Investment banks split on JOBS Act impact

Respondents think act will increase number of IPOs but also raise potential for fraud

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The investment banking community is split on the impact of the Jumpstart Our Business Startups (JOBS) Act, seeing both positive and negative implications, according to new research.

A telephone survey conducted by Market Measurement on behalf of leading accounting and consultancy firm BDO USA, asked executives at 100 US investment banks their views on the recently enacted legislation.

A majority of 55 percent of those questioned believe the JOBS Act will have a positive impact on the number of new IPO listings in the US. An equal percentage, however, think it will mean an increase in the potential for fraud or malpractice at these companies.

The JOBS Act aims to help companies raise capital primarily through lightening securities regulatory requirements for so-called emerging growth companies.

Certain elements of the act brought different responses. Four fifths of respondents favor repealing the ban on investment banks from publishing research on IPOs (an unsurprising figure given that it is those interviewed who mean to publish such research).

Executives also approve of the increase in the threshold for the number of shareholders a private company can have before it has to register with the SEC, from 500 to 2,000.

That said, only a slight majority of 52 percent favor allowing emerging businesses to file confidentially with the SEC. Although this would make it easier for small, growing companies to go public, 48 percent of respondents think this provision would have a negative effect on IPO pricings.