[Congressional Record Volume 157, Number 166 (Wednesday, November 2, 2011)]
[House]
[Pages H7226-H7229]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
{time} 1250
INCREASING SHAREHOLDER THRESHOLD FOR SEC REGISTRATION
Mr. SCHWEIKERT. Mr. Speaker, I move to suspend the rules and pass the
bill (H.R. 1965) to amend the securities laws to establish certain
thresholds for shareholder registration, and for other purposes, as
amended.
The Clerk read the title of the bill.
The text of the bill is as follows:
H.R. 1965
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHAREHOLDER REGISTRATION THRESHOLD.
(a) Amendments to Section 12 of the Securities Exchange Act
of 1934.--Section 12(g) of the Securities Exchange Act of
1934 (15 U.S.C. 78l (g)) is amended--
(1) in paragraph (1)--
(A) by striking ``$1,000,000'' both places it appears and
inserting ``$10,000,000'';
(B) in subparagraph (A), by striking ``; and'' and
inserting a semicolon;
(C) in subparagraph (B), by striking the comma at the end
and inserting ``; and''; and
(D) by inserting after subparagraph (B) the following:
``(C) in the case of an issuer that is a bank, as such term
is defined in section 3(a)(6) of this title, or a bank
holding company, as such term is defined in section 2 of the
Bank Holding Company Act of 1956 (12 U.S.C. 1841), not later
than 120 days after the last day of its first fiscal year
ended after the effective date of this subsection, on which
the issuer has total assets exceeding $10,000,000 and a class
of equity security (other than an exempted security) held of
record by 2,000 or more persons,''; and
(2) in paragraph (4), by striking ``three hundred'' and
inserting ``300 persons, or, in the case of a bank, as such
term is defined in section 3(a)(6), or a bank holding
company, as such term is defined in section (2) of the Bank
Holding Company Act of 1956 (12 U.S.C. 1841), 1,200''.
[[Page H7227]]
(b) Amendments to Section 15 of the Securities Exchange Act
of 1934.--Section 15(d) of the Securities Exchange Act of
1934 (15 U.S.C. 78o(d)) is amended, in the third sentence, by
striking ``three hundred'' and inserting ``300 persons, or,
in the case of bank, as such term is defined in section
3(a)(6), or a bank holding company, as such term is defined
in section (2) of the Bank Holding Company Act of 1956 (12
U.S.C. 1841), 1,200''.
SEC. 2. STUDY AND REPORT ON REGISTRATION THRESHOLDS.
(a) Study.--
(1) Analysis required.--The Chief Economist and Director of
the Division of Corporation Finance of the Commission shall
jointly conduct a study, including a cost-benefit analysis,
of shareholder registration thresholds.
(2) Costs and benefits.--The cost-benefit analysis under
paragraph (1) shall take into account--
(A) the incremental costs and benefits to investors of the
increased disclosure that results from registration;
(B) the incremental costs and benefits to issuers
associated with registration and reporting requirements; and
(C) the incremental administrative costs to the Commission
associated with different thresholds.
(3) Thresholds.--The cost-benefit analysis under paragraph
(1) shall evaluate whether it is advisable to--
(A) increase the asset threshold;
(B) index the asset threshold to a measure of inflation;
(C) increase the shareholder threshold;
(D) change the shareholder threshold to be based on the
number of beneficial owners; and
(E) create new thresholds based on other criteria.
(b) Report.--Not later than 2 years after the date of
enactment of this Act, the Chief Economist and the Director
of the Division of Corporation Finance of the Commission
shall jointly submit to the Committee on Banking, Housing,
and Urban Affairs of the Senate and the Committee on
Financial Services of the House of Representatives a report
that includes--
(1) the findings of the study required under subsection
(a); and
(2) recommendations for statutory changes to improve the
shareholder registration thresholds.
SEC. 3. RULEMAKING.
Not later than one year after the date of enactment of this
Act, the Commission shall issue final regulations to
implement this Act and the amendments made by this Act.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
Arizona (Mr. Schweikert) and the gentleman from Connecticut (Mr. Himes)
each will control 20 minutes.
The Chair recognizes the gentleman from Arizona.
General Leave
Mr. SCHWEIKERT. Mr. Speaker, I ask unanimous consent that all Members
may have 5 legislative days in which to revise and extend their remarks
and to add extraneous material on this bill.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Arizona?
There was no objection.
Mr. SCHWEIKERT. I reserve the balance of my time.
Mr. HIMES. Mr. Speaker, I yield myself such time as I may consume.
If we've learned one thing in the last 5 years, it is that the body
of financial regulation which keeps us, as a people, safe must not be
static, must not be dead, but, rather, a living thing that evolves and
changes, not just to make sure that innovations and new products and
new businesses don't get us into the kinds of troubles that we've
experienced in the last 5 years, but also to make sure that the
financial services industry remains entrepreneurial, that people who
want to start small banks, small asset managers, small businesses of
any kind have an opportunity to get started, to raise capital and to do
well.
The securities laws that were established in 1933 and 1934 need to
evolve and adapt to reflect the conditions in today's market. This is
why I've introduced H.R. 1965. This bill would allow banks and bank
holding companies to remain private to a point at which they believe it
is in their interest to go public, undertake the fairly lengthy and
complicated process of public registration at a moment when it makes
sense for them to go into the public markets.
The original securities laws stipulated that banks would have to
register with the SEC when they had more than 500 shareholders. Our
small banks, our community banks experience difficulties because as
original investors move on or pass on and leave shares to their
beneficiaries, very rapidly banks reach that 500 shareholder number and
are required to undertake the very complicated, up-front processes, but
also the ongoing reporting requirements associated with public
registration.
H.R. 1965 would very simply raise that threshold from 500
shareholders to 2,000 shareholders, again allowing these small banks to
pick the optimal moment at which they go public, to allow them to
continue to raise money in the private markets from private investors
until such point that it makes sense for them to register and go
public.
Now, it might be asked, is this prudent? And the answer to that
question, of course, is that the banks and the bank holding companies
are very heavily regulated by their prudential regulators. From the
moment they are chartered, they are overseen by State and Federal
entities that are designed to keep them from any sort of fraud from
imprudent activities, and so this is an industry that is already
heavily regulated, even for these companies who remain private.
I'd like to note that this bill provides relief to small banks by
recognizing that unique characteristic, that they are regulated, and
that they should continue to have access to the capital sources that
got them started until they choose to go public.
I will note that this bill passed with broad bipartisan support in
both subcommittee and committee, and I'd like to close my statement by
thanking Chairman Bachus and Ranking Member Frank, as well as
subcommittee Chair Garrett and Ranking Member Waters, for their hard
work and cooperation in putting this bill together.
With that, I yield 4 minutes to the minority whip, Mr. Hoyer of
Maryland.
Mr. HOYER. I thank the gentleman for yielding, and I congratulate him
for his leadership on this effort.
I thank my friend, Chairman Bachus, for his facilitating the passage
of this legislation.
Community banks, Mr. Speaker, are the life blood of our local
economies. They are locally owned and operated. They know their local
businesses and residents intimately, and lend to them, not just because
it's a sound business decision, but also because it benefits the
greater community.
With the credit and lending crisis we have experienced over the past
couple of years, the small banks that operate in our local communities
face numerous challenges just to stay afloat. These are the banks we
need to see lending to small businesses and homeowners, but they are
hamstrung in their attempt to raise capital by outdated SEC
registration requirements. This one is over half a century old.
Under the nearly 50-year-old 500 investor exemption rule, banks have
to register with the SEC if they have more than 500 shareholders. The
gentleman from Connecticut (Mr. Himes), whose bill this is, explained
why that is difficult and why it changes as people who have stock die
and leave their stock to more people and to heirs. Banks that have
exceeded this low threshold must provide extensive and costly financial
disclosure under our Federal securities laws.
Now, over the years, we have upped the threshold in terms of dollars
that the bank assets have, but we have not affected the number of
shareholders. To reverse this registration, they are then forced to
lower their number of shareholders by buying back stock which, all too
often, means losing local shareholders who keep these banks connected
with their local communities.
The rationale behind SEC registration rules generally is to provide
effective and timely disclosure to protect investors, which of course
all of us support. However, as Maryland's Banking Supervisor Mark
Kaufman notes, the current rule adds to banks' cost with little
associated benefits, especially considering that, unlike most private
companies, banks file public disclosure already on a quarterly basis
and do so on a more timely basis than public companies, as the
gentleman from Connecticut pointed out in his remarks.
{time} 1300
The American Bankers Association, the Independent Community Bankers
of America, State groups like the Maryland Bankers Association and
small banks throughout Maryland and the Nation support raising this
threshold to 2,000, which is what this bipartisan legislation would do.
This will lift a significant regulatory burden on
[[Page H7228]]
our community banks without any offsetting price in regulatory
oversight and make it easier for them to raise capital so they can
continue to lend and support job growth in our communities.
I strongly urge my colleagues on both sides of the aisle to support
H.R. 1965.
I note that my friend from Arkansas (Mr. Womack) is also on the
floor. I want to thank him for his leadership in this effort as well.
Mr. HIMES. Mr. Speaker, I ask unanimous consent that the gentleman
from Michigan (Mr. Peters) be designated to control the balance of my
time.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Connecticut?
There was no objection.
The SPEAKER pro tempore. Without objection, the gentleman from
Alabama will control the 20 minutes for the majority.
There was no objection.
Mr. BACHUS. Thank you, Mr. Speaker.
At this time I would like to yield 2 minutes to the gentleman from
Arkansas (Mr. Womack), an original cosponsor of the legislation.
Mr. WOMACK. I thank the distinguished chairman for the time this
afternoon, and I'd also like to offer my thanks and appreciation to my
friend from Connecticut for his leadership on the issue. I am indeed an
original cosponsor.
The unemployment rate in our Nation is still in excess of 9 percent.
Millions of Americans are out of work. I just recently came back from
my district where we had a job fair, and of the 300 or 400 jobs that
were allegedly available on that particular day, there were several
times more than that looking. It is a painful reminder to me that job
creation is still critical to our country.
I'm also reminded as to how important it is that this job creation is
linked to access to capital by businesses large and small. The slow
pace of the recovery, the burdens of archaic and oftentimes unnecessary
regulation have fallen disproportionately on small businesses, and
particularly community banks.
As was commented on just a moment ago by the distinguished minority
whip, the community banks are the lifeblood of our communities. They
help a family purchase a home. They allow that mechanic the necessary
capital to open his first shop. They help a chef open her first
restaurant. Small businesses rely on these banks to give them a chance,
a chance to take advantage of the American Dream.
Today, this Chamber has the opportunity to make it easier for
community banks and small businesses to operate by removing a barrier
to raising capital. So today we have the opportunity to pass H.R. 1965,
and I strongly encourage my colleagues to support it. Your support will
result in the fact that community banks will have the flexibility they
need to raise capital without having to comply with onerous SEC
regulations intended for larger banks. They will use this money in my
district, the Third District of Arkansas, to create jobs, and that will
be good for my district, it will be good for our State, and it will be
good for America.
Again, my thanks for the time given to me by leadership and to my
friend from Connecticut, and I strongly encourage support of H.R. 1965.
Mr. PETERS. I reserve the balance of my time.
Mr. BACHUS. Mr. Speaker, at this time I would like to yield 1\1/2\
minutes to the subcommittee chair, Mrs. Capito from West Virginia, to
speak in favor of the bill.
Mrs. CAPITO. I thank the chairman of the committee, for recognizing
me.
I would like to speak in support of the gentleman from Connecticut's
legislation, H.R. 1965, which would amend the securities law to
establish certain thresholds for shareholder registration.
We all recognize that capital is tight for lenders and for
businesses, and this bill, along with several others that were passed
out of the Financial Services Committee, will address the issue of
capital formation and allow institutions much needed resources to
stimulate our economy. More capital equals more jobs, equals more
people back to work, equals a growing economy.
Cost of public companies to register with the SEC can be very, very
burdensome, and this cost is augmented when it's applied to smaller
institutions. They don't have the resources to be able to meet the
demands that larger companies do. So this bill would allow banks and
bank holding companies access to more capital for that very precious
and much needed impetus of job creation.
By raising the threshold from 500 to 2,000, it would permit easier
deregistration, and the expenses that are tied up with registering
would then go to stimulating our economy. More lending, more lending
for a florist, a restaurant. I noticed in Charleston, a long-time
restaurant that had been out of business was reopened under new
ownership just this morning. And that's good news, and that's the kind
of capital that small businesses need to be able to create jobs and
stimulate the economy.
I believe this is a good piece of legislation whose effect on the
economy will far outweigh any risks that it could propose, and I
heartily endorse the gentleman from Connecticut's legislation, H.R.
1965.
Mr. PETERS. Mr. Speaker, I currently do not have additional speakers;
so I reserve the balance of my time.
Mr. BACHUS. I thank the gentleman from Michigan.
At this time I would like to yield 1\1/2\ minutes to the gentleman
from Michigan (Mr. Huizenga).
Mr. HUIZENGA of Michigan. Mr. Speaker, I rise today in support of
H.R. 1965.
We missed that number by one. It should be 1964, because 1964 was the
last time that they actually updated these registration numbers. That
is a very long time. I can tell you, at age 42, it was a number of
years before I was even born the last time that this happened, and it's
high time that it does happen.
I can also tell you, Mr. Speaker, that here with the Republican
Americans' Job Creators Plan, the first thing on that list is: Empower
small businesses and reduce government barriers to job creation.
And I really hope that this bipartisan bill doesn't become part of
that lost 15 over in the Senate. This is a very proactive, bipartisan
step that this body is taking that as it goes over across to that next
Chamber needs to be addressed. We need to do this because we must
modernize; we must update; we must do these things to remain
competitive on a world market.
Mr. Speaker, I appreciate the opportunity and am pleased that I could
rise in support of that bill.
Mr. BACHUS. Mr. Speaker, I yield 5 minutes to the gentleman from
Arizona (Mr. Schweikert).
Mr. SCHWEIKERT. First, I would like to offer a thank you to my
chairman, Mr. Bachus, and also to the sponsor of the bill, my friend
from Connecticut.
H.R. 1965 actually has an opportunity here to actually solve some
things that have been of frustration, and learning some of the story
was fascinating.
In Arizona, many of our community banks are quite new, but across the
country you hear the story of community banks that have been there for
many, many, many years. And we had one come testify and was telling us
the story off to the side that most of its shareholders actually go
back to returning soldiers of World War II, and they've literally had
the same families, the same family members holding these shares for 50,
60 years. It causes one little technical problem: They've literally
been up against their 500 shareholders for all of those years. So their
ability to access new capital has been limited by these rules.
So this is a classic case of, if we want our banking system,
particularly our community banks, our local lenders, to be capitalized,
which they're typically capitalized with local investments, what a
terrific piece of legislation. And it's one of those moments where you
stand here and you look across the aisle and you find yourself smiling,
saying, This is terrific. We're doing something bipartisan. We're doing
something that actually produces capital in our Main Street of our
communities, particularly for those lenders that often fund our local
neighborhood businesses. We're heading in the right direction here.
[[Page H7229]]
{time} 1310
Mr. PETERS. I continue to reserve the balance of my time.
Mr. BACHUS. Mr. Speaker, I yield myself such time as I may consume.
About 2 years ago, the gentleman from Michigan (Mr. Peters) and I
were in Kabul and Kandahar together on a trip.
I remember talking to my Democratic colleague, saying that there must
be things that Republicans and Democrats can work together on to solve.
We were obviously in a country that was torn apart by differences, but
we both had something in common--we were concerned about our
constituents; we were concerned about unemployment; and we were
concerned about jobs. I think that's true of every Member in this body.
We know that the path to prosperity is jobs and that, if Americans
are working, if they're earning, they feel better about themselves and
that, if they're losing their jobs, then it's going to be not only a
problem for them and their families but for their communities and for
their country.
I am happy to report--and I think it's fitting that the gentleman
from Michigan would be across the aisle from me managing the time for
the minority--that here we are moving four pieces of legislation today,
tomorrow, and on Friday, legislation which will create jobs and will do
so without government expense. In fact, they'll do so with some
marginal savings to the government but with a great savings to those
businesses.
This morning--and I don't know that it was a coincidence--the job
figures came out. Large corporations lost 1,000 employees last month,
but our middle-sized and small businesses created 108,000 jobs. Now,
those aren't enough jobs; those aren't enough jobs for the people
graduating and going into the workforce, but that's where job creation
is coming from in the economy now--from small- and middle-sized
businesses, those with under 500 employees particularly, and from that
midrange of 50 to 500 employees.
This bill that the gentleman from Connecticut (Mr. Himes) has brought
forward has won bipartisan support because it actually will create jobs
in those small community banks and credit unions because it will make
their cost of capital less. In a recent survey, 70 percent of small-
and middle-sized businesses, those with 500 or fewer employees, said if
we had more capital, if we had more funding, we would hire. This is 70
percent. Only 14 percent said they were going to hire. The difference
in that number is that the others weren't sure that they could get
capital. There are two ways that you obtain capital to create jobs. One
is you go and borrow it from a bank, or from an insurance company in
some cases, or from someone else. But there is another way, which is by
someone willing to invest in your company.
As a small boy, I can remember my father had a business, and before
that, he'd invested with another man in a business. I think that one of
the American Dreams is not only owning a house--and that's still an
American Dream to own your own home even in the circumstances we've
been through--but either to have your own business or to be able to
invest in somebody else's business.
The gentleman from Connecticut's legislation will allow that
threshold of people who want to invest in a community-based financial
institution, and it will encourage those community banks to allow more
shareholders, more people, to participate. Yes, they will be
participating in the risk, but they'll also be participating in the
profit, which is really the American system. When you invest, you take
risks, but if things are successful, you profit. That's where the risks
and the profits ought to be taken. They shouldn't be taken by the
taxpayers involuntarily, and they shouldn't be taken by the government.
The government shouldn't take the taxpayers' money and invest in
business. It is those taxpayers--our constituents, our citizens--who
ought to make the decisions on what companies they want to invest in.
We all know community banks are struggling today. It will allow them to
attract investors, people who say, ``I want to invest in your bank.''
They may be people who do business with the banks, and will probably be
people who live in the community.
This bill will be the first of four bills that we bring forward, and
they are going to be successful. They're going to move from the House
to the Senate, I'll predict this week, because, as the minority whip,
the gentleman from Maryland, said, there is agreement that this is the
right thing to do and that we do have an obligation not only to oppose
some things but to also be for positive legislation. The House this
week will be for something. It will be for job creation. It will be for
allowing people to invest. It will be enabling companies to attract
that capital and hire people. So we can feel very good about ourselves
this week, and it can start with this bill.
This is not a minor piece of legislation, but it's on suspension
because it enjoys widespread support, as does the bill tomorrow. As for
the two in the following days, we've worked out the differences. The
gentleman from Colorado (Mr. Perlmutter) had a concern about a bill
later this week. He felt like it didn't have enough investor
protection. We've addressed that concern and have added his suggestion
to the bill.
All four of these bills that will move this week are bipartisan
bills. They're not Republican bills, they're not Democratic bills.
They're bipartisan bills. I commend the minority whip for speaking out
for these bills--I think that bodes well--and I hope the Senate was
listening. I also appreciate the gentleman from Connecticut for a bill
that really is long overdue. It will immediately allow our community
banks to invest and not be dependent on the government for help.
With that, I yield back the balance of my time.
Mr. PETERS. Mr. Speaker, I just want to join in and thank the
gentleman from Connecticut for bringing this very commonsense piece of
legislation before us. It is essential to bringing capital into our
local communities and creating jobs, as Chairman Bachus mentioned. I
also want to thank Chairman Bachus for his leadership on this issue.
I remember very fondly our trip to Afghanistan. It is nice that we
have found common ground and that we are working today in a bipartisan
fashion to make sure that our communities are strong and are vibrant
and have the tools necessary to create additional jobs.
So, with that, I would certainly encourage my colleagues to support
this important piece of legislation, and I yield back the balance of my
time.
The SPEAKER pro tempore. The question is on the motion offered by the
gentleman from Arizona (Mr. Schweikert) that the House suspend the
rules and pass the bill, H.R. 1965, as amended.
The question was taken.
The SPEAKER pro tempore. In the opinion of the Chair, two-thirds
being in the affirmative, the ayes have it.
Mr. BACHUS. Mr. Speaker, on that I demand the yeas and nays.
The yeas and nays were ordered.
The SPEAKER pro tempore. Pursuant to clause 8 of rule XX, further
proceedings on this question will be postponed.
____________________