Subject: File No. JOBS Act Title I
From: Ralph A Folden

June 27, 2012

Dear Sirs,
I agree with the Motley Fool critique of the congressionally passed "Jobs Act" as follows. Please do not disregard the investor safery or I fear that we will annhilate our precious stock market a long with the many other irreplaceable features in our economy.
Ralph Folden

-Dissecting the JOBS Act
The act does a lot of different things, but we wanted to focus on the three most vital areas for investors.

First, it exempts a wide swath of companies from key oversight measures for up to five years after coming public. Known as small "emerging growth companies," the definition includes any operation with less than $1 billion in annual revenue and a $700 million (or less) market capitalization.

Just so we're all on the same page here, this definition of "small" encompasses the vast majority of companies coming public. For instance, of the 79 IPOs this year, a full 69 of them qualified for emerging growth company treatment. The 10 that didn't included only the largest industry giants, like Facebook (Nasdaq: FB ) , Caesars Entertainment (Nasdaq: CZR ) , Yelp (Nasdaq: YELP ) , and Carlyle Group (Nasdaq: CG ) .

As we discuss throughout this series, the act excuses emerging growth companies from independent accounting requirements, rolls back rules designed to prevent conflicts of interests among ostensibly independent Wall Street analysts, allows companies to confidentially submit their IPO paperwork prior to actually going public, and makes it easier for executives to mask exorbitant and usurious pay packages.

As Matt Taibbi of Rolling Stone puts it:

This is like formally eliminating steroid testing for the first five years of a baseball player's career. Yes, you can pretty much bet that you'll see a lot of home runs in the first few years. ... But you'd better be ready to stick a lot of asterisks in the record book.
Second, the act creates an entirely new market for raising capital: crowdfunding. Think of crowdfunding as a cross between social networking and the New York Stock Exchange. It's the aggregation of small amounts of capital from a large pool of investors, usually via an Internet portal such as

The benefits of this type of funding can't be denied. To date, donation and perk-based versions have already brought to life popular webcomics, online games, affordable 3-D printers, and customizable watches that connect to your smartphone via Bluetooth technology.

At the same time, however, transforming crowdfunding into a bona fide capital market is full of perils. As we state and expand upon in our letter to the SEC, "the opportunities for misuse and abuse are enormous due to the inherently speculative nature of crowdfunding businesses and weaker accounting scrutiny and corporate governance."

Finally, the act makes it easier for private companies to grow without registering and disclosing key information to the SEC. Companies can now have as many as 2,000 shareholders (previously the limit was 500).

And less innocuously, alternative investment vehicles like hedge funds can now broadly advertise their wares, echoing a move the SEC made unilaterally in 1992 and then subsequently reversed after realizing just how much fraud it unleashed.

Congress has spoken
It can't be denied that one of the U.S. economy's greatest competitive advantages is the functioning and integrity of our capital markets. As Ilan noted in his testimony before the Senate, the cost of capital for emerging growth companies here is a shocking 75% less than in China. The reason? Investors from around the world trust our markets more than theirs -- or most other countries, for that matter.

It's for both this reason and for the protection of individual investors that we've asked the SEC to protect individual investors against any unintended consequences of the JOBS Act by offering a robust response to its worst parts.