U.S. | Jobs Act Get Mixed Reviews

JOBS Act Signed Into Law With Mixed Reviews

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Think JOBS Act Means Wild West Is Back? Think Again – Business News – CNBC

Any U.S. corporate executives who think they can use the Jobs Act’s relaxed rules for public listing to cut corners on accounting and disclosure may want to think again.

The Act, signed into law by President Barack Obama on Thursday, may allow smaller companies new to the markets to reduce their financial regulation, and it removes the requirement for an expensive internal audit. It does not protect CEOs and CFOs from being sued by regulators and investors for fraud.

So-called emerging growth companies—those with less than $1 billion in revenue—will be exempt from an outside audit of internal controls for up to five years. Yet senior management must continue to hold its accounting systems to the same standards introduced in 2002 under Sarbanes Oxley. The corporate reform law, passed after the Enron scandal, was designed to ensure that companies’ internal controls were in order.

“Management is still reviewing internal controls, testing them, and giving a report in their 10-K, even if the auditor won’t have to attest to it,” said Rick Kline, a partner at Goodwin Procter in Menlo Park, California, who specializes in capital markets transactions. “Management understands they have liability.”

Despite the loosening of some provisions, “this isn’t the Wild West,” said Brian Margolis, a corporate partner at Orrick, Herrington & Sutcliffe in New York. “Management that uses this for carte blanche to not have internal controls is really missing the boat.” …

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via Think JOBS Act Means Wild West Is Back? Think Again – Business News – CNBC.