[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3448 Introduced in House (IH)]

113th CONGRESS
  1st Session
                                H. R. 3448

To amend the Securities Exchange Act of 1934 to provide for an optional 
 pilot program allowing certain emerging growth companies to increase 
                    the tick sizes of their stocks.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           November 12, 2013

 Mr. Duffy (for himself and Mr. Carney) introduced the following bill; 
       which was referred to the Committee on Financial Services

_______________________________________________________________________

                                 A BILL


 
To amend the Securities Exchange Act of 1934 to provide for an optional 
 pilot program allowing certain emerging growth companies to increase 
                    the tick sizes of their stocks.

    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 ``Small Cap Liquidity Reform Act of 
2013''.

SEC. 2. LIQUIDITY PILOT PROGRAM FOR SECURITIES OF CERTAIN EMERGING 
              GROWTH COMPANIES.

    (a) In General.--Section 11A(c)(6) of the Securities Exchange Act 
of 1934 (15 U.S.C. 78k-1(c)(6)) is amended to read as follows:
    ``(6) Liquidity Pilot Program for Securities of Certain Emerging 
Growth Companies.--
            ``(A) Quoting increment.--Beginning on the date that is 90 
        days after the date of the enactment of the Small Cap Liquidity 
        Reform Act of 2013, the securities of a covered emerging growth 
        company shall be quoted using--
                    ``(i) a minimum increment of $0.05; or
                    ``(ii) if, not later than 60 days after such date 
                of enactment, the board of directors of the company so 
                elects in the manner described in subparagraph (D)--
                            ``(I) a minimum increment of $0.10; or
                            ``(II) the increment at which such 
                        securities would be quoted without regard to 
                        the minimum increments established under this 
                        paragraph.
            ``(B) Trading increment.--The securities of a covered 
        emerging growth company that are quoted at a minimum increment 
        of $0.05 or $0.10 under this paragraph shall be traded at--
                    ``(i) such minimum increment; or
                    ``(ii) such other increment as permitted by the 
                Commission by regulation, as the Commission considers 
                appropriate.
            ``(C) Future right to opt out or change minimum 
        increment.--
                    ``(i) In general.--At any time beginning on the 
                date that is 90 days after the date of the enactment of 
                the Small Cap Liquidity Reform Act of 2013, the board 
                of directors of a covered emerging growth company the 
                securities of which are quoted at a minimum increment 
                of $0.05 or $0.10 under this paragraph may elect in the 
                manner described in subparagraph (D)--
                            ``(I) for the securities of such company to 
                        be quoted at the increment at which such 
                        securities would be quoted without regard to 
                        the minimum increments established under this 
                        paragraph; or
                            ``(II) to change the minimum increment at 
                        which the securities of such company are quoted 
                        from $0.05 to $0.10 or from $0.10 to $0.05.
                    ``(ii) When election effective.--An election under 
                this subparagraph shall take effect on the date that is 
                30 days after such election is made.
                    ``(iii) Single election to change minimum 
                increment.--A covered emerging growth company may not 
                make more than one election under clause (i)(II).
            ``(D) Manner of election.--
                    ``(i) In general.--An election is made in the 
                manner described in this subparagraph by informing the 
                Commission and each exchange on which the securities of 
                the covered emerging growth company are quoted or 
                traded.
                    ``(ii) Consultation.--In making an election under 
                subparagraph (A)(ii), the board of directors shall 
                first consult with the primary listing market and major 
                shareholders of the covered emerging growth company and 
                with any brokers and dealers that the board of 
                directors considers relevant to the quality of the 
                market for the securities of the company.
            ``(E) Issuers ceasing to be covered emerging growth 
        companies.--
                    ``(i) In general.--If an issuer the securities of 
                which are quoted at a minimum increment of $0.05 or 
                $0.10 under this paragraph ceases to be a covered 
                emerging growth company, the securities of such issuer 
                shall be quoted at the increment at which such 
                securities would be quoted without regard to the 
                minimum increments established under this paragraph.
                    ``(ii) Exceptions.--The Commission may by 
                regulation, as the Commission considers appropriate, 
                specify any circumstances under which an issuer shall 
                continue to be considered a covered emerging growth 
                company for purposes of this paragraph after the issuer 
                ceases to meet the requirements of subparagraph 
                (L)(ii).
            ``(F) Securities trading below $1.--
                    ``(i) Initial price.--
                            ``(I) At effective date.--If the trading 
                        price of the securities of a covered emerging 
                        growth company is below $1 at the close of the 
                        last trading day before the date that is 90 
                        days after the date of the enactment of the 
                        Small Cap Liquidity Reform Act of 2013, the 
                        securities of such company shall be quoted 
                        using the increment at which such securities 
                        would be quoted without regard to the minimum 
                        increments established under this paragraph.
                            ``(II) At ipo.--If a covered emerging 
                        growth company makes an initial public offering 
                        after the day described in subclause (I) and 
                        the first share of the securities of such 
                        company is offered to the public at a price 
                        below $1, the securities of such company shall 
                        be quoted using the increment at which such 
                        securities would be quoted without regard to 
                        the minimum increments established under this 
                        paragraph.
                    ``(ii) Average trading price.--If the average 
                trading price of the securities of a covered emerging 
                growth company falls below $1 for any 90-day period 
                beginning on or after the day before the date of the 
                enactment of the Small Cap Liquidity Reform Act of 
                2013, the securities of such company shall, after the 
                end of such period, be quoted using the increment at 
                which such securities would be quoted without regard to 
                the minimum increments established under this 
                paragraph.
            ``(G) Fraud or manipulation.--If the Commission determines 
        that a covered emerging growth company has violated any 
        provision of the securities laws prohibiting fraudulent, 
        manipulative, or deceptive acts or practices, the securities of 
        such company shall, after the date of the determination, be 
        quoted using the increment at which such securities would be 
        quoted without regard to the minimum increments established 
        under this paragraph.
            ``(H) Ineligibility for increased minimum increment 
        permanent.--The securities of an issuer may not be quoted at a 
        minimum increment of $0.05 or $0.10 under this paragraph at any 
        time after--
                    ``(i) such issuer makes an election under 
                subparagraph (A)(ii)(II);
                    ``(ii) such issuer makes an election under 
                subparagraph (C)(i)(I), except during the period before 
                such election takes effect; or
                    ``(iii) the securities of such issuer are required 
                by this paragraph to be quoted using the increment at 
                which such securities would be quoted without regard to 
                the minimum increments established under this 
                paragraph.
            ``(I) Additional reports and disclosures.--The Commission 
        shall require a covered emerging growth company the securities 
        of which are quoted at a minimum increment of $0.05 or $0.10 
        under this paragraph to make such reports and disclosures as 
        the Commission considers necessary or appropriate in the public 
        interest or for the protection of investors.
            ``(J) Limitation of liability.--An issuer (or any officer, 
        director, manager, or other agent of such issuer) shall not be 
        liable to any person under any law or regulation of the United 
        States, any constitution, law, or regulation of any State or 
        political subdivision thereof, or any contract or other legally 
        enforceable agreement (including any arbitration agreement) for 
        any losses caused solely by the quoting of the securities of 
        such issuer at a minimum increment of $0.05 or $0.10, by the 
        trading of such securities at such minimum increment or such 
        other increment as permitted by the Commission under 
        subparagraph (B)(ii), or by both such quoting and trading, as 
        provided in this paragraph.
            ``(K) Report to congress.--Not later than 6 months after 
        the date of the enactment of the Small Cap Liquidity Reform Act 
        of 2013, and every 6 months thereafter, the Commission, in 
        coordination with each exchange on which the securities of 
        covered emerging growth companies are quoted or traded, shall 
        submit to Congress a report on the quoting and trading of 
        securities in increments permitted by this paragraph and the 
        extent to which such quoting and trading are increasing 
        liquidity and active trading by incentivizing capital 
        commitment, research coverage, and brokerage support, together 
        with any legislative recommendations the Commission may have.
            ``(L) Definitions.--In this paragraph:
                    ``(i) Board of directors.--The term `board of 
                directors' means a board of directors or any person or 
                persons performing similar functions.
                    ``(ii) Covered emerging growth company.--The term 
                `covered emerging growth company' means an emerging 
                growth company, as defined in the first paragraph (80) 
                of section 3(a), except that--
                            ``(I) such paragraph shall be applied by 
                        substituting `$750,000,000' for 
                        `$1,000,000,000' each place it appears; and
                            ``(II) subparagraphs (B), (C), and (D) of 
                        such paragraph do not apply.''.
    (b) Sunset.--Effective on the date that is 5 years after the date 
of the enactment of this Act, section 11A(c)(6) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78k-1(c)(6)) is repealed.
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