[Congressional Record Volume 164, Number 115 (Tuesday, July 10, 2018)]
[House]
[Pages H6013-H6015]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




               MODERNIZING DISCLOSURES FOR INVESTORS ACT

  Mr. HUIZENGA. Mr. Speaker, I move to suspend the rules and pass the 
bill (H.R. 5970) to require the Securities and Exchange Commission to 
implement rules simplifying the quarterly financial reporting regime, 
as amended.
  The Clerk read the title of the bill.
  The text of the bill is as follows:

                               H.R. 5970

       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 ``Modernizing Disclosures for 
     Investors Act''.

     SEC. 2. FORM 10-Q ANALYSIS.

       (a) In General.--The Securities and Exchange Commission 
     shall conduct an analysis of the costs and benefits of 
     requiring reporting companies to use Form 10-Q for submitting 
     quarterly financial reports. Such analysis shall consider--
       (1) the costs and benefits of Form 10-Q to emerging growth 
     companies;
       (2) the costs and benefits of Form 10-Q to the Commission 
     in terms of its ability to protect investors, maintain fair, 
     orderly, and efficient markets, and facilitate capital 
     formation;
       (3) the costs and benefits of Form 10-Q to other reporting 
     companies, investors, market researchers, and other market 
     participants, including the costs and benefits associated 
     with--
       (A) the public availability of the information required to 
     be filed on Form 10-Q;
       (B) the use of a standardized reporting format across all 
     classes of reporting companies; and
       (C) the quarterly disclosure by some companies of financial 
     information in formats other than Form 10-Q, such as a 
     quarterly earnings press release;
       (4) the costs and benefits of alternative formats for 
     quarterly reporting for emerging growth companies to emerging 
     growth companies, the Commission, other reporting companies, 
     investors, market researchers, and other market participants; 
     and
       (5) the expected impact of the use of alternative formats 
     of quarterly reporting by emerging growth companies on 
     overall market transparency and efficiency.
       (b) Report Required.--Not later than 180 days after the 
     date of enactment of this Act, the Commission shall issue a 
     report to Congress that includes--
       (1) the results of the analysis required by subsection (a); 
     and
       (2) recommendations for decreasing costs, increasing 
     transparency, and increasing efficiency of quarterly 
     financial reporting by emerging growth companies.

  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.
  The Chair recognizes the gentleman from Michigan.

                              {time}  1630


                             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 include extraneous material on the 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 commend my colleague, Mrs. Wagner, from Missouri for 
her work on this very important bill. This is part of a series of bills 
that we have seen, not just today but throughout the time that we have 
put forth on the Capital Markets Subcommittee, as well as the Financial 
Services Committee overall, because we know that there is no one thing 
that has ground the gears of our economy to a halt or to slow it down, 
and there is also no one magic thing that can happen or be passed that 
will suddenly spring it to life. It is a little like throwing sand in 
the gears of a machine. Over time, it just gets harder and harder and 
harder for that machine to grind on.
  We are here through a whole series of bills, both today and at other 
times, to add a little oil to the machine, to try to make sure that our 
capital markets are continuing to move and to be the envy of the world. 
We know, Mr. Speaker, that our capital markets here in the United 
States have been and continue to be the envy of the world, and they are 
a vibrant ecosystem fueling America's economic growth and generating 
millions of private sector jobs.
  These capital markets provide financing and needed resources to the 
smallest startups and to the very largest of the international 
companies that we have here in the United States. However, smaller 
companies have often been penalized for their size.
  As we have talked about in previous bills, the number of IPOs, or 
initial public offerings, that have occurred in the United States have 
plummeted. We have tried to fix that or tried to help improve that 
through things like the JOBS Act, but these small companies still face 
significant regulatory and market impediments that disincentivize them 
from accessing capital via the public markets.
  The Federal securities laws require that most SEC registrants 
disclose certain information on an ongoing basis, including a quarterly 
report on what is called the form 10Q. Form 10Q includes condensed 
financial information and

[[Page H6014]]

other data prepared by a company and reviewed, though generally 
unaudited, by its independent auditor.
  The purpose is to provide a continuing view of the company's 
financial position during the year. The report must be filed for each 
of the first three fiscal quarters of the company's fiscal year.
  The SEC's current corporate disclosure system imposes a number of 
outdated, duplicative, burdensome, and unnecessary requirements on U.S. 
companies diverting private sector resources toward regulatory 
compliance and away from innovation, growth, and job creation, where it 
really should be. Moreover, this outdated disclosure regime leads to 
unnecessarily long, complicated, and often immaterial public company 
disclosures, resulting in widespread investor confusion and, 
potentially, suboptimal investment decisions.
  While the SEC has often recognized the need to study and streamline 
the corporate disclosure regime, it has recently been Congress that has 
actually spurred them on in this regard. Through provisions such as the 
JOBS Act and the FAST Act, the SEC is required to study current 
regulations and then eliminate these outdated, duplicative, and 
unnecessary disclosure obligations.
  Form 10Q can create extreme administrative costs. A 2011 report of 
the IPO Task Force found that 92 percent of public companies said that 
``administrative burden of public reporting'' was a significant 
challenge to completing an IPO and becoming a public company.
  We have talked about, Mr. Speaker, earlier, that lack of ability for 
retail investors, the Joe and Jane investor, to have the same 
opportunity that some sort of well-financed, professional investor or 
fund that is out there is going to have.
  We need to allow them to have access into these pools of companies so 
that they may catch the upside of so many of these companies that are 
seeing extreme growth. That is the reason why we need to have these 
IPOs.
  In addition to filing forms 10K annually and 10Q quarterly, companies 
must file current reports on form 8K, often within 4 business days 
after the occurrence of specified events; these are things that could 
move their stock price, for example, and is relevant disclosure that 
needs to happen. They are then required to file these form 8Ks.
  In other words, by the time a quarterly report is filed, many 
material events have already been reported by a company through these 
8Ks; and according to widespread economic views regarding efficiency of 
markets, that information has then been priced into the cost of an 
equity. Granting early growth companies the option of issuing a press 
release or other short form that includes earnings results, as opposed 
to a full 10Q form, would provide investors with important quarterly 
financial information but reduce unnecessary burdens and complexities 
associated with the current quarterly reporting system.
  Again, it is extremely important that investors have access to that 
information. This bill does nothing to diminish that. In fact, it makes 
it more approachable and more accessible to the average investor.
  Nonetheless, this bill does not require any action by the SEC to 
change the 10Q reporting regime. It simply requires the SEC to consider 
the issue and report back to Congress on it. In doing so, the SEC can 
consider the substantial costs of these financial disclosures and aim 
to modernize the disclosure process in a manner that encourages 
investors to make more efficient use of the information filed with the 
SEC.
  Specifically, H.R. 5970, the Modernizing Disclosures for Investors 
Act, would require the SEC to provide a report to Congress with a cost-
benefit analysis for emerging growth companies' use of the SEC form 10Q 
and recommendations for decreasing costs, increasing transparency, and 
increasing efficiency of quarterly financial reporting by emerging 
growth companies within 180 days after enactment of this bill.
  I would like to commend my colleagues, Representative Wagner and 
Representative Gottheimer, for their bipartisan work on this very 
important bill. This bill, it is important to note, Mr. Speaker, passed 
the Financial Services Committee by a vote of 56-0. That is very 
important information because I believe that this is bipartisan and 
should be a bicameral step toward maintaining the health of our capital 
markets.
  Mr. Speaker, I urge all of my colleagues to vote for H.R. 5970, and I 
reserve the balance of my time.
  Ms. MAXINE WATERS of California. Mr. Speaker, I yield myself such 
time as I may consume.
  Mr. Speaker, robust and regular disclosures by public companies, such 
as the detailed quarterly financial information filed on a form 10Q, 
make our markets more attractive to investors by enabling informed 
investment decisions and ensuring shareholders can hold corporate 
boards accountable for practices that may undermine the value of the 
company.
  Standardized quarterly financial reporting on form 10Q also provides 
a means for regulators to conduct efficient and effective oversight of 
public companies and protect investors from fraud and other corporate 
misconduct.
  When investors have faith in the integrity of our markets, they are 
more likely to entrust their capital to public companies, thereby 
providing opportunities for economic growth and job creation.
  The benefits of quarterly reporting are well recognized by the 
investor community. In a June 2016 letter to the SEC's Division of 
Corporate Finance, the SEC's Investor Advisory Committee wrote, ``The 
current degree, quality, and frequency of disclosure for U.S. issuers 
overall is appropriate and a source of strength for the U.S. capital 
markets. The current system greatly benefits retirees, pension funds, 
endowments, and households that are directly and indirectly market 
participants.''
  Additionally, in May and June of this year, investors and investor 
advocacy groups wrote to the Financial Services Committee expressing 
their support for the SEC's current quarterly reporting regime, 
including the form 10Q.
  According to CalPERS, the largest public pension fund in the United 
States with more than $350 billion in global assets, ``10Qs provide 
substantial and important information and serve as a great historical 
resource. Any modification of standard quarterly filings should be 
preceded by significant study with ample opportunity for investor 
input.''
  While some business groups have called for the elimination of the 10Q 
as a cost-saving measure for corporations, I agree that any attempt to 
alter the existing quarterly reporting requirements first requires a 
careful and balanced study that considers the impact of any changes on 
investors and our markets.
  H.R. 5970, as amended, requires the SEC to conduct such a study, to 
include consideration of the benefits of form 10Q reporting to the SEC, 
public companies, investors, market researchers, and other market 
participants.
  I support the bill as amended, and I thank Mr. Gottheimer and Mrs. 
Wagner for working together to develop a bipartisan approach to the 
study. I hope that the SEC takes this study as an opportunity to hear 
from investors about the disclosures they find important and ensure 
that our public markets and the companies which seek to access them 
continue to enjoy the benefits of comprehensive and standardized 
financial disclosure.
  Mr. Speaker, I yield back the balance of my time.
  Mr. HUIZENGA. Mr. Speaker, it has been a long afternoon. We have 
covered a lot of territory, eight different bills, I think, today. As I 
had said earlier, there is no magic bill that is going to somehow cure 
or remedy some of the challenges that our capital markets have seen 
over the last number of years, but this is a step towards that.
  H.R. 5970 and so many of these other bills are important steps that 
this House is taking on a very bipartisan basis. I commend everybody 
who has worked on this--Mr. Gottheimer and Mrs. Wagner in this 
particular case--and I look forward to continuing to work with my 
colleagues across the aisle to search for true solutions in policy and 
to set aside the politics of what needs to happen.
  Mr. Speaker, I urge my colleagues to vote in favor of H.R. 5970, and 
I yield back the balance of my time.

[[Page H6015]]

  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. 5970, as amended.
  The question was taken; and (two-thirds being in the affirmative) the 
rules were suspended and the bill, as amended, was passed.
  The title of the bill was amended so as to read: ``A bill to require 
the Securities and Exchange Commission to carry out a cost benefit 
analysis of the use of Form 10-Q and for other purposes.''.
  A motion to reconsider was laid on the table.

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