and said that meaningful job creation would be more likely to come from the $109 billion transportation bill currently en route to the House.

Though politicians -- especially conservatives -- commonly argue that federal regulation is bad for job growth, most research suggests that it's not categorically destructive. Rather, academics and business professionals say that regulation can stymie job growth in some situations and help it along in others.

FOLLOW BUSINESS