Unintended Consequences Emerge In JOBS Act

Among the provisions of the House-approved JOBS bill was the easing of disclosure requirements for small companies seeking to go public. But consumer advocates pointed out that with the definition of "small" meaning $1 billion, it included the majority of companies. The White House and Democrats in the Senate want to modify the wording to guard against securities fraud.

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The Senate is debating a bill today that blazed through the House with ease. It's called the JOBS Act. With a name like that, it's no wonder just 23 House members voted against it. But as NPR's Tamara Keith reports, some senators are concerned about unintended consequences.

TAMARA KEITH, BYLINE: As with a lot of bills, the name JOBS Act is actually an acronym. It stands for Jump Start Our Business Startups and backers say it will, in fact, create jobs.

SEN. JOHN THUNE: If job growth is our priority here in the United States Senate, we should not delay on moving forward with this important job-creating legislation.

KEITH: That's John Thune, a Republican senator from South Dakota, who took to the floor today to push for the bill. The JOBS Act does a number of things. It makes it easier for companies to do initial public offerings, reduces reporting and auditing requirements, and would open the door to crowd funding of business startups.

THUNE: What we want to do is make it easier for the small businesses - which literally, are the engine and the backbone of our economy - create most of the new jobs in our economy; to do that - to create jobs, to invest capital, to put their capital to work.

KEITH: But a growing chorus now says the measure could do more harm than good. Earlier this week, Securities and Exchange Commission chairman Mary Schapiro sent a six-page letter to senators, raising a number of concerns.

John Coffee, a securities law professor at Columbia, is no fan, either. He calls it over-broad and says the claims of job creation are dubious, at best.

JOHN COFFEE: I think some very smart lawyers found a way to gut the federal securities laws without admitting that.

KEITH: He says transparency would take a huge hit because some fairly large companies, that bring in up to a billion dollars a year, would be exempt from certain filing requirements.

Another provision Coffee thinks is dangerous is crowd-funding. It would allow companies to raise up to $2 million in early stage capital through social media or other outlets.

COFFEE: This is a very broad permission for all kinds of fraudsters to be able to market anything they dream up in every barroom or Starbucks across the country.

KEITH: He pictures smooth-talkers with slick Powerpoint presentations, selling shares in companies that don't even exist - and largely getting away with it. Illinois Democrat Dick Durbin said on the Senate floor, he's seen this movie before and it doesn't end well. He describes the JOBS Act as a freight train bill.

SEN. DICK DURBIN: Bills that oftentimes will pass one chamber or the other and come roaring into the other chamber - and maybe pass too quickly and usually, with regret.

KEITH: Durbin says he and some colleagues are offering an alternative that better protects investors. The White House said Wednesday it supports much of the House bill, but also supports efforts to safeguard against abuse. But the pressure remains quite strong to move forward on this bill, full steam ahead.

Tamara Keith, NPR News, the Capitol.

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