[Congressional Record Volume 159, Number 68 (Wednesday, May 15, 2013)]
[House]
[Pages H2627-H2629]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
RULEMAKING DEADLINE EXEMPTING CERTAIN SECURITIES
Mr. McHENRY. Madam Speaker, I move to suspend the rules and pass the
bill (H.R. 701) to amend a provision of the Securities Act of 1933
directing the Securities and Exchange Commission to add a particular
class of securities to those exempted under such Act to provide a
deadline for such action, as amended.
The Clerk read the title of the bill.
The text of the bill is as follows:
H.R. 701
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. RULEMAKING DEADLINE FOR EXEMPTING CERTAIN
SECURITIES.
Section 3(b)(2) of the Securities Act of 1933 (15 U.S.C.
77c(b)(2)) is amended in the matter preceding subparagraph
(A) by striking ``The Commission'' and inserting ``Not later
than October 31, 2013, the Commission''.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
North Carolina (Mr. McHenry) and the gentlewoman from California (Ms.
Waters) each will control 20 minutes.
The Chair recognizes the gentleman from North Carolina.
General Leave
Mr. McHENRY. Madam Speaker, I ask unanimous consent that all Members
have 5 legislative days within which to revise and extend their remarks
and to submit extraneous materials for the Record on H.R. 701, as
amended, currently under consideration.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from North Carolina?
There was no objection.
Mr. McHENRY. Madam Speaker, I yield myself such time as I may
consume.
My colleagues, this is a bipartisan, straightforward bill, and it had
unanimous support within the Financial Services Committee.
This bill codifies an intended deadline within the JOBS Act. This
legislation simply puts a reasonable date for the deadline for an
improved Regulation A, which came out of a bipartisan bill before the
House of Representatives just over a year ago and then the JOBS Act the
President signed more than a year ago. The deadline is very achievable,
setting an October 31 deadline for the SEC to write regulations. It is
nearly 19 months after the JOBS Act was signed into law, and it is, in
fact, 5 months before the due date of the SEC's recurring review of a
renewed Regulation A.
Regulation A is a very interesting provision within securities
regulation. It is a sensible and philosophically sound exemption that
should help millions of small- and moderate-sized businesses, but it's
actually unused by all small businesses. The JOBS Act language includes
raising the cap on Regulation A securities offerings from $5 million to
$50 million, which is existent in the law; but the act also requires
that we have meaningful regulatory improvements to Regulation A so it
can, in fact, be utilized by small businesses as it was intended.
Stakeholders and academics have testified that Regulation A should be
a covered security or that the SEC should radically simplify Reg A's
registration and qualifications if small businesses are to ever use and
utilize this well-intentioned exemption again. For proof of whether
State exemption matters, merely look at the dominance of rule 506, even
for issuances of $1 million, compared to those other exemptions; and
let's just face it--the numbers speak for themselves.
Additionally, other areas of critical consideration include quiet
periods, testing-the-waters activities, comment period turnaround, and
even the number of Securities and Exchange Commission staff dedicated
to small business exemptions. We've made that very clear to the
Securities and Exchange Commission the concerns we have on those
issues. The SEC must conduct a holistic review of Federal and State
regulations on these matters to learn which have impeded entrepreneurs
from accessing external capital, which is really the intention of
Regulation A.
If you look back at a GAO report, it asserted that, from 1997 to
2011, the number of Regulation A filings decreased from 116 annually to
19, and that's only the number of filings. To go to the next step of an
offering, it's even further reduced. It reduced from 57 in 1998 to just
one offering, under this important regulation, in 2011. Now, that's
very disturbing. The same GAO report maintains that the SEC has never
evaluated the abandonment of Regulation A, an exemption solely created
to capitalize small- and moderate-sized businesses and to empower
everyday investors. That's absurd. It's high time the SEC gets around
to this and gets it done. That's what this bill is all about.
The Small Business Administration asserts that there are more than 5
million small businesses in the U.S. with fewer than 20 employees,
representing 20 percent of our national employment, and that firms with
fewer than 100 employees employ more than 36 percent of our national
employment. These millions of small businesses do not utilize Reg. A or
other exemptions actually intended for them. There are bad consequences
for this because they are not able to get the capital they need to grow
and prosper and to perhaps go from being small businesses to big
businesses or from small businesses to more successful small
businesses. They are the ones that are at a loss, and at a time of high
unemployment we need to make sure that we are able to get those
capital-starved businesses access to the moneys they need to grow and
to prosper in these tough economic times.
This is a bipartisan bill that has garnered the support of my
colleagues from across the aisle, Ms. Eshoo and Mr. Scott, as well as
the support of my colleagues on this side of the aisle, Mr. Schweikert
and Mr. Garrett, who have long been proponents of these reforms and
necessary changes.
With that, I reserve the balance of my time.
Chamber of Commerce
of the United States of America,
Washington, DC, May 13, 2013.
To the Members of the U.S. House of Representatives: The
U.S. Chamber of Commerce, the world's largest business
federation representing the interests of more than three
million businesses and organizations of all sizes, sectors,
and regions, as well as state and local chambers and industry
associations, and dedicated to promoting, protecting and
defending America's free enterprise system, strongly supports
H.R. 701, which would amend a provision of the Securities Act
of 1933 to help ensure the success of the JOBS Act, which
became law last year.
H.R. 701 is a bi-partisan bill which would place a deadline
of October 31, 2013, for the Securities and Exchange
Commission to complete the changes to Regulation A as
required under the Jumpstart Our Business Startups Act
(``JOBS Act''). The bi-partisan JOBS Act mandates the
modernization of certain regulations critical to the capital
formation of emerging growth companies. The Chamber is
concerned that the pace of regulatory implementation is too
slow, and H.R. 701 would help ensure the timely
implementation of this legislation important to new
businesses.
The Chamber believes H.R. 701 would help speed the
implementation of the JOBS Act, thereby assisting the capital
formation needed for robust economic growth and job creation.
The Chamber strongly supports H.R. 701.
Sincerely,
R. Bruce Josten,
Executive Vice President,
Government Affairs.
____
NASDAQ OMX,
Washington, DC, May 7, 2013.
Hon. Jeb Hensarling,
Chairman, House Committee on Financial Services, Rayburn
House Office Building, Washington, DC.
Dear Chairman Hensarling: Rep. Patrick McHenry has proposed
legislation, H.R. 701, which seeks to impose a deadline on
the Securities and Exchange Commission (SEC) for completion
of an important section of the JOBS Act signed into law on
April 5, 2012. Specifically, the legislation requires the SEC
to issue its rules with respect to Regulation A by October
31st of this year.
NASDAQ OMX supports this legislation's goal to induce
timely action on a key feature of the JOBS Act. As rules are
finalized, small businesses should have the regulatory
certainty necessary to make critical capital funding
decisions that can allow them to grow and create jobs--the
purpose behind the JOBS Act and NASDAQ OMX's support of that
legislation.
[[Page H2628]]
Please let me know if I can be of further service to the
Committee.
Thank you,
Terry G. Campbell,
Vice President,
Global Government Relations.
____
Biotechnology
Industry Organization,
Washington, DC, May 13, 2013.
Dear Member of Congress: On behalf of the Biotechnology
Industry Organization (BIO) and its more than 1,100 members,
I am writing in strong support of H.R. 701, sponsored by Rep.
Patrick McHenry. I urge swift consideration and passage of
this important legislation by the House of Representatives.
H.R. 701 will speed the implementation of a key provision
in the Jumpstart Our Business Startups (JOBS) Act, which
passed both houses of Congress last year with broad,
bipartisan majorities. Title IV of the JOBS Act directed the
SEC to make revisions to Regulation A that will increase
access to capital for growing companies, including biotech
innovators.
Before the JOBS Act was enacted, Regulation A allowed
companies to conduct direct public offerings of up to $5
million; the JOBS Act increased the offering limit to $50
million. Once this change is implemented, Regulation A will
spur fundraising for emerging biotech companies, for which a
$50 million capital influx could support groundbreaking
research and stimulate job creation.
H.R. 701 will give the SEC a deadline to complete
rulemaking on Regulation A. The current delay at the SEC has
blunted the potential capital formation impact of the JOBS
Act at a time when research-intensive small businesses are in
dire need of funding for their innovative R&D. Changing the
eligibility threshold for Regulation A offerings will provide
a new source of private capital to finance the search for
cures and breakthrough medicines.
BIO supports expeditious implementation of the JOBS Act. On
behalf of BIO's membership, I urge you to support H.R. 701
when it is considered by the House of Representatives.
With Sincerest Regards,
James C. Greenwood,
President and CEO.
____
CONNECT,
May 15, 2013.
Hon. Patrick McHenry
U.S. Capitol,
Washington, DC.
Hon. David Scott
Dear Representatives McHenry and Scott: As a leading voice
for tech start-ups and emerging companies, CONNECT
enthusiastically endorses your efforts to pass H.R. 701. This
straightforward legislation, to set an October 31 deadline
for the SEC to promulgate rules to implement the JOBS Act
increase for Regulation A offerings, is specifically targeted
to increase the flow of capital to start-up and emerging
companies which represent the best job-creating engine to
spur America's economic recovery.
CONNECT was birthed out of the University of California--
San Diego over twenty-five years ago with the mission to
propel creative ideas and emerging technologies to the
marketplace by training entrepreneurs and connecting them to
the comprehensive resources they need to sustain viability
and business vibrancy. Since 1985, CONNECT has assisted in
the formation and development of over 3,000 companies and is
recognized as one of the world's most successful regional
innovation development programs. CONNECT is the recipient of
the 2010 ``Innovation in Regional Innovation Clusters'' award
presented by the U.S. Department of Commerce.
As you are well aware, one of the barriers to start-up
company growth is access to capital. Although the Reg A
offerings are supposed to help emerging companies get access
capital, the cost of compliance with regulatory burdens made
the $5 million cap unworkable. Congress was absolutely right
to pass the JOBS Act requiring the SEC to promulgate rules to
raise the cap to $50 million. Doing so will open new pathways
by which startups and emerging companies, including those
stuck in the proverbial ``valley of death,'' can access
capital, allowing them to grow and create new jobs. But more
than a year after this bipartisan triumph for innovators, the
SEC hasn't even published Reg A rules. H.R. 701 will fix this
and is urgently needed.
There is much talk in Washington about helping start-ups,
but your bill takes tangible action toward achieving that
goal and ensuring the promise of the JOBS Act is realized. We
commend you for finding a bi-partisan solution that will have
real-world benefits for America's entrepreneurs and
innovators. CONNECT stands ready to assist you as the bill
advances in the House and strongly encourages Majority Leader
Reid to promptly place the bill on the Senate floor calendar.
Sincerely,
Timothy Tardibono, M.A., J.D.,
Vice President of Public Policy.
____
Ms. WATERS. Madam Speaker, I yield myself such time as I may consume.
As you know, the Jumpstart Our Business Startups Act, or the JOBS Act
as it is commonly known, was signed into law about 1 year ago. This
bill received the support of both Democrats and Republicans on the
Financial Services Committee.
Some of us, including me, have some concerns about this legislation.
We are basically taking a chance that investors will not be harmed, but
we're taking a chance because we are so anxious to create jobs, and
this legislation is possibly yet another approach to creating jobs.
{time} 1250
This is not the American Jobs Act, but this is a jobs act. And I
believe that my colleague on the opposite side of the aisle, Mr.
McHenry, really believes that this is going to create jobs. So we're
going to take a chance that this will create jobs.
Regulation A currently allows certain companies to raise up to $5
million a year through a streamlined, less costly registration process,
providing smaller companies with much-needed capital without overly
burdening them with registration requirements. In the JOBS Act, we
raise that level to $50 million, thus providing small companies with a
greater ability to develop new products and create much-needed jobs for
their local economies.
The JOBS Act did not set a deadline under which the Commission needed
to complete this rulemaking. Given the tremendous workload the
Commission is managing--including setting up new offices under the Wall
Street Reform Act, regulating new markets such as the over-the-counter
derivatives market, and completing various other rulemakings under the
JOBS Act--it is understandable that the SEC has not yet completed the
Regulation A update. H.R. 701 would basically require that the SEC
complete the Regulation A rulemaking by October 31 of this year.
While I am reluctant to impose accelerated rulemaking timetables on
the Commission, given the resource constraints they face, I will
support this bill and my colleagues are supporting this bill,
particularly since we understand that the SEC has indicated that they
will finish the rulemaking before October 31 anyway, even without this
legislation.
Finally, I would ask that my colleagues support adequate funding for
the Commission so that they have the staff resources to carry out this
and other outstanding rulemakings under both the Wall Street Reform Act
and the JOBS Act. This is very important.
The SEC has a great responsibility carrying out the rulemaking for
all that we have placed on them. As I know that they like to do this
rulemaking in a timely fashion, we must recognize that they don't have
all the resources they need. So I hope that as we're taking a chance
with our colleagues on the opposite side of the aisle, hoping that this
bill is going to produce the kinds of jobs that have been indicated, we
want our friends on the opposite side of the aisle to reciprocate with
support for the SEC and the funding that they need.
With that, Madam Speaker, I reserve the balance of my time.
Mr. McHENRY. A 418 percent increase since the late nineties with the
Securities and Exchange Commission in terms of funding, I think, is
adequate; but I certainly appreciate my colleague's concerns.
We passed this provision in the fall of 2011 in this House with a
floor vote of 421-1. This enhances this provision and provides for a
deadline that is 19 months after the original act was signed. I think
that's more than generous and sufficient.
With that, I would like to yield 2\1/2\ minutes to my colleague from
Florida (Mr. Ross), who is a quite vocal proponent of getting capital
to small business.
Mr. ROSS. Madam Speaker, as my colleague mentioned earlier, the JOBS
Act passed into law with broad bipartisan support.
It hasn't been easy for Republicans and Democrats to agree on a lot
of things; but when it came to directing the SEC to get out of the way
and allow small public companies to raise capital and create jobs in
America, we agreed.
Over a year later, we're still waiting for the SEC to implement
several portions of a bill that should have been noncontroversial. This
isn't the first instance. In title II of this act, the SEC failed in a
time certain to follow the will of Congress and promulgate rules.
That's why we're here today.
[[Page H2629]]
Now, it's unclear when the SEC is going to promulgate the rules under
title IV, which will allow faster capital formation for smaller public
companies. But like the job creators and the unemployed in my district,
I'm tired of waiting. We're down here today urging Members to support
legislation to require the SEC to do their job and implement the rules
under this title by the end of October.
It's disheartening that we have to waste taxpayer dollars to do this,
but I urge Members to vote in favor of H.R. 701. Madam Speaker, it's
time for the SEC and all the regulators to stop stalling and stop
ignoring the will and direction of Congress. It's time for regulators
to do their jobs so Americans can go back to work and do their jobs,
and it's time that Congress hold all regulators accountable.
Thank you, Mr. Chairman, for this bill.
Ms. WATERS. Mr. Speaker, I ask unanimous consent that the gentleman
from Texas (Mr. Al Green) control the time for the remainder of the
debate.
The SPEAKER pro tempore (Mr. Pittenger). Is there objection to the
request of the gentlewoman from California?
There was no objection.
Mr. AL GREEN of Texas. Mr. Speaker, I continue to reserve the balance
of my time.
Mr. McHENRY. We're prepared to close.
Mr. AL GREEN of Texas. I will await your closing.
Mr. McHENRY. If the gentleman yields back his time, I will then
close. As the majority party, we have the right to close.
Mr. AL GREEN of Texas. I yield back the balance of my time.
Mr. McHENRY. Mr. Speaker, I would like to just simply close by saying
that we should help small businesses.
When we have congressional Members acknowledging pop culture, as I
did in committee, there is always a debate about that. But as Beyonce
once said, ``If you like it, you should have put a ring on it.''
Likewise, we should put a deadline on it. That's what this bill is all
about.
As I close, I will not quote Jay-Z, but I will say we should help
small businesses. And I ask my colleagues for their support as I yield
back the balance of my time.
Mr. DINGELL. Mr. Speaker, I rise in opposition to H.R. 701. While I
applaud the bipartisan efforts of my colleagues to help small
businesses grow and create jobs, the sting of the effects of financial
deregulation is still too strong to allow me to support this bill.
I voted against similar legislation in the 112th Congress because I
think raising the Securities and Exchange Commission (SEC) Regulation A
threshold is a bad idea. I note that Congress has raised this threshold
five times already. In each of those instances, though, Congress
approved a modest increase that was relative to the rate of inflation
and the purchasing power of the dollar. H.R. 701 would mandate an
unprecedented tenfold increase in the current threshold of $5 million
to $50 million. Such an increase strikes me as grotesquely large,
especially since inflation has risen only 165 percent since 1980.
H.R. 701 will force the SEC--without additional appropriations--to do
something that constitutes a tremendous incitement to perpetrate fraud
on investors. I cannot in good conscience support this bill and urge my
colleagues to vote it down.
The SPEAKER pro tempore. The question is on the motion offered by the
gentleman from North Carolina (Mr. McHenry) that the House suspend the
rules and pass the bill, H.R. 701, 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. AL GREEN of Texas. 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 motion will be postponed.
____________________