JOBS Act to roll back analyst reforms

The so-called global settlement between the SEC and top investment banks in 2003 sought to create a firewall between investment bankers and stock research analysts, which had become tools of bankers in the dot.com bubble.

The law was considered among the most far-reaching reforms stemming from the dot.com implosion, but with lawmakers these days desperate to prove that they are pro-business, they have made a point of making IPOs easier. The latest JOBS act has generated controversy in part because of this. It's all a little hazy.

While the global settlement required a compliance officer to be present when bankers met with analysts, the settlement has expired. The JOBS Act would allow research analysts to participate with the investment banking team in communicating with management of a newly defined "emerging growth company."

It also makes it easier for analysts of underwriting banks to publish research, though only a bit. They can currently issue research, but only with a lag time. That lag time will be eliminated.

The New York Times notes that Wall Street firms are taking a keen interest and will most likely wait to see how Finra reacts. These changes for the most part will not meaningfully affect company decisions to go public. My sense is that the regulatory burdens have always been something of a red herring. But the act makes for great political theater, and that's the real point.

What ails the IPO market is a rather complex issue, one that cries for responses on various levels, especially at the market structure level. The notion that profound changes such as decimalization have taken a toll on the IPO market cannot be ignored. At the same time, the power of the economy to revive the market cannot be discounted. My sense is that the IPO market will continue to fare well, and many people will take credit.  

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