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JOBS bill's big reaction from pro-Sarbox crowd

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The JOBS bill has generated strong bipartisan support in Congress. But others are concerned that some of provisions of the bill will roll back essential shareholders protections.

The bill that was overwhelmingly passed by the House intends to promote job growth by small, emerging companies, and relief from regulatory expenses was a huge priority. Newly defined emerging companies that go public would get a break on financial disclosure; they will have to supply only two years of audited financial data rather than three years. When they go public, they would be exempt from disclosure and shareholder approval rules on executive compensation passed with Dodd-Frank, and they get a break on auditing standards imposed by the Sarbanes-Oxley Act, notably 404(b).

To be sure, small public companies have already been given a reprieve on 404(b) via Dodd-Frank. These emerging companies also will also not have to hire a financial expert to lead the auditing process for five years, as opposed to the current requirement of one year.

In addition, the bill "would also effectively repeal Securities and Exchange Commission regulations and the financial industry's own rules that separate the activities of securities analysts from those of their investment banking colleagues at companies that underwrite initial public offerings for these emerging growth companies."

Truly, the dotcom era is over. At this point, you get the idea that some people are pining for those days to return. One thing that cannot be ignored here is the degree to which all this might backfire.

For the most part, big institutional investors have been supportive of Sarbanes-Oxley, and they can point to much evidence that the financial reporting process has become more sound. It's true that the law did not prevent Lehman Brothers from going bust. Nor did it prevent banks from engaging in all kinds of mortgage shenanigans. But on balance, the support for the financial reporting reforms remains strong.

Given the political crosswinds, the bill has a good chance of passing, however. It points the way to how the battle against Dodd-Frank and Sarbanes-Oxley will be fought in the near future. The fact is, a massive repeal is likely not going to be necessary. We're seeing a lot of small victories that add up to a major victory via the courts and other legislation. -Jim