[Congressional Record Volume 150, Number 56 (Wednesday, April 28, 2004)]
[House]
[Pages H2423-H2424]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
INCREASED CAPITAL ACCESS FOR GROWING BUSINESS ACT
Mrs. KELLY. Mr. Speaker, I move to suspend the rules and pass the
bill (H.R. 3170) to amend the Investment Company Act of 1940 to provide
incentives for small business investment, and for other purposes.
The Clerk read as follows:
H.R. 3170
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 ``Increased Capital Access for
Growing Business Act''.
SEC. 2. AMENDMENTS TO THE INVESTMENT COMPANY ACT OF 1940.
(a) Definition of Eligible Portfolio Company.--Section
2(a)(46)(C) of the Investment Company Act of 1940 (15 U.S.C.
80a-2(a)(46)(C)) is amended--
(1) by striking clause (i) and inserting the following:
``(i) it does not have any class of equity securities
listed for trading on a national securities exchange or
traded through the facilities of a national securities
association as described in Section 15A of the Securities
Exchange Act of 1934;'';
(2) by striking ``or'' at the end of clause (iii);
(3) by redesignating clause (iv) as clause (v); and
(4) by inserting after clause (iii) the following new
clause:
``(iv) the aggregate value of its outstanding publicly
traded equity securities is not more than $250,000,000,
except that the Commission may adjust such amounts by rule,
regulation, or order to reflect changes in one or more
generally accepted indices or other indicators for small
business, consistent with the public interest, the protection
of investors, and the purposes fairly intended by the policy
and provisions of this title; or''.
(b) Assets of Business Development Companies.--Section
55(a)(1) of the Investment Company Act of 1940 (15 U.S.C.
80a-55(a)(1)) is amended--
(1) in subparagraph (B), by striking ``securities with
respect to which a member of a national securities exchange,
broker, or dealer may extend or maintain credit to or for a
customer pursuant to rules or regulations adopted by the
Board of Governors of the Federal Reserve System under
Section 7 of the Securities Exchange Act of 1934'' and
inserting the following: ``equity securities listed for
trading on a national securities exchange or traded through
the facilities of a national securities association as
described in Section 15A of the Securities Exchange Act of
1934''; and
(2) by striking ``or'' at the end of subparagraph (A), by
inserting ``or'' after the semicolon at the end of
subparagraph (B), and by inserting after subparagraph (B) the
following new subparagraph:
``(C) from the issuer of such securities, which issuer is
described in section 2(a)(46)(A) and (B) but is not an
eligible portfolio company because the aggregate value of its
outstanding publicly traded equity securities is more than
$250,000,000 but not more than $500,000,000, if such
securities represent not more than 10 per centum of the total
assets of the business development company invested in
securities described in paragraphs (1) through (6) of this
section;''.
The SPEAKER pro tempore. Pursuant to the rule, the gentlewoman from
New York (Mrs. Kelly) and the gentlewoman from New York (Ms. Velazquez)
each will control 20 minutes.
[[Page H2424]]
The Chair recognizes the gentlewoman from New York (Mrs. Kelly).
General Leave
Mrs. KELLY. Mr. Speaker, I ask unanimous consent that all Members may
have 5 legislative days within which to revise and extend their remarks
and include extraneous material on H.R. 3170.
The SPEAKER pro tempore. Is there objection to the request of the
gentlewoman from New York?
There was no objection.
Mrs. KELLY. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I thank the Speaker very much for allowing me to bring
this important legislation to the floor for consideration today. I also
thank the gentlewoman from New York (Ms. Velazquez) for working with me
on this important issue that will help small businesses.
Small businesses are the backbone of our economy and Congress must
ensure that they have every opportunity to succeed. It is crucial that
small businesses have efficient access to capital in order to create
jobs and ensure a strong and growing economy.
Today, the legislation before us, the Increased Capital Access For
Growing Business Act, will ensure that small businesses have better
access to capital by modernizing outdated security laws.
In 1980, Congress created Business Development Companies to encourage
investments in small, developing and financially troubled businesses,
known as ``eligible portfolio companies.''
BDCs are publicly traded investment companies that invest in both
public and private companies and generate an injection of capital for
businesses. BDCs have provided significant benefits to the economy,
including the opportunity for the public to invest in small, developing
companies while also supplying much needed financing.
The legislation we are considering today makes important changes to
the securities laws that ensure the viability of BDCs and expands the
businesses these entities are able to assist.
In 1980, BDCs were able to invest in approximately 66 percent of the
12,000 publicly held operating companies. Since that time, however, the
Federal Reserve has amended its margin rules on several occasions,
resulting in a clear decrease in the number of eligible portfolio
companies.
In order to correct these unintended consequences, the legislation
amends the definition of an eligible portfolio company to enable the
BDCs to have a greater flexibility in selecting appropriate
investments.
To accomplish this goal, the legislation permits BDCs to provide
capital to a larger number of companies by increasing the size of
companies that BDCs can invest in to reflect changes in the market
since the creation of the act. The legislation also includes specific
authority for the Securities and Exchange Commission to modify dollar
thresholds in the future.
This would enable the SEC to review these thresholds on a regular
basis and consider changes that are in the interest of the companies
trying to access capital and shareholders of BDCs.
Small and developing businesses should be able to devote their
energies towards their customers growing their business, not worrying
about access to capital.
As BDCs are able to provide financing to additional small and medium
sized businesses, the economy will experience greater growth and job
creation.
I also would like to commend the chairman of the Committee on
Financial Services, the gentleman from Ohio (Mr. Oxley), and the
ranking member, the gentleman from Massachusetts (Mr. Frank), for
recognizing the importance and urgency of this legislation and agreeing
to move it quickly.
This is a no-cost, common sense piece of legislation that will help
small businesses and increase capital formation; and that is good,
healthy economic structure for all. I urge my colleagues to join me in
support of this important legislation for investors and small
businesses.
Mr. Speaker, I reserve the balance of my time.
Ms. VELAZQUEZ. Mr. Speaker, I yield myself such time as I may
consume.
(Ms. VELAZQUEZ asked and was given permission to revise and extend
her remarks.)
Ms. VELAZQUEZ. Mr. Speaker, I rise in support of H.R. 3170, the
Increased Capital Access For Growing Businesses Act; and I want to
commend my good friend and colleague, the gentlewoman from New York
(Mrs. Kelly), for moving this matter so expeditiously. I also want to
thank the gentleman from Ohio (Mr. Oxley) and the gentleman from
Massachusetts (Mr. Frank), the ranking member, for their support in
expediting the consideration of this measure.
With this legislation we have an opportunity to help more small
companies access capital so that they can expand and grow their
businesses. Business Development Companies are unique investment
companies authorized by the 1980 Amendments to the Investment Company
Act. They are publicly traded companies that invest primarily in small
companies.
Since 1980, BDCs have proven to be a valuable source of funding for
growing companies that do not have access to traditional sources of
financing like bank lending or access to the public securities markets.
At the same time, BDCs provide the investing public with an opportunity
to invest in private equity, an opportunity traditionally limited to
wealthy investors.
In 1980, when BDCs were first authorized by Congress, about two-
thirds of all publicly held companies were eligible for BDC investment.
While the securities and financial services industries evolved during
the 1990s, Congress did not act to keep the BDC statute current. As a
result, the number of public companies in which BDCs could invest in
has been reduced drastically, effectively eliminating the option of BDC
investment for many companies.
It is important to understand that just because a firm has gone
public does not mean that it can access the financing necessary for
growing and expanding. In the late 1990s, for instance, many companies
went public that may not have been able to do so under current market
conditions. As a result, after the market bubble burst, many of these
companies found themselves unable to access traditional financing
sources. These smaller, illiquid company stocks could have greatly
benefited from financing offered by BDCs. Instead, the current statute
severely restricts such investments by BDCs.
The current standard for eligibility, whether or not a company has
outstanding marginable securities, has proven unworkable, as it is tied
to a standard that is no longer relevant.
H.R. 3170 attempts to provide more certainty and update the law
concerning permissible investments by BDCs. It creates a more workable
standard to enable BDCs to provide financing to companies as originally
intended by the 1980 amendments. This legislation attempts to provide a
more objective standard, based on a market capitalization test, to
modernize the definition of eligible portfolio companies.
H.R. 3170 modernizes U.S. securities laws to reflect changes in the
marketplace. Small and growing companies are often widely regarded as
engines of economic growth and job creation. Allowing BDCs to invest in
more companies in need of capital will provide more opportunities, more
jobs, and contribute to the economic expansion.
I urge my colleagues to support this legislation critical for small
businesses and the U.S. economy.
Mr. Speaker, I have no further requests for time, and I yield back
the balance of my time.
Mrs. KELLY. Mr. Speaker, I have no further requests for time, and I
yield back the balance of my time.
The SPEAKER pro tempore. The question is on the motion offered by the
gentlewoman from New York (Mrs. Kelly) that the House suspend the rules
and pass the bill, H.R. 3170.
The question was taken; and (two-thirds having voted in favor
thereof) the rules were suspended and the bill was passed.
A motion to reconsider was laid on the table.
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