[Congressional Record Volume 151, Number 38 (Wednesday, April 6, 2005)]
[House]
[Pages H1790-H1791]
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. 436) 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. 436

       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 percent 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 gentleman from Georgia (Mr. Scott) each 
will control 20 minutes.
  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 the bill under consideration.
  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 the Congress 
must ensure that they have every opportunity to succeed. It is crucial 
that small businesses have sufficient 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

[[Page H1791]]

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, this 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, and not worrying about their access 
to capital.
  As BDCs are able to provide financing to additional small and medium-
sized businesses, the economy will experience greater growth and much 
more 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.

                              {time}  1245

  This is a no-cost commonsense piece of legislation that will help 
small businesses and increase capital formation. That is a 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.
  Mr. SCOTT of Georgia. Mr. Speaker, I yield myself such time as I may 
consume.
  Mr. Speaker, I rise in support of H.R. 436, the Increased Capital 
Access For Growing Businesses Act. I want to commend the gentlewoman 
from New York (Ms. Velazquez) and the gentlewoman from New York (Mrs. 
Kelly) for bringing this matter to the committee's attention, as well 
as the gentleman from Ohio (Mr. Oxley) and the gentleman from 
Massachusetts (Mr. Frank) for their support in expediting the 
consideration of this measure. With this legislation, we have an 
excellent opportunity to help more small businesses access capital so 
that they can expand and grow their businesses.
  Business development companies, or BDCs, are unique investment 
companies authorized by the 1980 amendments to the Investment Company 
Act. They are publicly traded companies that invest primarily in 
smaller companies. Since 1980, BDCs have proven to be a valuable and 
effective source of funding for small companies, allowing growing 
companies access to both capital and managerial expertise.
  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, neither Congress nor the SEC acted to keep the BDC statute 
current. As a result, the number of public companies in which BDCs 
could invest has been reduced drastically, effectively eliminating the 
option of BDC investment for many small public 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. Many small companies that went public in the 
late 1990s, for instance, found themselves unable to access the public 
markets for additional capital after the market bubble burst. These 
smaller, illiquid company stocks could benefit greatly from financing 
offered by BDCs. Instead, an out-of-date regulatory structure 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 creates a more 
workable standard to enable BDCs to provide financing to companies as 
originally intended by the 1980 amendments. The legislation provides an 
objective standard, based on a market capitalization test, to modernize 
the definition of eligible portfolio companies.
  H.R. 3170 modernizes United States security 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 entire United States economy. Mr. Speaker, I urge 
support of H.R. 436.
  Mr. OXLEY. Mr. Speaker, I rise in support of H.R. 436, the Increased 
Capital Access for Growing Business Act. This bill creates an improved 
regulatory environment for small business, the undisputed engine of our 
economy.
  A quarter of a century ago, Congress created business development 
companies to encourage investments in small businesses. Unrelated rules 
promulgated by regulators since that time have had the unintended 
consequence of limiting the investment opportunities of business 
development companies.
  This bill will restore the true intent of Congress by modernizing the 
securities laws governing these companies. Small businesses will once 
again have the important capital access provided by business 
development companies. This is crucial as small businesses must have 
efficient access to capital to create jobs and promote economic growth.
  I would like to commend my good friend and subcommittee chair, Mrs. 
Kelly of New York, for her fine work in crafting this bill. I urge my 
colleagues to join me in support of this important bipartisan 
legislation for investors and small businesses.
  Mr. SCOTT of Georgia. Mr. Speaker, I yield back the balance of my 
time.
  Mrs. KELLY. Mr. Speaker, I thank my collegue, the gentleman from 
Georgia (Mr. Scott) for his kind words about this bill.
  Mr. Speaker, I have no further requests for time, and I yield back 
the balance of my time.
  The SPEAKER pro tempore (Mr. Boozman). 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. 436.
  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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