Ed's Blog

The venerable English football club Manchester United (wikipedia), founded in 1878, is expected to file an IPO today under a new deregulatory U.S. law, the so-called JOBS Act of 2012, that passed overwhelmingly despite opposition from U.S. PIRG and other investor protection organizations, because it was supposedly intended to help newer, smaller, "emerging" companies go public without dealing with pesky securities law requirements designed to deter fraud and chicanery. Over at The Motley Fool, they say: "Thank the JOBS Act for the Ugliest IPO of the Year." From the Fool:

"Manchester United's owners explored listing shares in Asia and Europe, but, according to Dealbook, "The United States, which has long been criticized for its harsh rules surrounding I.P.O.'s, is now the place where foreign companies go to avoid regulation."

Bloomberg, in a story today, explains some of the complicated financial ploys already in use by and intended to be used by Man U, which was taken private in 2005. The Dealbook story from July linked above also explains some more of the special loopholes created by the JOBS Act, including these solely for foreign firms:

Excerpt: "Manchester United will not need to file quarterly reports, report material events, file proxy statements or disclose extensive compensation information, all of which American companies must do. Under a different S.E.C. rule adopted in 2008, Manchester United also does not need to report financials under the generally accepted accounting principles used in the United States, but can instead rely on international financial reporting standards."

Meanwhile, U.S. investor protection organizations are bracing for a possible announcement by the SEC (Reuters) that it is issuing a JOBS Act Interim Final Rule without an opportunity for a comment period as a regular Proposed Rule process would allow. In a letter to the SEC, the PIRG allies pointed out that there is no legitimate emergency need to skip this important check and balance. The groups also argue that this discretionary JOBS Act rulemaking is being considered despite the SEC's tardiness in completing numerous mandatory rules under the 2010 Wall Street Reform and Consumer Protection Act. 

Further, the groups point out that eliminating long-standing investor protections against deceptive stock solicitations is a bad idea that, especially in the new Internet world, will simply lead to more fraud, as it did in 1992 the last time the SEC weakened the rule. As that letter from PIRG allies told the SEC in May:

"The elimination of the GS&A (General Solicitations and Advertising) ban removes a fundamental premise of the Securities Act’s registration regime. The Act relies primarily on the regulation of offering activities by prohibiting all offers prior to the filing of a registration statement and strictly regulating all written offers once the registration statement has been filed. General solicitation and advertising activities therefore are generally permitted only if a registration statement has been filed, which provides a strong practical constraint on the ease with which fraudulent offers can reach their victims."

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