[Congressional Record Volume 160, Number 145 (Tuesday, December 2, 2014)]
[House]
[Pages H8258-H8260]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
DISCLOSURE MODERNIZATION AND SIMPLIFICATION ACT OF 2014
Mr. GARRETT. Mr. Speaker, I move to suspend the rules and pass the
bill (H.R. 4569) to require the Securities and Exchange Commission to
make certain improvements to form 10-K and regulation S-K, and for
other purposes, as amended.
The Clerk read the title of the bill.
The text of the bill is as follows:
H.R. 4569
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 ``Disclosure Modernization and
Simplification Act of 2014''.
SEC. 2. SUMMARY PAGE FOR FORM 10-K.
Not later than the end of the 180-day period beginning on
the date of the enactment of this Act, the Securities and
Exchange Commission shall issue regulations to permit issuers
to submit a summary page on form 10-K (17 C.F.R. 249.310),
but only if each item on such summary page includes a cross-
reference (by electronic link or otherwise) to the material
contained in form 10-K to which such item relates.
SEC. 3. IMPROVEMENT OF REGULATION S-K.
Not later than the end of the 180-day period beginning on
the date of the enactment of this Act, the Securities and
Exchange Commission shall take all such actions to revise
regulation S-K (17 C.F.R. 229.10 et seq.)--
(1) to further scale or eliminate requirements of
regulation S-K, in order to reduce the burden on emerging
growth companies, accelerated filers, smaller reporting
companies, and other smaller issuers, while still providing
all material information to investors;
(2) to eliminate provisions of regulation S-K, required for
all issuers, that are duplicative, overlapping, outdated, or
unnecessary; and
(3) for which the Commission determines that no further
study under section 4 is necessary to determine the efficacy
of such revisions to regulation S-K.
SEC. 4. STUDY ON MODERNIZATION AND SIMPLIFICATION OF
REGULATION S-K.
(a) Study.--The Securities and Exchange Commission shall
carry out a study of the requirements contained in regulation
S-K (17 C.F.R. 229.10 et seq.). Such study shall--
(1) determine how best to modernize and simplify such
requirements in a manner that reduces the costs and burdens
on issuers while still providing all material information;
(2) emphasize a company by company approach that allows
relevant and material information to be disseminated to
investors without boilerplate language or static requirements
while preserving completeness and comparability of
information across registrants; and
(3) evaluate methods of information delivery and
presentation and explore methods for discouraging repetition
and the disclosure of immaterial information.
(b) Consultation.--In conducting the study required under
subsection (a), the Commission shall consult with the
Investor Advisory Committee and the Advisory Committee on
Small and Emerging Companies.
(c) Report.--Not later than the end of the 360-day period
beginning on the date of enactment of this Act, the
Commission shall issue a report to the Congress containing--
(1) all findings and determinations made in carrying out
the study required under subsection (a);
(2) specific and detailed recommendations on modernizing
and simplifying the requirements in regulation S-K in a
manner that reduces the costs and burdens on companies while
still providing all material information; and
(3) specific and detailed recommendations on ways to
improve the readability and navigability of disclosure
documents and to discourage repetition and the disclosure of
immaterial information.
(d) Rulemaking.--Not later than the end of the 360-day
period beginning on the date that the report is issued to the
Congress under subsection (c), the Commission shall issue a
proposed rule to implement the recommendations of the report
issued under subsection (c).
(e) Rule of Construction.--Revisions made to regulation S-K
by the Commission under section 3 shall not be construed as
satisfying the rulemaking requirements under this section.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from New
Jersey (Mr. Garrett) and the gentlewoman from Wisconsin (Ms. Moore)
each will control 20 minutes.
The Chair recognizes the gentleman from New Jersey.
General Leave
Mr. GARRETT. Mr. Speaker, I ask unanimous consent that all Members be
given 5 legislative days within which to revise and extend their
remarks and include extraneous materials for the Record on H.R. 4569,
as amended, that is currently under consideration
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from New Jersey?
There was no objection.
Mr. GARRETT. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I rise now in support of H.R. 4569, which is the
Disclosure Modernization and Simplification Act of 2014. Having access
to the U.S. capital markets and the broad investor base that comes with
it is vital--literally vital--for U.S. companies to be able to grow
their businesses and create jobs in this country.
Over time, as our securities laws have continued to grow and evolve,
the number of new SEC rules and regulations that have been weighing
down on public companies continue now to multiply, and it is becoming
more and more difficult and costly for small businesses to succeed and
eventually go public.
Many of the disclosure rules that have been added over time are both
duplicative and are no longer needed due to many technological
advancements that we are all familiar with. And yet the SEC has taken
little action to review these unnecessary and outdated regulations and
to make appropriate changes to help U.S. companies and also investors.
So we have H.R. 4569 before us, and it seeks to do what? It removes
some of the outdated and unnecessary red tape and allows for the small
companies and investors to benefit from a more streamlined and
efficient public disclosure regime.
Specifically, the legislation would direct the SEC to simplify the
public company disclosure regime for issuers and investors by
permitting the issuers to submit a summary page of annual reports on
Form 10-Ks with cross references to the contents of the report. It is
that simple.
Because the typical 10-K filed by issuers is hundreds of pages long
and
[[Page H8259]]
written in legalese, investors do find it difficult to locate and to
digest the truly important information about the company in the report.
So permitting issuers to submit a summary page would enable companies
to concisely disclose pertinent information to investors without
exposing them to liability.
This summary page would also enable investors to more easily access
the most relevant information about that company.
This legislation would also direct the SEC to revise Regulation S-K--
``Reg S-K,'' it is called--to better scale disclosure rules for
emerging growth companies and smaller issuers, and to eliminate other
duplicative, outdated, or unnecessary Reg S-K disclosure rules for all
issuers.
In testimony before the Capital Markets Subcommittee, one witness
stated: ``The burdens imposed by existing regulation, primarily Reg S-K
and Reg S-X, effectively deny small companies access to the public
market and make investors less willing to invest.''
He added: ``This bill, H.R. 4569, is very constructive, and the
Commission is likely to be receptive to it. It might well launch a
process that would substantially reduce unneeded impediments to smaller
firms being able to access the public capital markets.''
Additionally, another commenter testified:
Over the course of time, proxies have become voluminous,
some required disclosures have becomes obsolete, and the
delivery of information has changed, though the legal
mandated forms of disclosure have not.
This situation has commonly been referred to as
``disclosure overload'' and it is apparent that investors are
not being given information in a decision-useful manner and,
in some cases, they are simply overwhelmed with non-relevant
information.
Even SEC Chair Mary Jo White has, on several occasions,
stated that a review of our current disclosure system is a
top priority for the Commission this year. So this bill would
help augment the SEC's effort by requiring the Commission to,
first, eliminate wholly unnecessary or outdated disclosure
requirements and to allow issuers to include a summary of
material in the form 10-K.
So this legislation builds on section 108 of the Jumpstart Our
Business Startups bill--you remember that, the JOBS Act--which directed
the SEC to study Reg S-K in order to simplify and modernize disclosure
rules. The SEC completed the study in December of 2013. Unfortunately,
the study proposed few substantive reform measures. Instead, it
recommended further study of Reg S-K disclosure rules.
Let me conclude with this. Given our continued economic difficulties,
I believe we need to stop studying and start taking action. Simplifying
and streamlining disclosure requirements will enable companies to
divert fewer resources to compliance, freeing up additional capital to
create American jobs.
Mr. Speaker, I reserve the balance of my time.
Ms. MOORE. Mr. Speaker, I yield myself such time as I may consume.
I rise in strong support of Mr. Garrett's bill, H.R. 4569, which was
favorably reported from the House Financial Services Committee, and
championed by my friend from New York (Mrs. Maloney).
I would like to associate myself with the long and extended
explanation by Mr. Garrett of New Jersey, and just to say, Mr. Speaker,
that, in short, this bill will make disclosures that public companies
make more streamlined, manageable, and user friendly.
I really appreciate the participation of my good friend,
Representative Maloney, who really worked hard to make sure that this
legislation was balanced and it included language to emphasize that we
needed to reduce burdens on companies, but we need to preserve
investment protection.
So, given the changes that Mrs. Maloney made with the Maloney
amendment, I strongly support the legislation, would urge all my
colleagues to support it, and I yield back the balance of my time.
Mr. GARRETT. Mr. Speaker, I thank the gentlelady for her assistance
in this matter.
Also, you made reference to Mrs. Maloney from New York for her work
as well. She is not on the floor right now, but I certainly do
appreciate her efforts with the legislation and in full committee and
in subcommittee as well in order to move forward on this piece of
legislation before the House, H.R. 4569.
And to your comment about perhaps I should have taken the substance
of the bill to heart, I did streamline the 10 pages down to four pages
to make it not duplicative, unnecessary, and outdated information.
Mr. Speaker, I yield such time as she may consume to the gentlewoman
from New York (Mrs. Maloney).
Mrs. CAROLYN B. MALONEY of New York. Mr. Speaker, I want to thank my
colleague for his hard work on this bill. I did want to come to the
floor and support it because it is one of the areas where we did work
together in a positive way.
=========================== NOTE ===========================
December 2, 2014, on page H8259, the following appeared: New
York (Mrs. MALONEY). Mrs. CAROLYN B. MALONEY. Mr. Speaker, I want
to thank my colleague
The online version should be corrected to read: New York (Mrs.
MALONEY). Mrs. CAROLYN B. MALONEY of New York. Mr. Speaker, I want
to thank my colleague
========================= END NOTE =========================
I would like to also take this opportunity to congratulate him on
being reappointed as chairman of the Capital Markets Committee on which
I serve. And I look forward to working with you in the next Congress.
When the Financial Services Committee marked up the JOBS Act in 2012,
Mr. Garrett included an amendment requiring the SEC to conduct a study
on how to modernize and simplify the disclosure process for emerging
growth companies.
The SEC published that study last December, and while the study
failed to make any specific recommendations on how to streamline the
disclosure process, it did provide, I thought, a very fascinating
history of all the different efforts to simplify registration and
disclosure processes, especially for smaller companies, which is a
concern for many Members of this Congress who want to relieve the
regulatory burden on particularly smaller companies.
{time} 1530
For example, here are some of the studies that they did: the SEC's
1969 Disclosure Policy Study; the 1977 Advisory Committee on Corporate
Disclosure; the simplified Form S-18 for small companies in 1979; a new
simplified Form S-B in 1992; the 1996 Task Force on Disclosure
Simplification; the 2005 Advisory Committee on Smaller Public
Companies; the Advisory Committee on Improvements to Financial
Reporting in 2007; and, most recently, the Advisory Committee on Small
and Emerging Companies.
What this history demonstrates is that the process of scaling and
streamlining the reporting requirements for smaller companies is
something that we all need to focus on in order to keep pace with the
ever-evolving marketplace, and it is one that historically has been
revisited every 7 to 10 years. It requires strong oversight by the SEC
and also by Congress.
I believe that now is an excellent time for the SEC to revisit the
disclosure requirements for smaller companies and to figure out how to
best modernize these requirements. This bill directs the SEC to build
on its 2013 study by making immediate improvements to reg S-K in the
short term and then by making specific and detailed recommendations on
how to simplify and modernize reg S-K in the long term.
We were able to work in a bipartisan manner on this bill to clarify
that any revisions the SEC makes should reduce burdens on small
businesses, while also ensuring that investors still have access to all
important information.
This bill will ensure that the SEC properly tailors its regulations
to the needs of small businesses and doesn't get caught up in a one-
size-fits-all reaction. I urge my colleagues to support this
commonsense bill.
Mr. GARRETT. I thank the gentlewoman for her efforts.
Mr. Speaker, at this point, I yield 2 minutes to the gentleman from
Indiana (Mr. Stutzman).
Mr. STUTZMAN. Mr. Speaker, I rise today in strong support of the
Disclosure Modernization and Simplification Act of 2014.
For far too long, our economy has remained weak, and small businesses
and wage earners have suffered greatly. Part of the reason they have
suffered is from too many regulations and from an increase in red tape
from Federal Government agencies, which has hindered growth and kept
businesses from expanding. They also present big challenges for startup
companies that are looking to gain solid footing in this shaky economy.
If we are going to move this country in the right direction, we need
to make it easier and not harder for Americans to do business. The
least we can do in Washington is to make sure Federal regulators do not
force business managers to report the same information over and over.
That is what this act is all about.
[[Page H8260]]
This legislation, along with others we will consider today, will help
remove the Federal Government from the backs of small business owners
and make it easier for all Americans to succeed.
It will revise regulations to include startup companies, to eliminate
redundant and duplicative provisions, and to discourage the disclosure
of immaterial information, among other simplifications. Now is the time
to remove these roadblocks on the pathway to success.
The American people are looking for us to ease some of these painful
economic burdens, and today, we have an opportunity to support
legislation that will have a positive impact on our economy, that which
limits the challenges on small business owners and job creators.
Let's work together in this Chamber and pass this series of bills in
a bipartisan fashion. Let's show our constituents that we are serious
about recharging our economic engine by pursuing commonsense regulatory
reforms.
I would like to thank Chairman Hensarling, Representative Garrett,
Representative Hurt, and the rest of the members of the Financial
Services Committee, who worked hard on this issue. I urge my colleagues
in the House to support this legislation.
Mr. GARRETT. I appreciate the gentleman's coming to the floor. More
importantly, I appreciate the gentleman's efforts and hard work on this
legislation in committee. Thank you very much.
Mr. Speaker, I yield back the balance of my time.
The SPEAKER pro tempore. The question is on the motion offered by the
gentleman from New Jersey (Mr. Garrett) that the House suspend the
rules and pass the bill, H.R. 4569, as amended.
The question was taken; and (two-thirds being in the affirmative) the
rules were suspended and the bill, as amended, was passed.
A motion to reconsider was laid on the table.
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