Legislation that was supposed to help smaller companies go public has aided larger firms to keep financial data out of the hands of investors.

The “Jumpstart Our Business Startups Act” (or JOBS Act) was promoted by President Barack Obama as a way to assist small businesses in their efforts to raise money through IPOs (stock market launches).

The same legislation, though, made it possible for larger companies (those earning less than $1 billion a year) to dodge reporting details about executive compensation and financial histories to the Securities and Exchange Commission.

Companies also can delay disclosing their plans to go public until just before the big day, under the JOBS Act.

“In effect, it means the press and potential investors have less time to comb through financial information, as well as less information to examine,” wrote James Temple in the San Francisco Chronicle.

The abuse of the law should not come as a surprise. At the time that the JOBS Act passed through Congress, Democratic Senator Carl Levin of Michigan warned, “We are about to embark upon the most sweeping deregulatory effort and assault on investor protection in decades.…It will allow vast new opportunities for fraud and abuse in capital markets.”

Meanwhile, the new law, which was adopted in April, hasn’t done much to boost the numbers for IPOs, according to Ernst & Young. This year, 130 companies raised $45 billion on U.S. exchanges, compared to 124 businesses and $40 billion in 2011.

The JOBS Act was the “brainchild” of the President’s Council on Jobs and Competitiveness, which is headed by General Electric CEO Jeffrey Immelt and, at the time the JOBS Act was proposed, consisted of 18 corporate CEOs and investment executives, two academics and two labor leaders.

-Noel Brinkerhoff, David Wallechinsky

To Learn More:

IPOs More Secretive Under New Law (by James Temple, San Francisco Chronicle)

Obama Opens Door to Fraud by Signing (No) JOBS Act (by Noel Brinkerhoff and David Wallechinsky, AllGov)