[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3606 Reported in House (RH)]

                                                 Union Calendar No. 281
112th CONGRESS
  2d Session
                                H. R. 3606

                          [Report No. 112-406]

  To increase American job creation and economic growth by improving 
  access to the public capital markets for emerging growth companies.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            December 8, 2011

  Mr. Fincher (for himself, Mr. Carney, Mr. Bachus, Mr. Crowley, Mr. 
Garrett, Mr. McHenry, Mr. Schweikert, Mr. Westmoreland, Mr. Garamendi, 
 Mr. Renacci, Mr. Huizenga of Michigan, Mr. Kind, Mrs. Blackburn, Mr. 
    DesJarlais, Mr. Tipton, Mr. Polis, Mr. Crawford, Mr. Griffin of 
Arkansas, Mr. Austin Scott of Georgia, Mr. Perlmutter, Mr. Himes, Mrs. 
McCarthy of New York, Mr. Connolly of Virginia, Mr. Peters, Mr. Grimm, 
 Mrs. Capito, Mr. Hensarling, and Ms. Eshoo) introduced the following 
    bill; which was referred to the Committee on Financial Services

                             March 1, 2012

Additional sponsors: Mr. Dold, Ms. Hayworth, Mr. Royce, Ms. Moore, Mr. 
   Neugebauer, Mr. Owens, Mr. Meehan, Mr. Sam Johnson of Texas, Mr. 
Sessions, Mr. King of New York, Mr. Welch, Mr. Smith of Washington, Ms. 
Sewell, Mr. Hurt, Mr. Womack, Mr. Ross of Arkansas, Mr. Scott of South 
Carolina, Mr. Schock, Mr. Carnahan, Mr. Luetkemeyer, Mr. Rush, Mr. Gary 
  G. Miller of California, Mr. Canseco, Mr. Larsen of Washington, Mr. 
                      Schilling, and Mr. Manzullo


                             March 1, 2012

  Reported with an amendment, committed to the Committee of the Whole 
       House on the State of the Union, and ordered to be printed
 [Strike out all after the enacting clause and insert the part printed 
                               in italic]
    [For text of introduced bill, see copy of bill as introduced on 
                           December 8, 2011]

_______________________________________________________________________

                                 A BILL


 
  To increase American job creation and economic growth by improving 
  access to the public capital markets for emerging growth companies.


 


    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Reopening American Capital Markets 
to Emerging Growth Companies Act of 2012''.

SEC. 2. DEFINITIONS.

    (a) Securities Act of 1933.--Section 2(a) of the Securities Act of 
1933 (15 U.S.C. 77b(a)) is amended by adding at the end the following:
            ``(19) The term `emerging growth company' means an issuer 
        that had total annual gross revenues of less than 
        $1,000,000,000 during its most recently completed fiscal year. 
        An issuer that is an emerging growth company as of the first 
        day of that fiscal year shall continue to be deemed an emerging 
        growth company until the earliest of--
                    ``(A) the last day of the fiscal year of the issuer 
                during which it had total annual gross revenues of 
                $1,000,000,000 or more;
                    ``(B) the last day of the fiscal year of the issuer 
                following the fifth anniversary of the date of the 
                first sale of common equity securities of the issuer 
                pursuant to an effective registration statement under 
                this title; or
                    ``(C) the date on which such issuer is deemed to be 
                a `large accelerated filer', as defined in section 
                240.12b-2 of title 17, Code of Federal Regulations, or 
                any successor thereto.''.
    (b) Securities Exchange Act of 1934.--Section 3(a) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78c(a)) is amended--
            (1) by redesignating paragraph (77), as added by section 
        941(a) of the Investor Protection and Securities Reform Act of 
        2010 (Public Law 111-203, 124 Stat. 1890), as paragraph (79); 
        and
            (2) by adding at the end the following:
            ``(80) Emerging growth company.--The term `emerging growth 
        company' means an issuer that had total annual gross revenues 
        of less than $1,000,000,000 during its most recently completed 
        fiscal year. An issuer that is an emerging growth company as of 
        the first day of that fiscal year shall continue to be deemed 
        an emerging growth company until the earliest of--
                    ``(A) the last day of the fiscal year of the issuer 
                during which it had total annual gross revenues of 
                $1,000,000,000 or more;
                    ``(B) the last day of the fiscal year of the issuer 
                following the fifth anniversary of the date of the 
                first sale of common equity securities of the issuer 
                pursuant to an effective registration statement under 
                the Securities Act of 1933; or
                    ``(C) the date on which such issuer is deemed to be 
                a `large accelerated filer', as defined in section 
                240.12b-2 of title 17, Code of Federal Regulations, or 
                any successor thereto.''.
    (c) Other Definitions.--As used in this Act, the following 
definitions shall apply:
            (1) Commission.--The term ``Commission'' means the 
        Securities and Exchange Commission.
            (2) Initial public offering date.--The term ``initial 
        public offering date'' means the date of the first sale of 
        common equity securities of an issuer pursuant to an effective 
        registration statement under the Securities Act of 1933.
    (d) Effective Date.--Notwithstanding section 2(a)(19) of the 
Securities Act of 1933 and section 3(a)(80) of the Securities Exchange 
Act of 1934, an issuer shall not be an emerging growth company for 
purposes of such Acts if the first sale of common equity securities of 
such issuer pursuant to an effective registration statement under the 
Securities Act of 1933 occurred on or before December 8, 2011.

SEC. 3. DISCLOSURE OBLIGATIONS.

    (a) Executive Compensation.--
            (1) Exemption.--Section 14A(e) of the Securities Exchange 
        Act of 1934 (15 U.S.C. 78n-1(e)) is amended--
                    (A) by striking ``The Commission may'' and 
                inserting the following:
            ``(1) In general.--The Commission may'';
                    (B) by striking ``an issuer'' and inserting ``any 
                other issuer''; and
                    (C) by adding at the end the following:
            ``(2) Treatment of emerging growth companies.--
                    ``(A) In general.--An emerging growth company shall 
                be exempt from the requirements of subsections (a) and 
                (b).
                    ``(B) Compliance after termination of emerging 
                growth company treatment.--An issuer that was an 
                emerging growth company but is no longer an emerging 
                growth company shall include the first separate 
                resolution described under subsection (a)(1) not later 
                than the end of--
                            ``(i) in the case of an issuer that was an 
                        emerging growth company for less than 2 years 
                        after the date of first sale of common equity 
                        securities of the issuer pursuant to an 
                        effective registration statement under the 
                        Securities Act of 1933, the 3-year period 
                        beginning on such date; and
                            ``(ii) in the case of any other issuer, the 
                        1-year period beginning on the date the issuer 
                        is no longer an emerging growth company.''.
            (2) Proxies.--Section 14(i) of the Securities Exchange Act 
        of 1934 (15 U.S.C. 78n(i)) is amended by inserting ``, for any 
        issuer other than an emerging growth company,'' after 
        ``including''.
            (3) Compensation disclosures.--Section 953(b)(1) of the 
        Investor Protection and Securities Reform Act of 2010 (Public 
        Law 111-203; 124 Stat. 1904) is amended by inserting ``, other 
        than an emerging growth company, as that term is defined in 
        section 3(a) of the Securities Exchange Act of 1934,'' after 
        ``require each issuer''.
    (b) Financial Disclosures and Accounting Pronouncements.--
            (1) Securities act of 1933.--Section 7(a) of the Securities 
        Act of 1933 (15 U.S.C. 77g(a)) is amended--
                    (A) by striking ``(a) The registration'' and 
                inserting the following:
    ``(a) Information Required in Registration Statement.--
            ``(1) In general.--The registration''; and
                    (B) by adding at the end the following:
            ``(2) Treatment of emerging growth companies.--An emerging 
        growth company--
                    ``(A) need not present more than 2 years of audited 
                financial statements in order for the registration 
                statement of such emerging growth company with respect 
                to an initial public offering of its common equity 
                securities to be effective, and in any other 
                registration statement to be filed with the Commission, 
                an emerging growth company need not present selected 
                financial data in accordance with section 229.301 of 
                title 17, Code of Federal Regulations, for any period 
                prior to the earliest audited period presented in 
                connection with its initial public offering; and
                    ``(B) may not be required to comply with any new or 
                revised financial accounting standard until such date 
                that a company that is not an issuer (as defined under 
                section 2(a) of the Sarbanes-Oxley Act of 2002 (15 
                U.S.C. 7201(a)) is required to comply with such new or 
                revised accounting standard, if such standard applies 
                to companies that are not issuers.''.
            (2) Securities exchange act of 1934.--Section 13(a) of the 
        Securities Exchange Act of 1934 (15 U.S.C. 78m(a)) is amended 
        by adding at the end the following: ``In any registration 
        statement, periodic report, or other reports to be filed with 
        the Commission, an emerging growth company need not present 
        selected financial data in accordance with section 229.301 of 
        title 17, Code of Federal Regulations, for any period prior to 
        the earliest audited period presented in connection with its 
        first registration statement that became effective under this 
        Act or the Securities Act of 1933 and, with respect to any such 
        statement or reports, an emerging growth company may not be 
        required to comply with any new or revised financial accounting 
        standard until such date that a company that is not an issuer 
        (as defined under section 2(a) of the Sarbanes-Oxley Act of 
        2002 (15 U.S.C. 7201(a))) is required to comply with such new 
        or revised accounting standard, if such standard applies to 
        companies that are not issuers.''.
    (c) Other Disclosures.--An emerging growth company may comply with 
section 229.303(a) of title 17, Code of Federal Regulations, or any 
successor thereto, by providing information required by such section 
with respect to the financial statements of the emerging growth company 
for each period presented pursuant to section 7(a) of the Securities 
Act of 1933 (15 U.S.C. 77g(a)). An emerging growth company may comply 
with section 229.402 of title 17, Code of Federal Regulations, or any 
successor thereto, by disclosing the same information as any issuer 
with a market value of outstanding voting and nonvoting common equity 
held by non-affiliates of less than $75,000,000.

SEC. 4. INTERNAL CONTROLS AUDIT.

    Section 404(b) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 
7262(b)) is amended by inserting ``, other than an issuer that is an 
emerging growth company (as defined in section 3 of the Securities 
Exchange Act of 1934),'' before ``shall attest to''.

SEC. 5. AUDITING STANDARDS.

    Section 103(a)(3) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 
7213(a)(3)) is amended by adding at the end the following:
                    ``(C) Transition period for emerging growth 
                companies.--Any rules of the Board requiring mandatory 
                audit firm rotation or a supplement to the auditor's 
                report in which the auditor would be required to 
                provide additional information about the audit and the 
                financial statements of the issuer (auditor discussion 
                and analysis) shall not apply to an audit of an 
                emerging growth company, as defined in section 3 of the 
                Securities Exchange Act of 1934. Any additional rules 
                adopted by the Board after the date of enactment of 
                this subparagraph shall not apply to an audit of any 
                emerging growth company, unless the Commission 
                determines that the application of such additional 
                requirements is necessary or appropriate in the public 
                interest, after considering the protection of investors 
                and whether the action will promote efficiency, 
                competition, and capital formation.''.

SEC. 6. AVAILABILITY OF INFORMATION ABOUT EMERGING GROWTH COMPANIES.

    (a) Provision of Research.--Section 2(a)(3) of the Securities Act 
of 1933 (15 U.S.C. 77b(a)(3)) is amended by adding at the end the 
following: ``The publication or distribution by a broker or dealer of a 
research report about an emerging growth company that is the subject of 
a proposed public offering of the common equity securities of such 
emerging growth company pursuant to a registration statement that the 
issuer proposes to file, or has filed, or that is effective shall be 
deemed for purposes of paragraph (10) of this subsection and section 
5(c) not to constitute an offer for sale or offer to sell a security, 
even if the broker or dealer is participating or will participate in 
the registered offering of the securities of the issuer. As used in 
this paragraph, the term ``research report'' means a written, 
electronic, or oral communication that includes information, opinions, 
or recommendations with respect to securities of an issuer or an 
analysis of a security or an issuer, whether or not it provides 
information reasonably sufficient upon which to base an investment 
decision.''.
    (b) Securities Analyst Communications.--Section 15D of the 
Securities Exchange Act of 1934 (15 U.S.C. 78o-6) is amended--
            (1) by redesignating subsection (c) as subsection (d); and
            (2) by inserting after subsection (b) the following:
    ``(c) Limitation.--Notwithstanding subsection (a) or any other 
provision of law, neither the Commission nor any national securities 
association registered under section 15A may adopt or maintain any rule 
or regulation in connection with an initial public offering of the 
common equity of an emerging growth company--
            ``(1) restricting, based on functional role, which 
        associated persons of a broker, dealer, or member of a national 
        securities association, may arrange for communications between 
        a securities analyst and a potential investor; or
            ``(2) restricting a securities analyst from participating 
        in any communications with the management of an emerging growth 
        company that is also attended by any other associated person of 
        a broker, dealer, or member of a national securities 
        association whose functional role is other than as a securities 
        analyst.''.
    (c) Expanding Permissible Communications.--Section 5 of the 
Securities Act of 1933 (15 U.S.C. 77e) is amended--
            (1) by redesignating subsection (d) as subsection (e); and
            (2) by inserting after subsection (c) the following:
    ``(d) Limitation.--Notwithstanding any other provision of this 
section, an emerging growth company or any person authorized to act on 
behalf of an emerging growth company may engage in oral or written 
communications with potential investors that are qualified 
institutional buyers or institutions that are accredited investors, as 
such terms are respectively defined in section 230.144A and section 
230.501(a) of title 17, Code of Federal Regulations, or any successor 
thereto, to determine whether such investors might have an interest in 
a contemplated securities offering, either prior to or following the 
date of filing of a registration statement with respect to such 
securities with the Commission, subject to the requirement of 
subsection (b)(2).''.
    (d) Post Offering Communications.--Neither the Commission nor any 
national securities association registered under section 15A of the 
Securities Exchange Act of 1934 may adopt or maintain any rule or 
regulation prohibiting any broker, dealer, or member of a national 
securities association from publishing or distributing any research 
report or making a public appearance, with respect to the securities of 
an emerging growth company, either--
            (1) within any prescribed period of time following the 
        initial public offering date of the emerging growth company; or
            (2) within any prescribed period of time prior to the 
        expiration date of any agreement between the broker, dealer, or 
        member of a national securities association and the emerging 
        growth company or its shareholders that restricts or prohibits 
        the sale of securities held by the emerging growth company or 
        its shareholders after the initial public offering date.

SEC. 7. OTHER MATTERS.

    (a) Draft Registration Statements.--Section 6 of the Securities Act 
of 1933 (15 U.S.C. 77f) is amended by adding at the end the following:
    ``(e) Emerging Growth Companies.--
            ``(1) In general.--Any emerging growth company, prior to 
        its initial public offering date, may confidentially submit to 
        the Commission a draft registration statement, for confidential 
        nonpublic review by the staff of the Commission prior to public 
        filing, provided that the initial confidential submission and 
        all amendments thereto shall be publicly filed with the 
        Commission not later than 21 days before the date on which the 
        issuer conducts a road show, as such term is defined in section 
        230.433(h)(4) of title 17, Code of Federal Regulations, or any 
        successor thereto.
            ``(2) Confidentiality.--Notwithstanding any other provision 
        of this title, the Commission shall not be compelled to 
        disclose any information provided to or obtained by the 
        Commission pursuant to this subsection. For purposes of section 
        552 of title 5, United States Code, this subsection shall be 
        considered a statute described in subsection (b)(3)(B) of such 
        section 552. Information described in or obtained pursuant to 
        this subsection shall be deemed to constitute confidential 
        information for purposes of section 24(b)(2) of the Securities 
        Exchange Act of 1934.''.
    (b) Tick Size.--Section 11A(c) of the Securities Exchange Act of 
1934 (15 U.S.C. 78k-1(c)) is amended by adding at the end the following 
new paragraph:
            ``(6) Tick size.--
                    ``(A) Study and report.--The Commission shall 
                conduct a study examining the transition to trading and 
                quoting securities in one penny increments, also known 
                as decimalization. The study shall examine the impact 
                that decimalization has had on the number of initial 
                public offerings since its implementation relative to 
                the period before its implementation. The study shall 
                also examine the impact that this change has had on 
                liquidity for small and middle capitalization company 
                securities and whether there is sufficient economic 
                incentive to support trading operations in these 
                securities in penny increments. Not later than 90 days 
                after the date of enactment of this paragraph, the 
                Commission shall submit to Congress a report on the 
                findings of the study.
                    ``(B) Designation.--If the Commission determines 
                that the securities of emerging growth companies should 
                be quoted and traded using a minimum increment of 
                greater than $0.01, the Commission may, by rule not 
                later than 180 days after the date of enactment of this 
                paragraph, designate a minimum increment for the 
                securities of emerging growth companies that is greater 
                than $0.01 but less than $0.10 for use in all quoting 
                and trading of securities in any exchange or other 
                execution venue.''.

SEC. 8. OPT-IN RIGHT FOR EMERGING GROWTH COMPANIES.

    (a) In General.--With respect to an exemption provided to emerging 
growth companies under this Act, or an amendment made by this Act, an 
emerging growth company may choose to forgo such exemption and instead 
comply with the requirements that apply to an issuer that is not an 
emerging growth company.
    (b) Special Rule.--Notwithstanding subsection (a), with respect to 
the extension of time to comply with new or revised financial 
accounting standards provided under section 7(a)(2)(B) of the 
Securities Act of 1933 and section 13(a) of the Securities Exchange Act 
of 1934, as added by section 3(b), if an emerging growth company 
chooses to comply with such standards to the same extent that a non-
emerging growth company is required to comply with such standards, the 
emerging growth company--
            (1) must make such choice at the time the company is first 
        required to file a registration statement, periodic report, or 
        other report with the Commission under section 13 of the 
        Securities Exchange Act of 1934 and notify the Securities and 
        Exchange Commission of such choice;
            (2) may not select some standards to comply with in such 
        manner and not others, but must comply with all such standards 
        to the same extent that a non-emerging growth company is 
        required to comply with such standards; and
            (3) must continue to comply with such standards to the same 
        extent that a non-emerging growth company is required to comply 
        with such standards for as long as the company remains an 
        emerging growth company.

SEC. 9. REVIEW OF REGULATION S-K.

    (a) Review.--The Securities and Exchange Commission shall conduct a 
review of its Regulation S-K (17 C.F.R. 229.10 et seq.) to--
            (1) comprehensively analyze the current registration 
        requirements of such regulation; and
            (2) determine how such requirements can be updated to 
        modernize and simplify the registration process and reduce the 
        costs and other burdens associated with these requirements for 
        issuers who are emerging growth companies.
    (b) Report.--Not later the 180 days after the date of enactment of 
this Act, the Commission shall transmit to Congress a report of the 
review conducted under subsection (a). The report shall include the 
specific recommendations of the Commission on how to streamline the 
registration process in order to make it more efficient and less 
burdensome for the Commission and for prospective issuers who are 
emerging growth companies.
                                                 Union Calendar No. 281

112th CONGRESS

  2d Session

                               H. R. 3606

                          [Report No. 112-406]

_______________________________________________________________________

                                 A BILL

  To increase American job creation and economic growth by improving 
  access to the public capital markets for emerging growth companies.

_______________________________________________________________________

                             March 1, 2012

  Reported with an amendment, committed to the Committee of the Whole 
       House on the State of the Union, and ordered to be printed