The Jobs Act After Five Years – Positives and Negatives

The Jumpstart our Business Startups Act (JOBS Act) has made it to its fifth anniversary, a significant milestone. Now may be a good time to evaluate what the law has done, whether positive or negative, for the nation’s economy and capital markets. Below, we very briefly discuss in somewhat general terms how the law has done and what to expect from it in the months and even years ahead.

Positives

There is substantial evidence that the landmark legislation is benefiting an array of small businesses to obtain capital they need to grow and expand. The new rules have been adopted in a steady and consistent manner. All of this is just the inception of what can be a significant transformation in the way capital is raised across the board, which in turn provides benefits for everyday investors and small businesses in the communities in which they reside.

Negatives

The state of affairs immediately after the Great Recession that helped contribute to the passage of the JOBS Act are still just as relevant now. For example, bank lending to small businesses, venture capital, and angel investments have not yet attained pre-recession levels.

It is important to note that wages remain basically unchanged while the wealth gap continues to expand between the rich and the poor. By permitting the average investor in the United States to invest in small businesses and startups and have a part to play in their success or failure, the JOBS Act has the potential to generate wealth and an atmosphere of shared prosperity in communities.

Work-in-Progress and the Future

The great feature of this law is that it essentially seeks to democratize finance. As time has progressed from the law’s inception five years prior, various improvements and fixes have been proposed and are likely to be added so that small investors can organize into a single entity. Also, mechanisms to sell and buy securities on the secondary investment market could be instituted in the future which would further ease capital formation.

Although the positivies of the JOBS Act seem to outweigh its negatives, there is still great potential for improvement.

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