[Congressional Record Volume 158, Number 48 (Thursday, March 22, 2012)]
[Senate]
[Pages S1995-S1996]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                             THE INVEST ACT

  Mr. FRANKEN. Madam President, I would like to discuss the votes that 
we have taken over the last few days. Tuesday, along with 54 of my 
colleagues, I voted in support of the INVEST In America Act as a 
substitute for H.R. 3606. In fact, I was an original cosponsor of the 
INVEST In America Act because it strikes the right balance between 
promoting entrepreneurship and protecting investors.
  But before I go into a long explanation, I would like to begin with a 
story. Bemidji is a town of about 14,000 people in northern Minnesota 
and might not be the first place you would think of as being a hotbed 
for start-up investment. But you would be wrong. Three entrepreneurs 
there, Tina, Bud and Tim, harnessed the power of the Internet and the 
crowd-sourcing website Kickstarter to raise over $17,000. With that 
money, they are opening a micro-brewery--the Bemidji Brewing Company.
  Two hundred and fifty individuals contributed to their efforts--about 
half of them were friends and family, and half of them were strangers. 
Many contributors gave $20--and in return, Bemidji Brewing is sending 
them a bottle opener and decal, and will carve their name into the 
walls of the future brewery. Bemidji Brewing hopes to have batches out 
to local establishments this summer.
  This is an amazing story. And there are thousands of others just like 
it. I support efforts to promote these types of crowd-sourced 
endeavors. But we don't need H.R. 3606 to produce more success stories 
like Bemidji Brewing. Instead, we need a balanced approach--one that 
limits investor risk and keeps our markets transparent and stable. When 
the public has the opportunity to contribute to start-up businesses, 
they should be aware of the risks--what are they getting in return for 
their money? Investing in securities comes with risks, but those risks 
are balanced with SEC requirements to provide full information and 
investor disclosure.
  H.R. 3606 just has too many problems. H.R. 3606 opens the door for 
large companies to more easily cook their books. It lets companies with 
tens of thousands of shareholders evade SEC oversight. It eliminates 
provisions to prevent conflicts of interest in company research that 
contributed to the dot com bubble. There are so many downsides and 
dangers to H.R. 3606 that it will destroy more jobs than it creates.
  The INVEST In America Act, however, promotes the same ideas contained 
in H.R. 3606--providing for investment opportunities for small business 
start-ups, easing the regulatory burden for emerging companies--but 
does so in a way that protects investors and our markets.
  Don't take it from me--take it from securities law experts. I have 
heard from Richard Painter, a professor of corporate law at the 
University of Minnesota, a former Associate Counsel to President George 
W. Bush, and Chief White House Ethics Lawyer from 2005 to 2007. Here is 
what he said about this debate:

       I strongly support these amendments to the JOBS Act. 
     Reckless and fraudulent conduct in connection with the offer 
     and sale of securities is a large part of what got us into 
     our present economic difficulties. Lowering the bar for the 
     offer and sale of risky securities to the public is no way to 
     get us out. If Congress changes the securities laws at all in 
     this Act, these amendments should be included.


[[Page S1996]]


  The current Chairman of the SEC, Mary Schapiro, has said that one 
component of H.R. 3606 is ``so broad that it would eliminate important 
protections for investors in even very large companies.'' Former SEC 
Chairman Arthur Levitt went much further, calling H.R. 3606 ``a 
disgrace'' and the ``most investor-unfriendly bill that I have 
experienced in the past two decades.'' Lynn Turner, former Chief 
Accountant at the SEC said, ``It won't create jobs, but it will 
simplify fraud.''
  And this is what Mike Rothman, the Commissioner of Minnesota's 
Department of Commerce, had to say:

       Too many Minnesotans have suffered too long from 
     unemployment. With nearly 170,000 Minnesotans out of work, 
     our State's highest priorities are supporting economic and 
     business growth and creating jobs. The Jobs bill passed 
     recently by the U.S. House of Representatives strives to 
     achieve much-needed job growth, but contains unwarranted 
     reduction in significant investor protections.
       The Minnesota Department of Commerce works to prevent 
     securities fraud. Last year, the Commerce Department 
     registered over 7,000 new licenses to broker dealers, agents, 
     and investment advisers and has over 125,000 individuals and 
     entities currently licensed. Through our State registration 
     process, we work to ensure that those selling securities and 
     advising consumers about securities are both knowledgeable 
     and capable. This essential level of oversight helps ensure 
     basic protection of Minnesota investors and consumers.
       The House version of the Jobs bill threatens to unravel 
     what years of experience teaches us is required to protect 
     investors by curtailing state oversight and, in the interest 
     of protecting our State's capital market, I urge you to 
     support the substitute amendment. Working together, we can 
     make every reasonable effort to create jobs while 
     safeguarding the need for basic and essential measures of 
     consumer protection.

  That is from Minnesota's Department of Commerce, the primary watchdog 
for securities in the state of Minnesota.
  Minnesota's AARP State President, Dr. Lowery Johnson, summarized the 
issues this way:

       Older Americans who have saved their entire lives by 
     accumulating savings and investments are disproportionately 
     represented among the victims of investment fraud. This 
     legislation before the Senate undermines vital investor 
     protections and threatens market integrity. Older Minnesotans 
     deserve safeguards that ensure proper oversight and investor 
     protection.
       We must not repeat the kind of penny stock and other frauds 
     that ensnared vulnerable investors in the past. The absence 
     of adequate regulation in the past has undermined the 
     integrity of the markets and damaged investor confidence 
     while having no positive impact on job creation. Please 
     preserve essential regulations that protect older investors 
     from fraud and abuse, promote the transparency, and ensure a 
     fair and efficient marketplace. We believe the amendment to 
     be offered by Senators Reed, Landrieu and Levin moves closer 
     to achieving this balance and deserves your support.

  I have also heard from other consumer groups from around the country. 
The Consumer Federation of America supports the INVEST In America Act, 
and cautions against H.R. 3606, noting that it would ``undermine market 
transparency, roll back important investor protections, and, if 
investors behave rationally, drive up the cost of capital for the small 
companies it purports to benefit.''
  All of these voices--from Minnesota and across the country--shaped my 
position on these bills. That is why I supported the INVEST In America 
Act. That is why 55 Senators voted in favor of it. The INVEST In 
America Act also included reauthorization of the Export-Import Bank, 
which has supported almost $1.2 billion in export sales in Minnesota 
over the last 5 years, and well over half of those exporters are small 
businesses. That is a lot of jobs in Minnesota.
  We have made some improvements to this bill. The amendment passed in 
the Senate is better than the language in the House bill. But it still 
leaves too many opportunities for harm. Here is the bottom line: I 
strongly support entrepreneurs, I support innovation, and I support job 
creation. The INVEST In America Act struck the right balance between 
promoting jobs and entrepreneurship while preserving the integrity that 
our markets have historically enjoyed.
  American public companies have benefited from the lowest cost of 
capital in the world, and this is because of the low risks associated 
with investing in transparent, well-regulated markets. America is a 
great place to invest because the entire world has confidence in our 
markets. If H.R. 3606 increases fraud, or even just investment losses, 
this bill runs the risk of backfiring completely--decreasing investor 
confidence and ultimately increasing the cost of doing business. And 
this will ultimately destroy jobs, not create them.
  In the end, I couldn't support H.R. 3606 for all those reasons. It is 
a bill that is going to enable fraud, a bill that turns our securities 
market into a lottery game, and a bill that will lead to many 
Minnesotans, especially seniors, losing their hard-earned savings and 
investments.

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