“But all along, we continued to urge the Senate to improve on the legislation,” the official said. Obama pressed for improvements at the Rose Garden signing ceremony, when he highlighted the key role regulators would play in writing the rules needed to implement controversial parts of the measure. “That was the balance the president struck in signing the bill.”
A central feature of the Jobs Act makes it easier for private firms to go public.
That portion of the measure, which took effect immediately, grew out of a March 2011 forum at the Treasury Department. Kate Mitchell, a Democrat and a Silicon Valley venture capitalist, spearheaded a discussion about reviving the market for initial public offerings of stock, or IPOs. Eager to come up with a plan, she recruited investment bankers, entrepreneurs, lawyers, academics and other venture capitalists to form the IPO Task Force.
The task force successfully lobbied to temporarily remove certain regulatory barriers for “emerging growth companies,” defined as those with less than $1 billion in revenue.
Those companies can now give regulators less financial data before they go public and fewer details about executive compensation. They can also delay an audit of their internal controls that was mandated for all companies after the Enron accounting scandal.
The most controversial element allows investment banks that take a company public to also publish research about the company, removing a firewall put in place after the dot-com bust, when it became clear that banks were promising to hype companies’ stock through research to secure the lucrative underwriting business.
Companies can take advantage of the relaxed rules for only up to five years, which appealed to Democrats, Mitchell said. The deregulatory bent pleased Republicans.
“There was nothing radical about the relief granted,” Mitchell said. All the changes had a basis in existing practices, she said. For example, very small firms have been allowed to file scaled-back versions of financial documents for years.
Even the staunchest critics say it’s too early to tell whether these provisions are working, especially because it typically takes more than a year to prepare for an IPO. But they also say the initial signs suggest the measure has had lackluster results.
Firms can pick and choose which of the relaxed rules to embrace. Many companies are adopting some of the less controversial options and steering clear of others for fear they will be shunned by investors.