Six months after President Barack Obama signed into law the Jumpstart Our Business Startups Act, mid-market investment banks are still waiting for guidance needed to set their compliance and insurance strategies.

Designed to spur growth by giving small and midsize businesses greater access to investment capital and a smoother transition from private to public ownership, the JOBS Act creates new exemptions to several initial public offering and crowdfunding regulations, and a significant roll-back of restrictions on analysts' research reports and participation in meetings with IPO clients.

Despite an August guidance statement from the U.S. Securities and Exchanges Commission on the law, banking liability experts say that considerable ambiguity remains for small and midsize banks' compliance obligations.

“Unfortunately, I think a few firms are going to have to wind up being targeted by regulators before that kind of clarity can be had,” said Derek Lakin, a New York-based senior vice president of financial services and executive risk at Lockton Cos. L.L.C. “I hate to say it, but I think we're in sort of a gray area until that happens.”

Under the new law, investment banks brokering IPOs for qualifying emerging-growth companies are permitted to use their own analysts to produce and distribute research reports on those companies, a practice outlawed by the 2002 Sarbanes-Oxley Act and the Global Analyst Research Settlement reached in 2003 between the SEC and the country's 10 largest banks. The new law also allows in-house analysts to attend and participate in pitch meetings and other conferences between an IPO client's management team and the bank's investment personnel, which had been similarly banned.

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The research rules were relaxed largely for logistical reasons, experts said. Most emerging-growth companies — defined in the JOBS Act as companies with less than $1 billion in gross annual revenue — aren't big enough to warrant the attention of the broader analyst community. Therefore, only research analysts working for the banks brokering an IPO typically are positioned to evaluate those companies' potential stock performance.

“When you're talking about all of these smaller, emerging-growth companies, there might not be any other investment bank covering them,” said Richard Magrann-Wells, New York-based senior vice president and financial services practice leader at Willis North America Inc.

“Obviously, the problem with that is the only investment bank that understands the stock is the one taking it public,” he said. The JOBS Act “rolls all of that back a bit and does allow analysts from an underwriting bank to issue statements for emerging growth companies.”

Allowing analysts to attend and participate in their banks' investment meetings with clients shortens and simplifies preparing an IPO for small and mid-market companies and their banks.

“Theoretically, what Congress did makes a lot of sense,” said Fred Knopf, a White Plains, N.Y.-based partner and securities industry practice chair at Wilson Elser Moskowitz Edelman and Dicker L.L.P.

However, experts said mid-market investment firms may find the new law's practical application more difficult. In its Aug. 22 guidance (see story, page 20), the SEC noted that while limitations on certain activities have been relaxed, banks and their directors and officers still can be held liable under federal antifraud laws for analysts' conduct while engaged in those activities.

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“The one thing that hasn't changed is the liability,” Mr. Magrann-Wells said. “All of this wonderful change that's come about to make it easier to do an IPO doesn't mean they've relaxed any of the liability for banks or for their officers and directors.”

The SEC's guidance also said the JOBS Act does not supercede the Global Analyst Research Settlement, meaning that the eight remaining banks — with Bear, Stearns & Co. Inc. and Lehman Bros. Inc. having dissolved since the settlement — cannot take advantage of the relaxed research regulations. That could lengthen the time it takes the middle market to develop internal compliance standards, as experts said smaller firms often look to larger competitors for guidance on compliance.