Wednesday, April 11, 2012
Why the Jobs Act Has Wall Street Sweating It
Lawyers and bankers at major Wall Street firms are worrying that provisions in the newly passed Jobs Act will compromise the independence of their research and leave them open to investor lawsuits around initial public offerings they underwrite, adding a new headache in managing potential conflicts of interest among different divisions, according to CNBC.
At the heart of the debate is a measure in the Jobs Act that will allow analysts to write research reports ahead of an IPO being marketed by their investment banking colleagues. Analysts will also be allowed to write research immediately after an IPO, instead of waiting for a 40-day blackout period as current rules require. Bankers estimate the new rule would actually cover as much as 90 percent of companies looking to go public. That would have included some of the recent high-profile IPOs such as LinkedIn, Zynga and Pandora Media.
Supporters of the act, who include venture capitalists and buyout firms backing start-up companies, argue that small companies typically are not covered by research and therefore need investor attention. But Wall Street bankers and lawyers fear that the act leaves research analysts vulnerable to pressure to write biased reports about companies before IPOs to help their investment banking counterparts land a role in those deals. That could open up the door to a flood of investor lawsuits when the stocks do not perform as expected...
Read more at http://www.cnbc.com/id/47018347