[Congressional Record Volume 169, Number 97 (Monday, June 5, 2023)]
[House]
[Pages H2723-H2725]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




    FINANCIAL STATEMENT REPORTING REQUIREMENTS FOR EMERGING GROWTH 
                               COMPANIES

  Mrs. WAGNER. Mr. Speaker, I move to suspend the rules and pass the 
bill (H.R. 2608) to amend the Federal securities laws to specify the 
periods for which financial statements are required to be provided by 
an emerging growth company, and for other purposes, as amended.
  The Clerk read the title of the bill.
  The text of the bill is as follows:

                               H.R. 2608

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. FINANCIAL STATEMENT REPORTING REQUIREMENTS FOR 
                   EMERGING GROWTH COMPANIES.

       (a) Securities Act of 1933.--Section 7(a)(2) of the 
     Securities Act of 1933 (15 U.S.C. 77g(a)(2)) is amended--
       (1) in subparagraph (A), by striking ``and'' at the end;
       (2) by redesignating subparagraph (B) as subparagraph (C); 
     and
       (3) by inserting after subparagraph (A) the following:
       ``(B) need not present acquired company financial 
     statements or information otherwise required under section 
     210.3-05 or section 210.8-04 of title 17, Code of Federal 
     Regulations, or any successor thereto, for any period prior 
     to the earliest audited period of the emerging growth company 
     presented in connection with its initial public offering and, 
     thereafter, in no event shall an issuer that was an emerging 
     growth company but is no longer an emerging growth company be 
     required to present financial statements of the issuer (or 
     acquired company financial statements or information 
     otherwise required under section 210.3-05 or section 210.8-04 
     of title 17, Code of Federal Regulations, or any successor 
     thereto) for any period prior to the earliest audited period 
     of the emerging growth company presented in connection with 
     its initial public offering; and''.
       (b) Securities Exchange Act of 1934.--Section 12(b)(1)(K) 
     of the Securities Exchange Act of 1934 (15 U.S.C. 
     78l(b)(1)(K)) is amended by striking ``firm;'' and inserting 
     ``firm, provided that the application of an emerging growth 
     company need not present acquired company financial 
     statements or information otherwise required under section 
     210.3-05 or section 210.8-04 of title 17, Code of Federal 
     Regulations, or any successor thereto, for any period prior 
     to the earliest audited period of the emerging growth company 
     presented in connection with its application and, thereafter, 
     in no event shall an issuer that was an emerging growth 
     company but is no longer an emerging growth company be 
     required to present financial statements of the issuer (or 
     acquired company financial statements or information 
     otherwise required under section 210.3-05 or section 210.8-04 
     of title 17, Code of Federal Regulations, or any successor 
     thereto) for any period prior to the earliest audited period 
     of the emerging growth company presented in connection with 
     any application under subsection (b) of this section;''.


[[Page H2724]]


  The SPEAKER pro tempore. Pursuant to the rule, the gentlewoman from 
Missouri (Mrs. Wagner) and the gentleman from California (Mr. Sherman) 
each will control 20 minutes.
  The Chair recognizes the gentlewoman from Missouri.

                              {time}  1645


                             General Leave

  Mrs. WAGNER. 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 
gentlewoman from Missouri?
  There was no objection.
  Mrs. WAGNER. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I rise in support of H.R. 2608, a bill to specify the 
periods for which financial statements are required by an emerging 
growth company.
  I thank my colleague, our esteemed chairman of the Financial Services 
Committee, Mr. McHenry, for his leadership on this important piece of 
bipartisan legislation which will ensure the continued success of the 
IPO on-ramp enacted in the bipartisan JOBS Act of 2012.
  To address the steady decline of small company IPOs, title I of the 
JOBS Act of 2012 established a new class of public companies, or 
issuers, known as emerging growth companies.
  These companies are given an on-ramp of up to 5 years to comply with 
certain regulatory requirements prior to, throughout, and immediately 
after the company's IPO.
  Under the JOBS Act, one particularly helpful accommodation provided 
to EGCs is the requirement to provide 2 years of audited financial 
statements instead of 3 years in its IPO registration statement.
  Under certain circumstances, however, an EGC, or a company that went 
public as an EGC, must provide financial statements for earlier 
periods. This has occurred occasionally, for example, in the case of 
acquired company financial statements and for follow-on offerings 
involving an emerging growth company that lost its EGC status during 
IPO registration.
  H.R. 2608 resolves this misinterpretation by establishing that an 
emerging growth company, as well as any issuer that went public issuing 
EGC disclosure obligations, only needs to provide 2 years of audited 
financial statements.
  Mr. Speaker, by ensuring that EGCs can consistently rely on the JOBS 
Act's scaled disclosure obligations by eliminating this irregularity, 
H.R. 2608 will enhance the utility and the benefits of EGC 
accommodations.
  For this reason, I urge my colleagues to support H.R. 2608, and I 
reserve the balance of my time.
  Mr. SHERMAN. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I rise in support of H.R. 2608, sponsored by the 
gentleman from North Carolina.
  I want to put this bill in context. The first two bills we considered 
in this session dealt with private offerings, where there is very 
limited investor protection and where there are requirements as to who 
is allowed to invest.
  We are now focusing on public companies where there is a lot of 
investor protection and where anyone can invest and anyone who buys can 
then freely sell it to anyone else.
  Just as by way of illustration, we are talking about, in this bill, 
whether there will be 2 or 3 years of audited financial statements for 
certain public companies. That differs from the private offerings that 
we considered in the first two bills. Private offerings are not 
required to have any audited financial statements.
  A special accommodation has been made to emerging growth companies, 
known as EGCs, who are obligated to provide 2 years of audited 
financial statements when they first provide an initial public 
offering.
  Other companies, on the other hand, are required to provide 3 years 
of audited financial statements when they go public. In some 
situations, however, an EGC must provide 3 years of audited financials, 
including cases where they acquire another company.
  This bill would recognize that whatever standards we have when the 
company first goes public, those standards being for 2 years of audited 
financials, I think are logically applied in certain other 
circumstances. One of those is where the company goes to the public a 
second time for a follow-on offering, and the other is when the company 
uses its stock to acquire a company.
  We have a rule that, for the most important gatekeeping requirement, 
says 2 years of audited financials. This bill would provide that same 
standard for emerging growth companies in these two other types of 
situations. This will harmonize the EGC framework, making sure that 
these smaller reporting companies have a scaled-down obligation but 
still do provide 2 years of audited financials.
  Mr. Speaker, I urge my colleagues to vote ``yes'' on this important 
bill, and I reserve the balance of my time.
  Mrs. WAGNER. Mr. Speaker, I yield such time as he may consume to the 
gentleman from North Carolina (Mr. McHenry), the chairman of the full 
Financial Services Committee.
  Mr. McHENRY. Mr. Speaker, I thank the chair of the Subcommittee on 
Capital Markets, Mrs. Wagner, for leading our committee Republicans' 
capital formation agenda on the Financial Services Committee. She has 
done a fantastic job.
  I thank the Members of the minority party for joining with us in 
passing some of these important bills.
  By the end of today, we will haved passed 11 of those bills through 
the House of Representatives in the last 2 weeks. I thank the Members 
for their work there.
  Mr. Speaker, I rise in support of H.R. 2608. This bill clarifies the 
periods for which financial statements are required to be provided by 
an emerging growth company.
  Now, an emerging growth company is an important provision of the JOBS 
Act of 2012. These are smaller companies that are growing rapidly, and 
the idea here is we want them to be able to access the public markets 
more quickly.
  Now, let me stop here. It is a real pleasure to spend time on the 
House floor getting back to the policy that I am most steeped in and 
most interested in and, quite frankly, thrilled that I am not talking 
about the debt ceiling. Thank you for your indulgence there.
  This important provision of the JOBS Act, called the emerging growth 
company piece of the JOBS Act, has this designation of an IPO on-ramp. 
The idea here is these are smaller revenue companies, and in their 
growth, we want them to be able to get to the public markets as quickly 
as they can.
  Emerging growth companies are given a 5-year ramping period in the 
public markets to comply with a lot of regulatory requirements that 
public companies are obligated to comply with.
  The goal here was to have an accommodation to have more companies go 
public here in the United States, and it has worked. This was title I 
of the JOBS Act. The success of this provision was as a direct result 
of it being self-executing. We wrote the law, and instantly, that day, 
people started using the statute.
  Within the first 2 years of enactment of the JOBS Act, emerging 
growth companies resulted in 85 percent of all U.S. IPOs. Additionally, 
this specific accommodation for 2 years of audited financial statements 
was utilized by 65 percent of emerging growth companies within the 
first 2 years of the JOBS Act.
  Despite the success of the JOBS Act IPO on-ramp, there are 
clarifications Congress should make to maximize the utility of these 
provisions. For example, there are instances where an emerging growth 
company, or a company that qualifies as such during its initial public 
offering, must provide financial statements for periods earlier than 2 
years.
  The first instance is when an emerging growth company acquires a 
significant business. The emerging growth company must present 3 years 
of financial statements, even though the post-merger company also 
qualifies as an emerging growth company. This is kind of a wonky 
failure of the statute.
  The second instance is when a company qualifies as an emerging growth 
company during its IPO but later tries to conduct a follow-on offering 
to raise capital after it loses its emerging growth company status. In 
such instances, the company would also be required to provide 3 years 
of financial statements.

[[Page H2725]]

  This bill updates emerging growth company financial reporting 
accommodations to clarify that an emerging growth company, as well as 
any company that qualifies as such, when it is conducting its initial 
public offering, does not need to provide financial statements for a 
period earlier than 2 years, which is required during the emerging 
growth company's initial public offering. That is a lot of words.
  This update will increase efficiency by ensuring that these companies 
will be able to consistently rely on the JOBS Act's scaled financial 
reporting requirement accommodation. It will eliminate an aberrational 
result that actually has been shown to require burdensome and 
unnecessary financial reporting obligations.
  This bill clearly establishes that an emerging growth company will 
not be required to provide audited financial statements for any period 
earlier than 2 years, including in those instances I mentioned that 
were not previously addressed in the original JOBS Act.
  Mr. Speaker, after 11 years of the JOBS Act, this particular section 
of the JOBS Act has shown that it has been wonderfully successful. We 
have more IPOs using the statute than any other change in security laws 
we have made as a Congress in recent memory. That is a great success.
  We want to update that existing statute, and we are doing so in a 
bipartisan way. That should be a welcome sign for Congress, that we can 
do complicated things in a bipartisan way. That is what we are here to 
do.
  Mr. Speaker, I urge my colleagues to vote ``yes.''
  Mr. SHERMAN. Mr. Speaker, I yield myself such time as I may consume 
for closing.
  This bill passed our committee by a 41-to-0 vote. In passing H.R. 
2608, Congress is making sure that smaller companies have scaled-down 
disclosure obligations in all instances rather than just the initial 
public offering. We apply the same standard to acquisitions and follow-
on offerings. This is a commonsense reform. It reduces the burden on 
small companies and still provides investors with 2 years of audited 
financial statements.
  Mr. Speaker, I urge my colleagues to support this bill, and I yield 
back the balance of my time.
  Mrs. WAGNER. Mr. Speaker, I strongly urge my colleagues to support 
H.R. 2608, and I yield back the balance of my time.
  Ms. JACKSON LEE. Mr. Speaker, I rise today to speak on H.R. 2608, a 
bill to amend the Federal securities laws to specify the periods for 
which financial statements are required to be provided by an emerging 
growth company, and for other purposes.
  H.R. 2608 would change the reporting period for financial statements 
submitted to the Securities and Exchange Commission (SEC) by an 
emerging growth company (EGC) or former EGC when it acquires another 
company.
  The bill would ensure that EGCs and former EGCs submit financial 
statements for their target companies that cover a reporting period 
that does not exceed the earliest audited period for the EGC or former 
EGC, as presented in connection with an initial public offering.
  Under current law, when reporting to the SEC, acquiring companies 
(including EGCs) must submit up to two years of financial statements 
for their target companies.
  H.R. 2608 is a measure that will limit the financial information an 
emerging growth company must submit to the Securities and Exchange 
Commission.
  Specifically, an emerging growth company is not required to present a 
financial statement for any period prior to the earliest audited period 
of the emerging growth company in connection with its initial public 
offering, such as a statement for an acquired company.
  This bill is being amended to clarify and specify language in the 
original text.
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentlewoman from Missouri (Mrs. Wagner) that the House suspend the 
rules and pass the bill, H.R. 2608, 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.

                          ____________________