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Rubicon Associates is headed by a Chartered Financial Analyst charter holder with over 20 years of experience in the investment management industry focused on the analysis, investment and management of fixed income and preferred stock portfolios. Over the years, he has analyzed and invested in... More
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  • Tear Down The (Chinese) Wall! 2 comments
    Apr 5, 2012 10:10 PM

    From the NY Times:

    Wall Street is examining whether it will benefit from a little-known section of a broad new law that President Obama is expected to sign on Thursday.

    Provisions tucked into the so-called JOBS Act, or the Jumpstart Our Business Startups, will roll back some major securities regulations and parts of a landmark legal settlement struck almost a decade ago. That 2003 settlement built a Chinese wall between Wall Street research analysts and investment bankers, an effort to prevent analysts from improperly promoting stocks to help their firms drum up business from corporate clients.

    Under the new legislation, some of those restrictions would be eased when it comes to smaller companies, so-called emerging growth companies.

    Wall Street senses an opportunity. Davis Polk, a large law firm that caters to Wall Street, wrote in a recent note to clients that the JOBS Act represented "the most significant legislative loosening in memory of restrictions around the I.P.O. process and public company reporting obligations."

    The new legislation passed through Congress over the objections of regulators, past and present, who warned of the potential risks to investors.

    "It is a bad sequel to a bad movie," said Eliot Spitzer, the former New York attorney general. "It shouldn't be called the JOBS Act, it should be called the Bring Fraud Back to Wall Street Act."

    Welcome back to the good old days! Yes, this is how we de-risk banks.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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Comments (2)
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  • Caiman Valores
    , contributor
    Comments (2333) | Send Message
    Michael I agree it is an unfortunate piece of legislation and it substantially loosens the regulations around public fund raising for businesses seeking to raise less than $1M of capital. Even for those seeking $1M to $2M the only additional requirement is to provide audited accounts. It has also firmly established the internet based crowd funding industry and I believe that will lead to less than legitimate operators starting up crowd funding businesses with an eye firmly on generating fees and commissions than quality start-up businesses. From all of this there will be substantial opportunities for Wall Street and it certainly brings back memories of the dot com IPO excesses. I believe that in the long run it will only create more opportunity for fraud than legitimate investment, which will drive small investors away from start-up funding.
    5 Apr 2012, 11:18 PM Reply Like
  • Rubicon Associates
    , contributor
    Comments (2133) | Send Message
    Author’s reply » I think you have hit the nail on the head. I remember the dot-bomb nonsense, and this plays right into the same thing - analysts will be able to attract banking business and so on. It never turns out good.
    5 Apr 2012, 11:21 PM Reply Like
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