An influential US law-maker Carl Levin has called for the SEC to scrap the JOBS Act, signed into law April 2012 by President Barack Obama, and repropose the rule to provide more protection for investors. Incidentally, Levin voted in favor of the rule earlier 2012 but it seems that he has finally had time to rethink his vote.
JOBS Act was proposed by the SEC to scale back a number of securities regulations to help smaller companies raise capital and create jobs.
The rule allows companies to advertise to investors as long as they take “reasonable steps” to verify that purchasers are “accredited investors.” Accredited investors include those with net worth of at least $1 million or an annual income of at least $200,000. However, it does not go as far as to how these ‘reasonable steps’ may be achieved.
Levin asserts that issuers should be required, at a minimum, to provide documentation of the steps they took to ensure buyers were accredited before selling them securities, as is required in banking and other industries. This is common sense practice.