Venture exchanges

(a)

Securities Exchange Act of 1934

Section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f) is amended by adding at the end the following:

(m)

Venture exchange

(1)

Definitions

In this subsection:(A)

Early-stage, growth company

(i)

In general

The term early-stage, growth company means an issuer—(I)that has not made any registered initial public offering of any securities of the issuer; and(II)with a public float of not more than the value of public float required to qualify as a large accelerated filer under section 240.12b–2 of title 17, Code of Federal Regulations, or any successor regulation.(ii)

Treatment when public float exceeds threshold

An issuer shall not cease to be an early-stage, growth company by reason of the public float of the issuer exceeding the threshold specified in clause (i)(II) until the later of—(I)the end of the period of 24 consecutive months during which the public float of the issuer exceeds $2,000,000,000 (as such amount is indexed for inflation every 5 years by the Commission to reflect the change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics, setting the threshold to the nearest $1,000,000); and(II)the end of the 1-year period following the end of the 24-month period described in subclause (I), if the issuer requests the 1-year extension from a venture exchange and the venture exchange elects to provide that extension.(B)

Public float

With respect to an issuer, the term public float means the aggregate worldwide market value of the voting and non-voting common equity of the issuer held by non-affiliates.(C)

Venture security

(i)

In general

The term venture security means—(I)a security of an early-stage, growth company that is exempt from registration pursuant to section 3(b) of the Securities Act of 1933 (15 U.S.C. 77c(b));(II)a security of an emerging growth company; or(III)a security registered under section 12(b) and listed on a venture exchange (or, prior to listing on a venture exchange, listed on a national securities exchange) where—(aa)the issuer of the security has a public float that is not more than the value of public float required to qualify as a large accelerated filer under section 240.12b–2 of title 17, Code of Federal Regulations, or any successor regulation; or(bb)the average daily trade volume is not more than 75,000 shares during a continuous 60-day period.(ii)

Treatment when public float exceeds threshold

A security shall not cease to be a venture security by reason of the public float of the issuer of the security exceeding the threshold specified in clause (i)(III)(aa) until the later of—(I)the end of the period of 24 consecutive months beginning on the date on which—(aa)the public float of the issuer exceeds $2,000,000,000; and(bb)the average daily trade volume of the security is not less than 100,000 shares during a continuous 60-day period; and(II)the end of the 1-year period following the end of the 24-month period described in subclause (I), if the issuer of the security requests the 1-year extension from a venture exchange and the venture exchange elects to provide that extension.(2)

Registration

(A)

In general

A person may register (and a national securities exchange may register a listing tier of the exchange) as a national securities exchange solely for the purpose of trading venture securities by filing an application with the Commission pursuant to subsection (a) and the rules and regulations thereunder.(B)

Publication of notice

The Commission shall, upon the filing of an application under subparagraph (A), publish notice of the filing and afford interested persons an opportunity to submit written data, views, and arguments concerning the application.(C)

Approval or denial

(i)

In general

Not later than 90 days after the date on which a notice is published under subparagraph (B), or within such longer period as to which the applicant consents, the Commission shall—(I)by order grant the registration; or(II)institute a denial proceeding under clause (ii) to determine whether registration should be denied.(ii)

Denial proceeding

(I)

In general

A proceeding under clause (i)(II) shall—(aa)include notice of the grounds for denial under consideration and opportunity for hearing; and(bb)be concluded not later than 180 days after the date on which the notice is published under subparagraph (B).(II)

Order

At the conclusion of a proceeding under clause (i)(II), the Commission shall by order grant or deny the registration.(III)

Extension

The Commission may extend the time for conclusion of a proceeding under clause (i)(II) for a period of not more than 90 days if the Commission—(aa)finds good cause for the extension; and(bb)publishes the reasons for the finding described in item (aa) or for such longer period as to which the applicant consents.(iii)

Criteria for approval or denial

The Commission shall—(I)grant a registration under this paragraph if the Commission finds that the requirements of this Act and the rules and regulations thereunder with respect to the applicant are satisfied; and(II)deny a registration under this paragraph if the Commission does not make the finding described in subclause (I).(3)

Powers and restrictions

In addition to the powers and restrictions otherwise applicable to a national securities exchange, a venture exchange—(A)may only constitute, maintain, or provide a market place or facilities for bringing together purchasers and sellers of venture securities;(B)may not extend unlisted trading privileges to any venture security;(C)may only, if the venture exchange is a listing tier of another national securities exchange, allow trading in securities that are registered under section 12(b) on a national securities exchange other than a venture exchange; and(D)may, subject to the rule filing process under section 19(b)—(i)determine the increment to be used for quoting and trading venture securities on the exchange; and(ii)choose to carry out periodic auctions for the sale of a venture security instead of providing continuous trading of the venture security.(4)

Treatment of certain exempted securities

A security that is exempt from registration pursuant to section 3(b) of the Securities Act of 1933 (15 U.S.C. 77c(b)) shall be exempt from section 12(a) of this Act to the extent the security is traded on a venture exchange, if the issuer of the security is in compliance with—(A)all disclosure obligations of such section 3(b) and the regulations issued under such section; and(B)ongoing disclosure obligations of the applicable venture exchange that are similar to those provided by an issuer under tier 2, as described in sections 230.251 through 230.263 of title 17, Code of Federal Regulations, or any successor regulation.(5)

Venture securities traded on venture exchanges may not trade on non-venture exchanges

A venture security may not be traded on a national securities exchange that is not a venture exchange during any period in which the venture security is being traded on a venture exchange.(6)

Commission authority to limit certain trading

The Commission may limit transactions in venture securities that are not effected on a national securities exchange as appropriate to promote efficiency, competition, capital formation, and to protect investors.(7)

Disclosures to investors

The Commission shall issue regulations to ensure that persons selling or purchasing venture securities on a venture exchange are provided disclosures sufficient to understand—(A)the characteristics unique to venture securities; and(B)in the case of a venture exchange that is a listing tier of another national securities exchange, that the venture exchange is distinct from the other national securities exchange.(8)

Rule of construction

Nothing in this subsection may be construed as requiring transactions in venture securities to be effected on a national securities exchange.

(b)

Securities Act of 1933

Section 18 of the Securities Act of 1933 (15 U.S.C. 77r) is amended—(1)by redesignating subsection (d) as subsection (e); and(2)by inserting after subsection (c) the following:

(d)

Treatment of securities listed on a venture exchange

Notwithstanding subsection (b), a security is not a covered security pursuant to subsection (b)(1)(A) if the security is only listed, or authorized for listing, on a venture exchange, as defined in section 6(m) of the Securities Exchange Act of 1934 (15 U.S.C. 78f(m)).

(c)

Sense of Congress

It is the sense of Congress that the Securities and Exchange Commission should—(1)when necessary or appropriate in the public interest and consistent with the protection of investors, make use of the general exemptive authority of the Commission under section 36 of the Securities Exchange Act of 1934 (15 U.S.C. 78mm) with respect to the provisions added by the amendments made by this section; and(2)if the Commission determines appropriate, create an Office of Venture Exchanges within the Division of Trading and Markets of the Commission.(d)

Rule of construction

Nothing in this section or the amendments made by this section shall be construed to impair or limit the construction of the anti-fraud provisions of the securities laws, as defined in section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)), or the authority of the Securities and Exchange Commission under those provisions.(e)

Effective date for tiers of existing national securities exchanges

In the case of a securities exchange that is registered as a national securities exchange under section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f) on the date of enactment of this Act, any election for a listing tier of that exchange to be treated as a venture exchange under subsection (m) of such section, as added by subsection (a) of this section, shall not take effect before the date that is 180 days after such date of enactment.