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Study: JOBS Act Helps IPOs, but Could Lead to Scandals

Joe Mont | July 11, 2012

A new study by BDO USA, an accounting and consulting firm, finds that executives at leading investment banks, despite their general bullishness over provisions of the recently enacted JOBS Act, have conflicting views when it comes to a potential downside.

A narrow majority (55%) said they think the JOBS Act will successfully boost the number of businesses going public on U.S. exchanges.  That same percentage, however, said they believe the new law's rollback of regulatory requirements for these newly public companies will “increase the chances for scandals at these businesses”

These findings are from a national telephone survey of 100 capital markets executives at leading investment banks conducted by Market Measurement, Inc., an independent market research consulting firm, on behalf of BDO USA, The survey, conducted in June, presented  respondents with various elements of the new JOBS Act and asked whether they will have positive, negative or no impact on the U.S. IPO Market.

The survey found solid, favorable responses to many JOBS Act provisions, including a repeal on the ban on investment banks from publishing analyst research on IPOs they are marketing (80%); providing a five-year exemption from Sarbanes-Oxley mandated audits of internal controls (74%); and increasing the maximum number of shareholders a private company can have before it is required to register with the SEC from 500 to 2000 for private businesses (66%).  Those polled also had, in the majority, favorable opinions regarding the new law's provisions to allow crowdfunding (58%) and confidential SEC filings for emerging growth companies (52%).

Investment bankers were split in their attitudes about a provision of the JOBS Act that allows emerging growth companies to provide less information and requires fewer financial disclosures in their IPO documents and subsequent filings.  Although this may make it easier to go public, there wasn't a clear consensus on how it will impact IPO pricings. Although a slight majority (52%) are not concerned about the impact on pricings, 48% agreed that the lack of information will ultimately have a negative impact.