As written, the JOBS Act only removes protections against fraud, without adding any protections for regular people. The AFL-CIO has issued this statement, The Jobs Act--A Cynical and Dangerous Return to the Politics of Financial Deregulation,
Workers' retirement savings will be in greater risk of fraud and speculation if securities market deregulation once again is railroaded through Congress. Once again our economy will be at risk from the folly of policymakers promoting financial bubbles and ignoring the needs of the real economy. The AFL-CIO calls on Congress to set aside the politics of the 1%, the old game of special favors for Wall Street, and turn to the business of real job creation. The labor movement strongly opposes the JOBS Act and any other effort to weaken the Dodd-Frank Act.
We support the efforts of Senate Democrats such as Jack Reed, Carl Levin, and Mary Landrieu to amend the "JOBS Act" to lessen the harm it does to investors, pension funds and the U.S. economy.
Jesse Eisinger, writing at ProPublica in Congress's Genius Jobs Plan--for Fraudsters, Shills, and Wall St. Analysts, makes the case
John Coffee, a Columbia Law professor, has hailed the bill as "the boiler room legalization act." And rightly so. Boiler room operations were one of the unsung job creators of the 1990s, producing some of America's greatest penny stocks and boom times for yacht makers and coke dealers.
... Taking advantage of the revolutionary possibilities of the Internet, the bill loosens decades-old investor protections so that companies can directly advertise to those who would like to be separated from their money. It does that by giving broad exemptions for start-ups that want to "crowdfund" by raising small amounts of money over the Internet. I.P.O. pitches next to "Lose Your Belly!" ads. Sounds like a great idea!
Nigeria shouldn't be the only country to benefit from the web. Right here in America, the elderly are increasingly attractive to a variety of entrepreneurial spirits. If JOBS becomes the law, such innovators could flourish.
Other provisions in the JOBS Act allow companies to solicit investors, with advertising, etc. This is a mistake.
Fixing the Bill
Crowd-funding is enabled by new technologies, and should be explored for democratizing and expanding investment opportunities. If done right this is an opportunity to enable companies to bypass the gatekeepers-of-wealth, and regular people to participate in a democratic investment economy. But it has to be done right, with adequate protections in place from the start.
The legislation has to limit what people can lose and ensure sufficient transparency, to make sure an investment is real and viable and is not a scam designed to take off with the cash.
There is a Reed-Landrieu-Levin amendment that addresses many of the concerns in the bill. According to the Consumer Federation of America, among other protections it,
... limits the companies that would qualify as "emerging companies" to those with less than $250 million in gross revenue and by eliminating the House bill's exemptions from accounting rules, say-on-pay and golden parachute vote requirements, and executive compensation disclosures. And it provides somewhat greater protection than the House bill against a resurgence in the kind of abusive securities analyst practices that fueled the tech stock bubble and bust.
... It includes stronger pro-investor provisions from the Senate Reg A bill, including requirements for audited financial statements, SEC authority to require up-front disclosure and periodic reporting, and a negligence-based litigation remedy. Importantly, it improves on that bill by limiting companies to raising $50 million through Regulation A offerings over three years, rather than once every 12 months, thus significantly reducing the risk that this provision will be used to evade public reporting requirements for larger companies.
... takes important steps to minimize the potential for harm, in particular by requiring that crowd-funding be conducted through an appropriately regulated Internet portal and requiring offerings of all sizes to provide financial information to investors subject to regulatory requirements appropriate to the size of the offering.
Also, Senators Scott Brown (R-MA), Jeff Merkley (D-OR) and Michael Bennet (D-CO), have introduced the bipartisan CROWDFUND Act (S. 2190). The CROWDFUND Act will:
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