[Congressional Record Volume 164, Number 115 (Tuesday, July 10, 2018)]
[House]
[Pages H6003-H6005]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]





                         MAIN STREET GROWTH ACT

  Mr. HUIZENGA. Mr. Speaker, I move to suspend the rules and pass the 
bill (H.R. 5877) to amend the Securities Exchange Act of 1934 to allow 
for the registration of venture exchanges, and for other purposes, as 
amended.
  The Clerk read the title of the bill.
  The text of the bill is as follows:

                               H.R. 5877

       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 ``Main Street Growth Act''.

     SEC. 2. VENTURE EXCHANGES.

       (a) Securities Exchange Act of 1934.--Section 6 of the 
     Securities Exchange Act of 1934 (15 U.S.C. 78f) is amended by 
     adding at the end the following:
       ``(m) Venture Exchange.--
       ``(1) Registration.--
       ``(A) In general.--A person may register themself (and a 
     national securities exchange may register a listing tier of 
     such exchange) as a national securities exchange solely for 
     the purposes of trading venture securities by filing an 
     application with the Commission pursuant to subsection (a) 
     and the rules and regulations thereunder.
       ``(B) Publication of notice.--The Commission shall, upon 
     the filing of an application under subparagraph (A), publish 
     notice of such filing and afford interested persons an 
     opportunity to submit written data, views, and arguments 
     concerning such application.
       ``(C) Approval or denial.--
       ``(i) In general.--Within 90 days of the date of 
     publication of a notice under subparagraph (B) (or within 
     such longer period as to which the applicant consents), the 
     Commission shall--

       ``(I) by order grant such registration; or
       ``(II) institute a denial proceeding under clause (ii) to 
     determine whether registration should be denied.

       ``(ii) Denial proceeding.--A proceeding under clause 
     (i)(II) shall include notice of the grounds for denial under 
     consideration and opportunity for hearing and shall be 
     concluded within 180 days of the date of the publication of a 
     notice under subparagraph (B). At the conclusion of such 
     proceeding the Commission, by order, shall grant or deny such 
     registration. The Commission may extend the time for 
     conclusion of such proceeding for up to 90 days if the 
     Commission finds good cause for such extension and publishes 
     the Commission's reasons for so finding or for such longer 
     period as to which the applicant consents.
       ``(iii) Criteria for approval or denial.--The Commission 
     shall grant a registration under this paragraph if the 
     Commission finds that the requirements of this title and the 
     rules and regulations thereunder with respect to the 
     applicant are satisfied. The Commission shall deny such 
     registration if it does not make such finding.
       ``(2) Powers and restrictions.--In addition to the powers 
     and restrictions otherwise applicable to a national 
     securities exchange, a venture exchange--
       ``(A) may only constitute, maintain, or provide a market 
     place or facilities for bringing together purchasers and 
     sellers of venture securities;
       ``(B) may not extend unlisted trading privileges to any 
     venture security;
       ``(C) may only, if the venture exchange is a listing tier 
     of another national securities exchange, allow trading in 
     securities that are registered under section 12(b) on a 
     national securities exchange other than a venture exchange; 
     and
       ``(D) may, subject to the rule filing process under section 
     19(b)--
       ``(i) determine the increment to be used for quoting and 
     trading venture securities on the exchange; and
       ``(ii) choose to carry out periodic auctions for the sale 
     of a venture security instead of providing continuous trading 
     of the venture security.
       ``(3) Treatment of certain exempted securities.--A security 
     that is exempt from registration pursuant to section 3(b) of 
     the Securities Act of 1933 shall be exempt from section 12(a) 
     of this title to the extent such securities are traded on a 
     venture exchange, if the issuer of such security is in 
     compliance with--
       ``(A) all disclosure obligations of such section 3(b) and 
     the regulations issued under such section; and
       ``(B) ongoing disclosure obligations of the applicable 
     venture exchange that are similar to those provided by an 
     issuer under tier 2 of Regulation A (17 C.F.R. 230.251 et 
     seq).
       ``(4) Venture securities traded on venture exchanges may 
     not trade on non-venture exchanges.--A venture security may 
     not be traded on a national securities exchange that is not a 
     venture exchange during any period in which the venture 
     security is being traded on a venture exchange.
       ``(5) Rule of construction.--Nothing in this subsection may 
     be construed as requiring transactions in venture securities 
     to be effected on a national securities exchange.
       ``(6) Commission authority to limit certain trading.--The 
     Commission may limit transactions in venture securities that 
     are not effected on a national securities exchange as 
     appropriate to promote efficiency, competition, capital 
     formation, and to protect investors.
       ``(7) Disclosures to investors.--The Commission shall issue 
     regulations to ensure that persons selling or purchasing 
     venture securities on a venture exchange are provided 
     disclosures sufficient to understand--
       ``(A) the characteristics unique to venture securities; and
       ``(B) in the case of a venture exchange that is a listing 
     tier of another national securities exchange, that the 
     venture exchange is distinct from the other national 
     securities exchange.
       ``(8) Definitions.--For purposes of this subsection:
       ``(A) Early-stage, growth company.--
       ``(i) In general.--The term `early-stage, growth company' 
     means an issuer--

       ``(I) that has not made any registered initial public 
     offering of any securities of the issuer; and
       ``(II) with a public float of less than or equal to the 
     value of public float required to qualify as a large 
     accelerated filer under section 240.12b-2 of title 17, Code 
     of Federal Regulations.

       ``(ii) Treatment when public float exceeds threshold.--An 
     issuer shall not cease to be an early-stage, growth company 
     by reason of the public float of such issuer exceeding the 
     threshold specified in clause (i)(II) until the later of the 
     following:

       ``(I) The end of the period of 24 consecutive months during 
     which the public float of the issuer exceeds $2,000,000,000 
     (as such amount is indexed for inflation every 5 years by the 
     Commission to reflect the change in the Consumer Price Index 
     for All Urban Consumers published by the Bureau of Labor 
     Statistics, setting the threshold to the nearest $1,000,000).
       ``(II) The end of the 1-year period following the end of 
     the 24-month period described under subclause (I), if the 
     issuer requests such 1-year extension from a venture exchange 
     and the venture exchange elects to provide such extension.

       ``(B) Public float.--With respect to an issuer, the term 
     `public float' means the aggregate worldwide market value of 
     the voting and non-voting common equity of the issuer held by 
     non-affiliates.
       ``(C) Venture security.--
       ``(i) In general.--The term `venture security' means--

       ``(I) securities of an early-stage, growth company that are 
     exempt from registration pursuant to section 3(b) of the 
     Securities Act of 1933;
       ``(II) securities of an emerging growth company; or
       ``(III) securities registered under section 12(b) and 
     listed on a venture exchange (or, prior to listing on a 
     venture exchange, listed on a national securities exchange) 
     where--

       ``(aa) the issuer of such securities has a public float 
     less than or equal to the value of public float required to 
     qualify as a large accelerated filer under section 240.12b-2 
     of title 17, Code of Federal Regulations; or
       ``(bb) the average daily trade volume is 75,000 shares or 
     less during a continuous 60-day period.
       ``(ii) Treatment when public float exceeds threshold.--
     Securities shall not cease to be venture securities by reason 
     of the public float of the issuer of such securities 
     exceeding the threshold specified in clause (i)(III)(aa) 
     until the later of the following:

       ``(I) The end of the period of 24 consecutive months 
     beginning on the date--

       ``(aa) the public float of such issuer exceeds 
     $2,000,000,000; and
       ``(bb) the average daily trade volume of such securities is 
     100,000 shares or more during a continuous 60-day period.

       ``(II) The end of the 1-year period following the end of 
     the 24-month period described under subclause (I), if the 
     issuer of such securities requests such 1-year extension from 
     a venture exchange and the venture exchange elects to provide 
     such extension.''.

       (b) Securities Act of 1933.--Section 18 of the Securities 
     Act of 1933 (15 U.S.C. 77r) is amended--
       (1) by redesignating subsection (d) as subsection (e); and
       (2) by inserting after subsection (c) the following:
       ``(d) Treatment of Securities Listed on a Venture 
     Exchange.--Notwithstanding subsection (b), a security is not 
     a covered security pursuant to subsection (b)(1)(A) if the 
     security is only listed, or authorized for listing, on a 
     venture exchange (as defined under section 6(m) of the 
     Securities Exchange Act of 1934).''.
       (c) Sense of Congress.--It is the sense of the Congress 
     that the Securities and Exchange Commission should--
       (1) when necessary or appropriate in the public interest 
     and consistent with the protection of investors, make use of 
     the Commission's general exemptive authority under section 36 
     of the Securities Exchange Act of 1934 (15 U.S.C. 78mm) with 
     respect to the provisions added by this section; and
       (2) if the Commission determines appropriate, create an 
     Office of Venture Exchanges within the Commission's Division 
     of Trading and Markets.
       (d) Rule of Construction.--Nothing in this section or the 
     amendments made by this section shall be construed to impair 
     or limit the construction of the antifraud provisions of the 
     securities laws (as defined in section 3(a) of the Securities 
     Exchange Act of 1934 (15 U.S.C. 78c(a))) or the authority of 
     the Securities and Exchange Commission under those 
     provisions.
       (e) Effective Date for Tiers of Existing National 
     Securities Exchanges.--In the case of a securities exchange 
     that is registered as a national securities exchange under 
     section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 
     78f) on the date of the enactment of this Act, any election 
     for a listing tier of such exchange to be treated as a 
     venture exchange under subsection (m) of such section shall 
     not take effect before the date that is 180 days after such 
     date of enactment.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Michigan (Mr. Huizenga) and the gentlewoman from California (Ms. Maxine 
Waters) each will control 20 minutes.

[[Page H6004]]

  The Chair recognizes the gentleman from Michigan.


                             General Leave

  Mr. HUIZENGA. 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 Michigan?
  There was no objection.
  Mr. HUIZENGA. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I rise in support of H.R. 5877, the Main Street Growth 
Act, introduced by my friend and colleague from the Financial Services 
Committee, the gentleman from Minnesota (Mr. Emmer), which would help 
further facilitate capital formation for smaller issuers.
  Specifically, the Main Street Growth Act would provide for the 
creation and registration of venture exchanges. Venture exchanges would 
be prohibited from extending unlisted trading privileges, or UTP, as 
they are known, to any venture security, which would prevent venture 
securities from trading on exchanges other than the one that it is 
listed on, in order to concentrate liquidity onto the venture exchange. 
In addition, venture exchanges would also be exempt from 
decimalization.
  The U.S. capital markets have, and continue to be, a vibrant 
ecosystem, fueling America's economic growth and generating millions of 
private sector jobs. These markets provide financing and needed 
resources to the smallest startups, as well as the largest 
international companies.
  However, a company's size has often impacted how easily it is to 
access capital, as larger companies generally found the capital markets 
easier to access than smaller companies.
  While the number of IPOs in the U.S. has rebounded from its post-
crisis collapse--thanks, in part, to the success of the JOBS Act--
smaller companies still face significant regulatory and market 
impediments that disincentivize them from accessing capital via the 
public markets.
  There are differing perspectives as to why fewer companies, 
particularly smaller companies, have gone public over the past few 
decades. In fact, Chairman Clayton recently said, at the end of the 
day, no matter what those reasons are, it is ``not good'' that would be 
happening.
  The data suggests that, in order to fulfill its capital formation 
mandate, the SEC needs to tailor its approach to account for the 
varying nature and size of companies, including the one-size-fits-all 
regulatory structure of the current equity markets.
  As a natural extension of the JOBS Act and the new securities 
offerings available to startup enterprises, venture exchanges offer one 
possible solution to the liquidity and capital access challenges faced 
by smaller issuers.
  A venture exchange construct would expand access to capital for 
entrepreneurs; enable earlier public participation in the company's 
lifecycle; and attract post-issuance support, including research, 
sales, and capital commitments by market-makers.
  In fact, the SEC's Commissioners, market participants, and other 
interested parties have all expressed interest in the concept of 
venture exchanges as a means to provide secondary market liquidity to 
smaller companies.
  NASDAQ recently testified at a hearing held on May 23 of this year: 
``NASDAQ recommends permitting issuers to choose to trade in an 
environment with consolidated liquidity as would be allowed under the 
Venture Exchange Legislation. By creating a market for smaller issuers 
that is voluntary for issuers to join and largely exempt from the UTP 
obligations, subject to key exemptions, we can concentrate liquidity to 
reduce volatility and improve the trading experience.''
  Additionally, at that same hearing, the U.S. Chamber stated: ``While 
the JOBS Act did a great deal to help EGCs raise capital in primary 
offerings, it did comparatively little to address the secondary market 
trading in these same companies.''
  Legislation like the Main Street Growth Act is an important 
bipartisan step to better tailoring market structure rules for small 
issuers and helping to facilitate capital formation.
  I commend my colleague, Mr. Emmer, on his bipartisan work on the Main 
Street Growth Act, which passed the Financial Services Committee by a 
vote of 56-0, and I urge my colleagues to vote in favor of H.R. 5877.
  Mr. Speaker, I reserve the balance of my time.

                              {time}  1530

  Ms. MAXINE WATERS of California. Mr. Speaker, I yield myself such 
time as I may consume.
  Mr. Speaker, I rise in support of H.R. 5877, the Main Street Growth 
Act, a new and innovative idea that will help our Nation's small 
businesses raise funds to grow by issuing stock that investors are able 
to easily buy and sell in the secondary markets.
  Specifically, H.R. 5877 would create a venture exchange for investors 
to trade in the stock of emerging growth companies and early stage 
growth companies.
  Unlike a similar partisan bill last Congress, H.R. 5877, as amended, 
would allow companies to create a venture exchange in a way that 
balances the needs of small companies and the protection of their 
investors in the secondary markets.
  Most importantly, the bill would retain State regulatory oversight 
over these small unregistered companies, which are more prone to fraud 
and failure. For example, small companies that are not regularly traded 
are frequent targets of scammers that use pump-and-dump schemes to dupe 
investors into thinking the stock is worth more than it is by spreading 
fake news and hot tips and then selling the stock at artificially high 
prices.
  So it makes sense for our State regulators, who are very familiar 
with these scams, to regulate and oversee these companies.
  I am also pleased that the bill ensures that companies trading on a 
venture exchange have a minimum level of disclosure and ongoing 
disclosure, including annual and semi-annual reports, that detail the 
health of the company's finances, business, and management, as well as 
the company's related party transactions and share ownership.
  This is important to investors buying shares on a venture exchange 
who may have little to no relationship to the company to otherwise have 
access to such information.
  In addition, the bill would allow the SEC to establish additional 
restrictions on any over-the-counter trading that is not on a venture 
exchange.
  If our goal is to centralize trading on a single exchange to make it 
easier for investors to buy and sell small company stock, then I think 
it makes sense for the SEC to have the authority to limit over-the-
counter trading.
  Mr. Speaker, I support H.R. 5877, and I thank Representative Emmer 
for working with Democrats to support our Nation's small businesses and 
their investors.
  Mr. Speaker, I reserve the balance of my time.
  Mr. HUIZENGA. Mr. Speaker, I yield such time as he may consume to the 
gentleman from Minnesota (Mr. Emmer), the author of this legislation.
  Mr. EMMER. Mr. Speaker, I too rise in support of H.R. 5877, the Main 
Street Growth Act.
  Ever since the JOBS Act was signed into law, Congress has worked hard 
to build on its success to ensure American businesses, entrepreneurs, 
and investors are able to realize the real and potential benefits that 
make our markets the envy of the world.
  The Main Street Growth Act continues that discussion. Approved by the 
House Financial Services Committee by a vote of 56-0, this legislation 
will facilitate the creation of venture exchanges, a concept many see 
as a viable means to encourage more early-stage IPOs and improve 
capital formation.
  When businesses go public, jobs are created and new centers of wealth 
are formed. In fact, a 2012 study found that for the 2,766 companies 
that participated in an IPO between 1996 and 2010, total employment 
across these businesses increased by 2.2 million jobs, while total 
revenue increased by over $1 trillion.
  Unfortunately, sustaining and encouraging more companies to move 
forward with an IPO has proven difficult over time. Every year for the 
past two decades, the number of public companies in the United States 
has dropped,

[[Page H6005]]

with the only exception being the year Congress passed the JOBS Act.
  Since 2009, the number of U.S.-listed IPOs, on average, has hovered 
at fewer than 200 a year, well below the previous decade's average.
  While there are a multitude of factors that a company takes into 
consideration when determining whether to go public, one such 
calculation is whether or not the current market structure fosters an 
active and liquid secondary trading environment for that company's 
securities.
  Ensuring there is a place for investors to easily trade and sell 
their securities is often a key determinant in a decision not to list, 
if the business owner is not confident that such a marketplace exists.
  Small business hesitation when making this determination is not 
unfounded. According to the U.S. Securities and Exchange Commission, 
small cap stocks, or those with capitalization below $100 million, 
typically exhibit the least liquidity, while mid cap stocks, with 
capitalization between $2 billion and $5 billion, tend to exhibit a 
greater amount of liquidity.
  Recognizing the continued challenges we face in courting new IPOs, 
and understanding that liquidity is key for small companies interested 
in going public, as well as securities currently trading in the 
marketplace, it is clear that we must take steps to better tailor our 
markets in order to account for the varying size and nature of 
potential public companies if we are to encourage new capital 
formation.
  Here is where the Main Street Growth Act can help.
  Under the Main Street Growth Act, an entity can register with the SEC 
to establish a venture exchange; a market designed specifically to 
support the trading of small and emerging companies, as well as 
currently listed but liquidity-challenged securities.
  These venture exchanges will trade venture securities, which include 
early stage and emerging growth companies, as well as securities 
currently trading in the marketplace but are below a certain public 
float or average daily trade volume threshold.
  In my home State of Minnesota, there are more than 30 companies 
currently listed on an exchange that may meet the necessary criteria to 
explore the benefits of a new venture exchange as envisioned by this 
legislation.

  Additionally, there are over 130 Minnesota-based companies that are 
not listed publicly and have utilized private means of funding for 
their businesses, but could qualify to list on a venture exchange to 
improve their ability to create new growth and employment 
opportunities.
  The Main Street Growth Act includes important provisions to 
concentrate liquidity by ensuring that the trading of securities listed 
on a venture exchange may only occur on that venture exchange.
  Also, utilizing the current exchange model serves as an efficient way 
to ensure investor protection while improving their standing in our 
capital markets.
  The Main Street Growth Act is a consensus bill with input from my 
colleagues on both sides of the aisle and with the administration as 
well. It directly complements SEC Chairman Clayton's ongoing efforts to 
``examine whether the current market structure meets the needs of all 
types of companies that have the potential to be public companies.''
  Mr. Speaker, I would like to extend my gratitude to the chairman and 
ranking member of the Financial Services Committee and their staff for 
their tireless work on this legislation and the issues related to 
improving capital formation in the United States.
  Mr. Speaker, I encourage my colleagues to join me in supporting H.R. 
5877.
  Ms. MAXINE WATERS of California. Mr. Speaker, I have no further 
speakers, and I yield back the balance of my time.
  Mr. HUIZENGA. Mr. Speaker, I also have no further speakers, and I 
yield back the balance of my time.
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentleman from Michigan (Mr. Huizenga) that the House suspend the rules 
and pass the bill, H.R. 5877, 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.

                          ____________________