[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