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The Reluctant Regulator

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Securities and Exchange Commission Chairman Schapiro made headlines today because of the agency's failure to move forward with changes that were mandated by the JOBS Act. At the time Congress voted on the JOBS Act, I made the point that the SEC had fallen down on the job. The SEC's failure to undertake, on its own initiative, a modernization of its regulations created the need for the JOBS Act in the first place. Once Congress took up the task, the SEC--too busy voicing its distaste for innovation in capital formation--failed to offer productive help to Congress in drafting the Act.

The provision at issue--Section 201 of the JOBS Act--is practically self-executing because it partially eliminates the existing prohibition on general solicitation. Had the SEC simply put out a proposed implementing rule immediately after the passage of the JOBS Act, it would have had time to consider public comments (as opposed to the back-channel comments that seem to have scared Ms. Schapiro into inaction), and to finalize the rule in a timely manner.

Ms. Schapiro apparently chose inaction in order not "to be tagged with an Anti-Investor legacy". In reality, it was the SEC's failure to act that hurt investors. Investor protection does not mean protecting investors from hearing about investment opportunities. Investors benefit from having access to information about a broad range of potential investments, which is all the offending provision of the JOBS Act was intended to accomplish.

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Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.