As the 1990s drew to a close Congress passed legislation
signed by the President ensuring the deregulation of the derivatives markets.
At the time CFTC Chairwoman Brooksley Born was one of the sole voices of
dissent. Less than ten years that dissent proved prophetic as the most severe
market crisis since the great depression unfolded. Many believe the unregulated
derivative market was at its core.
Now, as markets struggle to recover from that crisis,
legislation is about to be enacted which will deregulate part of the capital
formation process. As in the late 1990s Congress is about to pass legislation
the President says he will sign. It is called the JOBS Act, H.R. 3606.
The JOBS Act has noting to do with the President's
initiatives to create jobs. It started in the House of Representatives as H.R.
3606 titled the Jumpstart Our Business Startups Act or JOBS. It has passed in
the House. It passed in the Senate minor amendments. The legislation now goes
back to the House. Whether it will create jobs remains to be seen. It clearly
has everything to do with stripping away regulatory requirements in the capital
formation process by amending key provisions of the securities statutes. Its
main features are:
SEC Chairman Schapiro forwarded a letter to the Chairman
of the Senate Banking committee expressing concern about the Act. Likewise,
Jack Herstein, President of the North American Securities Administrators
Association, and others have raised questions about the adequacy of investor
SEC Commissioner Louis Aguilar published a statement
presenting critical issues regarding H.R. 3606 entitled "Investor Protection is
Needed For True Capital Formation" (March 16, 2012). Key points raised by
Commissioner Aguilar include:
Despite these objections the Act is expected to shortly
become law. One can only hope that Commissioner Aguilar's remarks do not
presage the future in the same fashion as those of Ms. Born.
For more cutting edge commentary on
developing securities issues, visit SEC Actions, a
blog by Thomas Gorman.
For more information about LexisNexis
products and solutions connect with us through our corporate site.