[Congressional Record Volume 169, Number 97 (Monday, June 5, 2023)]
[House]
[Pages H2727-H2729]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                ENCOURAGING PUBLIC OFFERINGS ACT OF 2023

  Mrs. WAGNER. Mr. Speaker, I move to suspend the rules and pass the 
bill (H.R. 2793) to amend the Securities Act of 1933 to expand the 
ability to use testing the waters and confidential draft registration 
submissions, and for other purposes, as amended.
  The Clerk read the title of the bill.
  The text of the bill is as follows:

                               H. R. 2793

       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 ``Encouraging Public Offerings 
     Act of 2023''.

     SEC. 2. EXPANDING TESTING THE WATERS.

       Section 5(d) of the Securities Act of 1933 (15 U.S.C. 
     77e(d)) is amended--

[[Page H2728]]

       (1) by striking ``Notwithstanding'' and inserting the 
     following:
       ``(1) In general.--Notwithstanding'';
       (2) by striking ``an emerging growth company or any person 
     authorized to act on behalf of an emerging growth company'' 
     and inserting ``an issuer or any person authorized to act on 
     behalf of an issuer''; and
       (3) by adding at the end the following:
       ``(2) Additional requirements.--
       ``(A) In general.--The Commission may promulgate 
     regulations, subject to public notice and comment, to impose 
     such other terms, conditions, or requirements on the engaging 
     in oral or written communications described under paragraph 
     (1) by an issuer other than an emerging growth company as the 
     Commission determines appropriate.
       ``(B) Report to congress.--Prior to any rulemaking 
     described under subparagraph (A), the Commission shall submit 
     to Congress a report containing a list of the findings 
     supporting the basis of the rulemaking.''.

     SEC. 3. CONFIDENTIAL REVIEW OF DRAFT REGISTRATION STATEMENTS.

       Section 6(e) of the Securities Act of 1933 (15 U.S.C. 
     77f(e)) is amended--
       (1) in the heading, by striking ``Emerging Growth 
     Companies'' and inserting ``Confidential Review of Draft 
     Registration Statements'';
       (2) by redesignating paragraph (2) as paragraph (4); and
       (3) by striking paragraph (1) and inserting the following:
       ``(1) In general.--Any issuer may, with respect to an 
     initial public offering, initial registration of a security 
     of the issuer under section 12(b) of the Securities Exchange 
     Act of 1934 (15 U.S.C. 78l(b)), or follow-on offering, 
     confidentially submit to the Commission a draft registration 
     statement, for confidential nonpublic review by the staff of 
     the Commission prior to public filing, provided that the 
     initial confidential submission and all amendments thereto 
     shall be publicly filed with the Commission not later than--
       ``(A) in the case of an initial public offering, 10 days 
     before the effective date of such registration statement;
       ``(B) in the case of an initial registration of a security 
     of the issuer under such section 12(b), 10 days before 
     listing on an exchange; or
       ``(C) in the case of a follow-on offering, 48 hours before 
     the effective date of such registration statement.
       ``(2) Follow-on offering defined.--In this subsection, the 
     term `follow-on offering' means an offering by an issuer 
     during the 12-month period beginning on the effective date of 
     the initial public offering of the issuer or the initial 
     registration of a security of the issuer under section 12(b) 
     of the Securities Exchange Act of 1934 (15 U.S.C. 78l(b)).
       ``(3) Additional requirements.--
       ``(A) In general.--The Commission may promulgate 
     regulations, subject to public notice and comment, to impose 
     such other terms, conditions, or requirements on the 
     submission of draft registration statements described under 
     this subsection by an issuer other than an emerging growth 
     company as the Commission determines appropriate.
       ``(B) Report to congress.--Prior to any rulemaking 
     described under subparagraph (A), the Commission shall submit 
     to Congress a report containing a list of the findings 
     supporting the basis of the rulemaking.''.

  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.


                             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 this 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 am proud to rise today in support of my bill, H.R. 
2793, the Encouraging Public Offerings Act.
  This bipartisan piece of legislation would encourage more companies 
to go public and expand provisions of the JOBS Act by codifying an 
existing SEC rule.
  The SEC rule that this bill codifies allows for all companies to test 
the waters by communicating directly with certain potential investors 
before filing for an IPO.
  Although small companies are known to drive technological innovation 
and job creation, they frequently face obstacles in obtaining funding 
in the capital markets.
  These obstacles often are the result of the disproportionately larger 
burden that securities regulations--written for large public 
companies--place on small companies when they seek to go public.
  Title I of the JOBS Act established a new category of issuers known 
as emerging growth companies or EGCs. To qualify as an EGC, a company 
must maintain a certain threshold of annual revenue.
  The law provides that EGCs with a 5-year on-ramp to comply with 
certain regulatory requirements related to disclosure and reporting.
  Additionally, title I allows for EGCs to test the waters by meeting 
with investors to explain their business structure before issuing an 
IPO.
  Biotech companies, especially in the Second District of Missouri in 
particular, have been vocal about the benefits that testing the waters 
provides.
  These meetings allow for additional time to explain to investors the 
complicated technologies and regulatory pathways and complex product 
offerings of the company to encourage greater participation in the IPO.
  While the JOBS Act has made it easier for small companies to go 
public, the JOBS Act alone has not been enough to entirely overcome the 
capital formation obstacles that many companies face as they attempt to 
go public.
  The Encouraging Public Offerings Act ensures that all companies, 
rather than just emerging growth companies, are allowed to test the 
waters.
  This bill will make listing on exchanges more attractive, 
strengthening our financial markets and providing Main Street investors 
with more opportunities to grow their nest eggs.
  Mr. Speaker, this process may sound complicated, but it is actually 
quite simple. Start-up companies are oftentimes doing innovative and 
complex activities.
  They should be encouraged to sit down with potential investors and 
given the opportunity to explain why their business model is the right 
one for an investment plan without additional regulatory burdens.
  The best analogy that I can give here, Mr. Speaker, is when you are 
trying to teach your children the value of a dollar and how to make a 
good, sound argument.
  I remember telling my sons, who were trying to get my husband and I 
to pay for a new stereo, that they needed to present a plan to us for 
this potential investment.
  They went back to their rooms, did their preparation, and then sat 
down with us and explained their argument for why they needed a stereo 
and why we should make that investment.
  Mr. Speaker, start-up companies need that same opportunity to pitch 
their product to potential investors.
  We need to incentivize start-ups to grow and expand, creating jobs 
for American workers and strengthening our economy. While we don't 
always fund the stereo purchases, we need to give them that chance.
  I thank my good friend from New York (Mr. Meeks) for his longstanding 
support of this legislation, and I urge all my colleagues to support 
this bill.
  Mr. Speaker, 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. 2793, the Encouraging Public 
Offerings Act of 2023, sponsored by the gentlewoman from Missouri.
  I think the gentlewoman has laid it out clearly. We are talking here 
about the process by which a company goes public, and this allows the 
company to do two things before they go public.
  One of those is to confer with prospective investors, and the other 
is to get a nonpublic review by the SEC staff of their registration 
statement.
  This process of allowing these things to happen has been tried with 
ESG companies. The SEC has now adopted it as a policy for other 
companies, and now this bill would codify that decision.
  I should point out this bill came before our committee, and the vote 
was 39-1. This bill codifies the recent SEC rule that allows any 
issuer, not just an ESG, to submit a confidential draft of their 
registration statement for nonpublic review.
  This bill also allows the issuers to confer with prospective 
investors; in effect, testing the waters about whether a public 
offering makes sense.
  By freeing all issuers to use these two methods and codifying the 
SEC's administrative action, we can provide all companies with the 
assurance that these tools will be available to them.
  This bill codifies, as I have said, the 2019 SEC rulemaking that 
allows

[[Page H2729]]

issuers to test the waters before going public.
  This allows the issuer to gauge interest in their public offering by 
talking to certain institutional investors without first needing to 
file a registration statement.
  Given the cost of going through the entire process, it only makes 
sense to allow companies to talk to institutional investors before they 
decide to go public and commit themselves to that large cost.
  Overall, this makes it easier for companies to access our capital 
markets to get the capital they need to grow their businesses.
  Mr. Speaker, this bill is one that should be adopted. The vote in 
committee was 39-1. I urge my colleagues to support it.
  Mr. Speaker, I yield back the balance of my time.
  Mrs. WAGNER. Mr. Speaker, I strongly urge my colleagues to support 
H.R. 2793, and I yield back the balance of my time.
  Ms. JACKSON LEE. Mr. Speaker, I rise today in support of H.R. 2793, 
the Encouraging Public Offerings Act of 2023.
  This bill provides statutory authority for all issuers of securities 
to use certain offering procedures that are available to emerging 
growth companies.
  Specifically, the bill allows under statute issuers of securities to 
communicate with potential investors to ascertain interest in a 
contemplated securities offering, either before or after the filing of 
a registration statement (i.e., test the waters).
  Additionally, issuers are allowed under statute to submit a 
confidential draft registration statement to the Securities and 
Exchange Commission for review prior to public filing or within one 
year after the initial public offering or registration.
  This bill strikes ``an emerging growth company or any person 
authorized to act on behalf of an emerging growth company'' and inserts 
``an issuer or any person authorized to act on behalf of an issuer.''
  This bill further adds the following additional requirements:
  (A) In general--the Commission may promulgate regulations, subject to 
public notice and comment, to impose such other terms, conditions, or 
requirements on the engaging in oral or written communications 
described under paragraph (1) by an issuer other than an emerging 
growth company as the Commission determines appropriate.
  (B) Report to Congress--Prior to any rulemaking described under 
subparagraph (A), the Commission shall submit to Congress a report 
containing a list of the findings supporting the basis of the 
rulemaking.
  The Congressional Budget Office estimates that it would cost an 
insignificant amount for the agency to justify any further rulemakings 
to the Congress because the SEC already allows such practices under 
current policy.
  The Congressional Budget Office expects that the net effect on 
discretionary spending over the 2023-2028 period would be negligible, 
assuming appropriation actions consistent with that authority, because 
the SEC is authorized to collect fees each year to offset its annual 
appropriation.
  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. 2793, as amended.
  The question was taken.
  The SPEAKER pro tempore. In the opinion of the Chair, two-thirds 
being in the affirmative, the ayes have it.
  Mrs. WAGNER. Mr. Speaker, on that I demand the yeas and nays.
  The yeas and nays were ordered.
  The SPEAKER pro tempore. Pursuant to clause 8 of rule XX, further 
proceedings on this motion will be postponed.

                          ____________________