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JOBS Act Hasn’t Encouraged as Many Companies to Avoid Sarbanes-Oxley as Some Would Have Hoped

Before the House of Representatives got down with some Audit Integrity whatever whatever, we had the Jumpstarting Our Business Startups Act as an example of Congressional wading into the accounting/auditing regulatory waters. If you need a refresher, the JOBS Act flew through Congress and the got the President's signature last year despite a lot of people saying that it would result a lot of fraud.

One of the biggest sticking points was that the JOBS Act would grant exemptions from complying with Sarbanes-Oxley to "emerging growth companies." And since many people actually remember why Sarbanes-Oxley had to come about in the first place, it doesn't sit well with them because, you know, internal controls and stuff. It was a legit criticism then and we wrote a number of posts last year that demonstrated just how ill-prepared some of the companies filing under the JOBS Act were. 

But a funny thing happened on the way to all the jumpstarting of all those businesses — there's been very little jumpstarting, according to a study from BDO

According to a new study by BDO USA, LLP, one of the nation's leading accounting and consulting organizations, only 14 percent of capital markets executives at leading investment banks believe the JOBS Act is having a positive impact on increasing the number of IPOs on U.S. exchanges. A majority (58%) say it isn't positively impacting IPOs, while just over one-quarter (28%) believe it is still too early to evaluate the impact. Of those who don't believe it has had a positive impact or have yet to decide, more than two-thirds (68%) predict the law will never achieve its desired goal of increasing the number of businesses going public.
These latest findings represent a precipitous drop in the JOBS Act's perceived effectiveness from a year ago when a majority (55%) of I-bankers believed the JOBS Act would have a positive impact on U.S. IPO activity. Yet, by last winter, less than one-third (29%) of the capital markets community believed the new law had been effective in increasing the number of IPOs on U.S. exchanges and now that percentage has dropped even further.
If you're an anti-red tape type then it's probably disappointing that the Act hasn't had resulted in full-plus-infinity employment, but you might be relieved to know the shadier aspects are still quite popular:
When asked what provision of the JOBS Act has been most heavily utilized, excluding the confidential filing provision, 40 percent cite the ability to provide only two years of financials in the registration statement. Delayed compliance with public company accounting standards (25%) and the five-year SOX exemption (24%) were the other provisions cited by sizable proportions of the bankers. A much smaller proportion (9%) cited the ability to postpone disclosure of executive compensation.
Now, you could conclude that the savviest entrepreneurs/shiftiest criminals haven't quite figured out how to best navigate/exploit the JOBS Act because it's only been 15 fifteen months since it became law, but maybe that's a little too cynical. I'd entertain other theories.