[Congressional Record Volume 161, Number 109 (Tuesday, July 14, 2015)]
[House]
[Pages H5147-H5149]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
IMPROVING ACCESS TO CAPITAL FOR EMERGING GROWTH COMPANIES ACT
Mr. HURT of Virginia. Mr. Speaker, I move to suspend the rules and
pass the bill (H.R. 2064) to amend certain provisions of the securities
laws relating to the treatment of emerging growth companies, as
amended.
The Clerk read the title of the bill.
The text of the bill is as follows:
H.R. 2064
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 ``Improving Access to Capital
for Emerging Growth Companies Act''.
SEC. 2. FILING REQUIREMENT FOR PUBLIC FILING PRIOR TO PUBLIC
OFFERING.
Section 6(e)(1) of the Securities Act of 1933 (15 U.S.C.
77f(e)(1)) is amended by striking ``21 days'' and inserting
``15 days''.
SEC. 3. GRACE PERIOD FOR CHANGE OF STATUS OF EMERGING GROWTH
COMPANIES.
Section 6(e)(1) of the Securities Act of 1933 (15 U.S.C.
77f(e)(1)) is further amended by adding at the end the
following: ``An issuer that was an emerging growth company at
the time it submitted a confidential registration statement
or, in lieu thereof, a publicly filed registration statement
for review under this subsection but ceases to be an emerging
growth company thereafter shall continue to be treated as an
emerging market growth company for the purposes of this
subsection through the earlier of the date on which the
issuer consummates its initial public offering pursuant to
such registrations statement or the end of the 1-year period
beginning on the date the company ceases to be an emerging
growth company.''.
SEC. 4. SIMPLIFIED DISCLOSURE REQUIREMENTS FOR EMERGING
GROWTH COMPANIES.
Section 102 of the Jumpstart Our Business Startups Act
(Public Law 112-106) is amended by adding at the end the
following:
``(d) Simplified Disclosure Requirements.--With respect to
an emerging growth company (as such term is defined under
section 2 of the Securities Act of 1933):
``(1) Requirement to include notice on forms S-1 and F-1.--
Not later than 30 days after the date of enactment of this
subsection, the Securities and Exchange Commission shall
revise its general instructions on Forms S-1 and F-1 to
indicate that a registration statement filed (or submitted
for confidential review) by an issuer prior to an initial
public offering may omit financial information for historical
periods otherwise required by regulation S-X (17 C.F.R.
210.1-01 et seq.) as of the time of filing (or confidential
submission) of such registration statement, provided that--
``(A) the omitted financial information relates to a
historical period that the issuer reasonably believes will
not be required to be included in the Form S-1 or F-1 at the
time of the contemplated offering; and
``(B) prior to the issuer distributing a preliminary
prospectus to investors, such registration statement is
amended to include all financial information required by such
regulation S-X at the date of such amendment.
``(2) Reliance by issuers.--Effective 30 days after the
date of enactment of this subsection, an issuer filing a
registration statement (or submitting the statement for
confidential review) on Form S-1 or Form F-1 may omit
financial information for historical periods otherwise
required by regulation S-X (17 C.F.R. 210.1-01 et seq.) as of
the time of filing (or confidential submission) of such
registration statement, provided that--
``(A) the omitted financial information relates to a
historical period that the issuer reasonably believes will
not be required to be included in the Form S-1 or Form F-1 at
the time of the contemplated offering; and
``(B) prior to the issuer distributing a preliminary
prospectus to investors, such registration
[[Page H5148]]
statement is amended to include all financial information
required by such regulation S-X at the date of such
amendment.''.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
Virginia (Mr. Hurt) and the gentlewoman from California (Ms. Maxine
Waters) each will control 20 minutes.
The Chair recognizes the gentleman from Virginia.
General Leave
Mr. HURT of Virginia. Mr. Speaker, I ask unanimous consent that all
Members may have 5 legislative days in which to revise and extend their
remarks and to include extraneous material on this bill.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Virginia?
There was no objection.
Mr. HURT of Virginia. Mr. Speaker, I yield myself such time as I may
consume.
I rise in support of H.R. 2064, the Improving Access to Capital for
Emerging Growth Companies Act.
I would like to thank the ranking member for her support of this good
legislation. I would also like to thank Representative Fincher and
Representative Delaney for their efforts to successfully move this
legislation through the Financial Services Committee on a unanimous,
bipartisan vote.
Mr. Speaker, a key component of the JOBS Act was the so-called IPO--
the initial public offering--on-ramp provisions of title I, which
created a new classification of public company known as an emerging
growth company.
Emerging growth company status allows smaller companies that are
accessing capital in the public markets to utilize streamlined
registration and reporting requirements for up to 5 years after their
initial public offerings.
In doing so, emerging growth companies are able to spend fewer
resources in complying with costly regulations that are designed for
the largest public companies.
Just over 3 years since the JOBS Act's enactment, we continue to
witness the successful results of its implementation. In 2014, emerging
growth companies represented 86 percent of the 288 initial public
offerings, allowing those companies to raise over $42 billion in
capital.
That capital represents real dollars that can be used by these
companies to invest in research and development, in innovative
products, and, most importantly, in new jobs in their communities.
While these numbers are encouraging, more can still be done to
incentivize companies to access capital in our public markets.
H.R. 2064 will decrease the required time for a confidential
registration statement to be on file with the SEC before an emerging
growth company may conduct a road show from 21 days to 15 and will
further streamline disclosure requirements for emerging growth
companies. These targeted changes to the Federal securities laws will
make IPOs even more appealing to emerging growth companies.
One witness at a previous Capital Markets and Government Sponsored
Enterprises Subcommittee hearing commented:
We support this bill as it creates generally greater
optionality for issuers without altering the ultimate level
of required disclosure to investors. This bill is in keeping
with the philosophy that underlies title I of the JOBS Act
and the creation of safe harbors, such as ``testing the
waters'' and ``confidential filings.'' We believe, for
example, that providing issuers with the ability to file
without full financial statements will cut issuer time-to-
market, which is beneficial in mitigating market risk and
speeding access to capital.
I ask that my colleagues join me in supporting H.R. 2064.
Mr. Speaker, I reserve the balance of my time.
Ms. MAXINE WATERS of California. Mr. Speaker, I yield myself such
time as I may consume.
The Improving Access to Capital for Emerging Growth Companies Act is
a good bill and is the product of bipartisan compromise. The bill was
amended last year to address certain investor protection concerns while
still retaining key relief for small businesses.
H.R. 2064 amends title I of the Jumpstart Our Business Start-Ups Act
of 2012, to provide emerging growth companies--that is, EGCs--with
additional flexibility when going public.
During a hearing on this bill in the Capital Markets and Government
Sponsored Enterprises Subcommittee, one witness expressed concerns that
2 years of financial statements are necessary for the SEC to compare
years during its review, and, at a minimum, issuers should be required
to provide what they have.
My fear is that, if a company were allowed to delay its filing, as
this bill would allow, it would only likely delay the SEC's review,
resulting in no real benefit to the issuer.
I would also like to emphasize the problem Congress gets into when it
preempts the regulators by trying to issue rules by legislation. When
we get it wrong, it takes another act of Congress to fix it. However, I
support this legislation today because it seems as if a consensus has
emerged that this technical fix is appropriate.
I reserve the balance of my time.
Mr. HURT of Virginia. Mr. Speaker, I yield such time as he may
consume to the gentleman from Tennessee (Mr. Fincher), a coauthor of
this legislation.
Mr. FINCHER. Mr. Speaker, I rise today in support of H.R. 2064, the
Improving Access to Capital for Emerging Growth Companies Act.
I was pleased to introduce this legislation with my colleague,
Congressman John Delaney of Maryland.
This legislation builds upon the success of the original bipartisan
JOBS Act, which I worked on, that created a new category of stock
offering for emerging growth companies, which have proven to be a major
new source of job creation for the 21st century.
Job creation is the number one reason to support this legislation. As
companies are able to expand and go public, they are able to hire more
employees and to ultimately invest more in our economy.
Our bill makes important changes to the registration process to
ensure that these companies have the most efficient, streamlined access
to the market.
Shortening the 21-day filing period to 15 days would save companies
exposure to some market volatility before public launch.
The purpose of the 21-day period is to allow the information about
the EGC IPO to disseminate to the public before purchase orders are
taken on the EGC's stock, but with today's technology, the current 21-
day quiet period is unnecessarily long.
The shortened time period would allow the benefit of clearer
visibility in market conditions and would save companies from having to
update financials and other disclosure before public launch.
Additionally, the bill calls for a grace period of the JOBS Act
protections to an issuer who loses EGC status mid-IPO process. Under
current law, if a company exceeds the EGC status criteria during the
IPO process, it no longer qualifies for the designation.
This discourages a borderline EGC which may be considering going
public from making an offering. The grace period would allow an issuer
who qualifies as an EGC at the time of filing its confidential
registration statement for review to continue to be treated as an EGC
through the date on which it completes its initial public offering or 1
year has passed, whichever comes first.
Finally, the bill would permit EGCs to avoid incurring the
significant expense and effort of preparing and having audited
financials and related disclosures for past periods that will not be
included in the prospectus to investors.
This legislation was reported out of committee unanimously, and I
urge my colleagues on both sides of the aisle to support the passage of
H.R. 2064 today.
This is a simple adjustment to reduce the burdens placed on smaller
companies that are trying to access the market, grow their businesses,
and hire more employees.
Now more than ever, as Members of Congress, we need to be focused on
ways to facilitate job creation. This bill is an important step in that
direction.
Ms. MAXINE WATERS of California. Mr. Speaker, I yield such time as he
may consume to the gentleman from Maryland (Mr. Delaney).
It is because of his leadership not only on this issue, but on small
business, the opportunities of EGCs, and the fact that his negotiations
on this legislation led us to bipartisan support.
[[Page H5149]]
Mr. DELANEY. I want to thank the ranking member for her support and
leadership on this legislation. I also want to thank the gentleman from
Virginia for his support.
Most importantly, I want to thank my friend, the gentleman from
Tennessee, for giving me the opportunity to coauthor this piece of
legislation with him.
Mr. Speaker, emerging growth companies that raise capital from
private investors have two options available to them to give their
investors a return. The first option is to take the company public, and
the second option is to sell the business.
The data overwhelmingly suggests that, when companies go public, the
companies are very likely to take the capital they raise in a public
offering, invest it in the business, create jobs, and hire Americans,
as compared to when companies are sold, which are often done for
strategic reasons that are based on consolidations and often result in
jobs being lost.
So, while companies are completely free to make whatever choices they
want to make, we, as policymakers, should certainly be trying to level
the playing field as it relates to initial public offerings in order to
make them more accessible for emerging growth companies, particularly
if they can be done without compromising investor protection. I believe
strongly that H.R. 2064 does, in fact, do that.
My colleague from Tennessee went through the specifics in terms of
the processes that are being improved by the bill.
I have some firsthand experience with this process in having started
two businesses in the private sector and in having taken them both
public on the New York Stock Exchange, experiences that taught me that
a company's initial public offering, as it relates to due diligence and
scrutiny and oversight, is the day when they have the most focus by
regulators and investors and underwriters.
{time} 1500
So it is certainly a time where we have an opportunity for more
flexibility around timing, which I believe this bill does and will do
successfully. It will lead to more initial public offerings. It will
hopefully reverse the trends that we have seen across the last several
decades where the number of initial public offerings have decreased.
As I said in my opening comments, the more IPOs we have, the more
likely companies are to invest in their businesses, create jobs and
hire Americans. It is good for our economy. I urge my colleagues to
support H.R. 2064.
Mr. HURT of Virginia. Mr. Speaker, there are very few people in
Congress today who have worked harder and understand better the
importance of access to capital for our small businesses and for job
creation than does the chairman of our Subcommittee on Capital Markets
and Government Sponsored Enterprises.
I yield such time as he may consume to the gentleman from New Jersey
(Mr. Garrett).
Mr. GARRETT. Mr. Speaker, I thank the vice chairman for those
remarks.
I do in fact rise in support of the bill, H.R. 2064, the Improving
Access to Capital for Emerging Growth Companies, EGCs. I also want to
thank my friend Mr. Delaney and my other friend Mr. Fincher for their
hard work on the underlying piece of legislation.
As we said before, because of the JOBS Act, we have seen a
significant increase, a resurgence, if you will, in initial public
offerings, with 2014 being the best year for IPOs in more than a decade
now. If you look back, study after study has shown that job creation
expands significantly once a company goes public.
So Congress then should do what? We should do more to reduce the
burdens on these small and growing companies that want access to the
markets and want access there to capital and want access, therefore, to
grow and expand and create job creation. That is exactly what this
legislation does.
H.R. 2064 would expand upon the success of the JOBS Act by making
significant improvements in title I of that bill, including reducing
the number of days that an emerging growth company would have to wait
before commencing with the so-called road shows once it files with the
SEC, and it would significantly reduce and simplify the financial
disclosures that go along with it.
These are targeted and incremental changes that reflect the feedback
and input that the Committee on Financial Services--the members who
have supported it, the vice chairman as well--has received since the
JOBS Act was passed back in 2012.
We had a number of hearings on this, and one witness told our
committee: ``This bill is in keeping with the philosophy that underlies
title I of the JOBS Act, and the creation of safe harbors such as
`Testing the Waters' and `Confidential Filings.' . . . providing
issuers with the ability to file without financial statements will cut
issuer time-to-market which is,'' at the end of the day, ``beneficial
in mitigating market risk and speeding access to capital.''
With that said, by removing some of the ongoing hurdles to going
public, this bill, H.R. 2064, would help promote growth and help
promote job creation throughout our entire country, our entire economy.
Therefore, I urge its swift passage.
Ms. MAXINE WATERS of California. Mr. Speaker, I think that this is
the last bill that we are taking up on suspension today. What you have
seen is a fine example of both sides of the aisle working to do the
best thing that we could possibly do for our constituents.
There have been bills that were presented today that were suspect,
perhaps, when they first were introduced; there were bills today where
we had technical corrections; there were bills today where we had
bipartisan support where we never thought we would get bipartisan
support. I would like the work that we have done on the floor today to
demonstrate that we do have the ability to work together in the best
interests of the citizens of this country; and to the degree that we
understand that even in Dodd-Frank where there may still be some
concerns, that we can be civil about it, that we can be considerate
about it, and that we recognize that not only may there may be places
for technical corrections in Dodd-Frank, but in the JOBS Act and other
bills that we have heard today and that we will hear in the future.
I am very pleased to have been a part of the work that we have done
here on this floor today to get together in a bipartisan way, again, to
act in the best interests of all of the people of this country.
I yield back the balance of my time.
Mr. HURT of Virginia. Mr. Speaker, I want to thank the ranking member
again and those on her side of the aisle for looking for ways we can
work together for job creation and streamlining of the regulatory
structure as it relates to our financial markets.
I represent Virginia's Fifth District, and over the last 10, 20
years, we have seen a tremendous amount of high unemployment. I would
suggest to you that legislation like the legislation that
Representative Fincher and Representative Delaney have put forward
today is the kind of legislation that will lead to more private capital
on Main Street all across the Fifth District of Virginia and all across
America. I would suggest to you that that is why this bill deserves the
full support from the House of Representatives today.
I yield back the balance of my time.
The SPEAKER pro tempore. The question is on the motion offered by the
gentleman from Virginia (Mr. Hurt) that the House suspend the rules and
pass the bill, H.R. 2064, 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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