State of Innovation

Patents and Innovation Economics

JOBS Act a Small Step in Right Direction

The Senate passed the JOBS (Jumpstart Our Business Startups) Act, H.R. 3606 and President Obama is likely to sign it.  The goal of the legislation is to reduce some of the regulatory burdens in raising capital for startups.  The Act exempts small firms from Section 404 of the Sarbanes-Oxley Act for up to five years according to Wikipedia.  It also includes some of the crowdfunding ideas of HR 2930.  This legislation is a positive step in the right direction.  Unfortunately, it is a pebble in Sea of laws, regulations, and taxes strangling technology startups in the US.  My guess is that the reason this legislation is passing has little to do with what is good for the country, but what is good for Wall Street banks.

In my book The Decline and Fall of the American Entrepreneur I show that every academic study of the effectiveness of our Securities Laws shows that they have been either totally ineffective at protecting investors or worse counterproductive. The real answer to the lack of funding for start-ups would be to repeal all Securities Laws and Regulations except the common law requirements under contract and tort law.

March 22, 2012 - Posted by | -Economics, Innovation, Regulation | , , , ,


  1. Before the October 29, 1929, stock market crash on Wall Street, a company could issue stock without disclosing its financial status. Many bogus or severely undercapitalized corporations sold stock, eventually leading to the disastrous plunge in the market and an ensuing panic. From the havoc wreaked by the crash came the first major piece of federal securities legislation, the Securities Act of 1933 (15 U.S.C.A. § 77a et seq.). The act regulates the primary, or new issue, market. The following year, Congress provided for the creation of the Securities and Exchange Commission when it enacted far-reaching securities legislation in the Securities Exchange Act of 1934 (15 U.S.C.A. § 78a et seq.). These two laws, along with the Trust Indenture Act of 1939 (15a U.S.C.A. §§ 77aaa–77bbbb), the Investment Company Act of 1940 (15 U.S.C.A. §§ 80-1–80a-64), the Investment Advisers Act of 1940 (15 U.S.C.A. §§ 80b-1–80b-21), and the Public Utility Holding Company Act of 1935 (15 U.S.C.A. §§ 79a–79z-6) make up the bulk of federal securities laws under the jurisdiction of the SEC.

    Comment by Sugel | May 9, 2012 | Reply

  2. Actually the crash of 1929 was caused by the Federal Reserve. There have always been people who commit fraud and still are despite all the regulations we have passed. Every academic study has shown that all our financial regulations have not helped investors and in fact have hurt their return.

    Comment by dbhalling | May 10, 2012 | Reply

  3. Not to mention that all this financial regulation has just entrenched the largest banks and Wall Street firms. Obama has used all this regulation to demand huge campaign contributions from Wall Street and then used the Fed and the US Treasury to enrich them at the expense of the people.

    Comment by dbhalling | May 10, 2012 | Reply

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