[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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