Tuesday, March 20, 2012
Reed: Ill-Advised IPO Bill an Assault on Investor Protections
WASHINGTON, DC – Today, the U.S. Senate voted 54-44 in favor of Senator Jack Reed’s (D-RI) legislation to fix the so-called Jumpstart Our Business Startups Act (H.R. 3606) to prevent it from dismantling critical accounting standards and investor protections. However, 60 votes were needed to overcome a Republican filibuster and the amendment was blocked.
The House-passed H.R. 3606 would roll back critical Securities and Exchange Commission (SEC) rules and loosen auditing restrictions for some companies heading toward initial public offerings (IPOs). It would allow very large companies, with up to $1 billion in revenues per year, to avoid financial transparency and auditing requirements designed to ensure they’re not cooking the books.
Reed (D-RI) called H.R. 3606 “an ill-advised assault on investor protections” and warned that if this “unbalanced” bill becomes law without needed improvements, it could “weaken Wall Street oversight and water down corporate accounting requirements.”
The SEC requires public companies to disclose meaningful financial information to the public. This provides a common pool of knowledge for all investors to judge for themselves whether to buy, sell, or hold a particular security. Only through the steady flow of timely, comprehensive, and accurate public information can people make sound investment decisions. The result of this information flow is a far more active, efficient, and transparent capital market that facilitates the capital formation so important to our nation's economy. H.R. 3606 would roll back key investor protections, denying the public critical information that is essential to make sound judgments and would ultimately not lead to the proposed goal of the bill: providing for access to capital, particularly for small emerging companies.
“There is a place for IPO reform, but these are complex issues and Congress needs to strike a delicate balance. The ill-advised House bill loosens standards for taking a company public and lowers standards for protecting the public from investment fraud,” said Reed. “Investor protections have been sacrificed under the guise of a so-called jobs bill. I will continue working to fix these deficiencies.”
In an effort to balance market transparency and investor protection with improving small business's access to capital, Reed, along with Senators Mary Landrieu (D-LA) and Carl Levin (D-MI), offered a substitute amendment known as the INVEST in America Act, which would have provided new opportunities for small businesses and entrepreneurs to grow by raising capital in a way that protects investors; provided financing so businesses can expand and hire more workers; and encouraged U.S. companies to export and compete in a global marketplace.
“The American people want billion dollar companies to play fair and comply with the basic rules and responsibilities that go with being a public company,” concluded Reed.
Republicans also filibustered an amendment to renew the Export-Import (Ex-Im) Bank to help American exporters compete in a global economy and sell more of their products overseas. The Ex-Im Bank loans money to American companies when private lending is not available. Its investments made $41 billion in U.S. exports possible last year alone. The bank’s authorization expires at the end of May, but it could hit its loan capital limit in as little as two weeks.
Following the 55-44 vote, Majority Leader Harry Reid (D-NV) adjourned the Senate for the evening and said he would work with Senate leaders to set further votes on the underlying bill, H.R. 3606.