US ‘Jobs Bill’ raises fears of a scamfest

President Barack Obama has signed into law a major bill that excuses most companies from all governance requirements, investors and shareholder groups have said.

The so-called ‘Jobs Bill’, aimed at improving access to public capital markets for growing companies, will exempt ‘emerging’ businesses from a raft of transparency, accountability and disclosure requirements.

Businesses with annual sales of less than $1bn (£627m, €761m), for instance, will no longer be subject to say-on-pay requirements enshrined in the Sarbanes-Oxley Act, a law to be partly repealed to exclude any ‘emerging growth company’. Nor will they have to hire an independent auditor to assess internal finances after going public.  

Investors claim the legislation will expose shareholders to fraud and financial abuse risks.

The Council of Institutional Investors, a pension fund association with combined assets of $3tn, said: “We are disappointed that the Senate failed to include investor protections in a bill that would make it easier for companies to raise money. While it’s not at all clear that the legislation will create jobs, it will create greater risks for investors and, ultimately, could erode confidence in our capital markets. The bill dismantles many investor protections Congress put in place a decade ago after accounting scandals at Enron, WorldCom and other companies.”

Jack Herstein, president of the North American Securities Administrators Association, said the bill was in danger of “creating new jobs for promoters of internet boiler-room investment scams”.