continuous tightening of securities regulation and corporate governance norms in
the US following the various corporate governance scandals (Enron, WorldCom,
etc.) and the global financial crisis. This has appeared in the form of
legislation such as the Sarbanes-Oxley Act and the Dodd-Frank Act. More
recently, however, there has been a relaxation on some counts with a view to
enable companies to raise finances without being adversely affected by stifling
regulation (following criticism that tighter regulation increases the cost of
raising capital and of doing business).
(known as the JOBS Act) seeks to ease the process of raising capital through
IPOs for “emerging growth companies”, which are companies with total annual
gross revenues of less than $1 billion for the past fiscal year. It also
facilitates the process of crowd funding (previously discussed here).
The JOBS Act is summarized at the Harvard
Corporate Governance Blog, and the US SEC has also issued a set of FAQs.
While this legislation is intended
to ensure competitiveness in the US markets, it has already attracted severe criticism
on the ground that it offers inadequate investor protection. Examples are
It appears that the nature of regulation is being governed by economic
compulsions rather than the long-standing goal of securities law, which is