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Over a year ago, Congress passed the "Jump-Start Our Business Start-ups Act," better known as the JOBS Act. Its supporters said the new law would create American jobs by making it easier for "start-ups" to raise money by issuing IPOs -- initial public offerings of their shares.

Sounds like a win-win for business, investors and workers, right? After all, workers will benefit when their companies are able to raise capital, won't they? And we know investors love a chance at a hot IPO, assuming it doesn't turn out to be the next Facebook (NASDAQ:FB)-style debacle. But now that the new law has taken effect, it's clear that companies looking to raise money from investors could use the JOBS Act to hide information from the investing public. And, as we've seen repeatedly over the past twenty years, the more information companies can hide, the greater harm that can befall investors. From Enron and Global Crossing near the turn of the century to Crossing to Lehman Brothers (LEH) and AIG (NYSE:AIG) during the global financial crisis, to the most recent poster children of JPMorgan (NYSE:JPM) and MF Global, most observers would agree that a lack of transparency combined with high-risk business plans is a recipe for disaster, at least for investors.

Thanks to the JOBS Act, these new companies now can dispense with the pesky matter of making full disclosure about a company's finances to investors, and that should concern us all.

As the New York Times reported this month, the early experience with the JOBS Act shows that companies are awash in new cash, brokers are flush with IPO commission money, and investors (surprise, surprise!) are getting the shaft.

The JOBS Act allowed tech start-ups Zynga (NASDAQ:ZNGA) and Groupon (NASDAQ:GRPN) to raise truckloads of investor cash based on what the Times called "aggressive accounting tactics." It also allowed the New York grocery chain, Fairway (NASDAQ:FWM), to raise enough IPO cash so that the company's market cap is now $825 million. Each grocery store is now valued at an astounding $71 million! Now, aside from the, shall we say, "aggressive" shopping-cart maneuvers of some Fairway patrons, I like Fairway as much as the next person. But doesn't that number strike you as at least a little surprising?

And what's even more insulting is that the Securities and Exchange Commission -- that which we're supposed to think of as the "People's SEC" -- plays a big role in this whole charade.

"Fairway is classified as an emerging growth company, and therefore arguably benefited from the relief offered by the JOBS Act," wrote the Times's Steven M. Davidoff. "The first thing is that the company was able to obtain confidential review of its IPO documents with the SEC."

"Companies like this provision because their numbers are reviewed and revised by the SEC without the public's knowing the agency's focus," Davidoff wrote. "But this also puts investors in the dark about possible problems."

"Another significant advantage provided to Fairway by the JOBS Act was the ability to avoid for up to five years making extensive disclosures on its executive compensation or holding a 'say on pay' vote," according to Davidoff. "Fairway also took advantage of the law to avoid disclosing the full compensation of its executives."

Davidoff's reporting makes clear the dangers of the JOBS Act, and unfortunately it now appears that the problems many of us feared when the bill was being debated are now coming to fruition.

The JOBS Act was sold to the American investing public as a way to promote growth, create jobs and help the economy get motoring again. Even the law's nickname was picked to make it sound like a no-brainer. Who wants to stand in the way of creating jobs?

But it turns out that start-ups can use the new law to hide information from investors. A lot of commentators -- us included -- predicted that the JOBS Act would provide Wall Street with yet another opportunity to pull an "inside job" on the American investing public, which is now even more susceptible to stock fraud. This is one case where we hate to be right.

Zamansky & Associates are stock fraud attorneys representing investors in federal and state litigation and arbitration against financial institutions, including concerning JPMorgan's "London Whale" trading disaster, Facebook's IPO, MF Global's collapse and UBS's sale of "principal protection notes" issued by the now-defunct Lehman Brothers.

Disclaimer: Zamansky and Associates represents investors in arbitration cases against UBS regarding the sale of Lehman Brothers Structured Products.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Source: Investors Get The 'Inside JOBS' Treatment