Don't erode investor protections with cynically named JOBS Act

A trader works at the New York Stock A trader works at the New York Stock Exchange just before the opening bell. (March 16, 2012) Photo Credit: Getty Images

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In a welcome outbreak of bipartisanship, Democrats and Republicans alike are lined up behind the wholesome-sounding JOBS Act in Congress.

Unfortunately, the bill's deceptive title -- it stands for Jumpstart Our Business Start-Ups -- is in keeping with what it will do: make it easier to deceive investors.

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The law is supposed to boost the economy by making it easier for companies to raise money, particularly through Internet "crowd-sourcing." But it would also strip away key protections against fraud when companies with up to $1 billion in revenue sell shares to the public. For instance, such companies would be exempt from a requirement that an auditor assess internal controls. The bill also would let emerging companies avoid a vote on executive pay and release two years' financial results instead of three. At securities firms, analysts would be able to tout new offerings the firm's investment bankers hope to sell, something now barred.

The House and Senate have passed versions of the bill, and final House approval is likely. The White House is on board. But the bill is opposed by many who understand the securities business yet don't stand to profit -- or derive campaign contributions -- from it, including the chairwoman of the Securities and Exchange Commission, state securities regulators, pension funds, and some legal experts. Columbia University law professor John Coffee calls it "the boiler room legalization act." Ex-SEC chief Arthur Levitt brands it "a disgrace."

Bipartisanship is great -- if only the parties could come together on something more worthwhile.

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