[Congressional Record (Bound Edition), Volume 153 (2007), Part 20]
[House]
[Pages 27980-27982]
[From the U.S. Government Publishing Office, www.gpo.gov]




TO ELIMINATE THE EXEMPTION FROM STATE REGULATION FOR CERTAIN SECURITIES 
              DESIGNATED BY NATIONAL SECURITIES EXCHANGES

  Mr. MEEKS of New York. Mr. Speaker, I move to suspend the rules and 
pass the bill (H.R. 2868) to eliminate the exemption from State 
regulation for certain securities designated by national securities 
exchanges, as amended.
  The Clerk read the title of the bill.
  The text of the bill is as follows:

                               H.R. 2868

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

     SECTION 1. SCOPE OF EXEMPTION FROM STATE SECURITIES 
                   REGULATION.

       Section 18(b)(1) of the Securities Act of 1933 (15 U.S.C. 
     77r(b)(1)) is amended--
       (1) in subparagraph (A)--
       (A) by striking ``or the American Stock Exchange, or 
     listed, or authorized for listing, on the National Market 
     System of the Nasdaq Stock Market (or any successor to such 
     entities)'' and inserting ``, the American Stock Exchange, or 
     the Nasdaq Stock Market (or any successor to such 
     entities)''; and
       (B) by inserting before the semicolon the following: ``, 
     except that a security listed, or authorized for listing, on 
     the New York Stock Exchange, the American Stock Exchange, or 
     the Nasdaq Stock Market (or any successor to such entities) 
     shall not be a covered security if the exchange adopts 
     listing standards pursuant to section 19(b) of the Securities 
     Exchange Act of 1934 (15 U.S.C. 78s(b)) that designates a 
     tier or segment of such securities as securities that are not 
     covered securities for purposes of this section and such 
     security is listed, or authorized for listing, on such tier 
     or segment''; and
       (2) in subparagraph (B), by inserting ``covered'' after 
     ``applicable to''.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from New 
York (Mr. Meeks) and the gentleman from New York (Mr. Fossella) each 
will control 20 minutes.
  The Chair recognizes the gentleman from New York.


                             General Leave

  Mr. MEEKS of New York. Mr. Speaker, I ask unanimous consent that all 
Members may have 5 legislative days within which to revise and extend 
their remarks on this legislation and to insert extraneous material 
thereon.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from New York?
  There was no objection.
  Mr. MEEKS of New York. Mr. Speaker, I yield myself such time as I may 
consume.
  Mr. Speaker, I have been a major advocate of making sure that America 
maintains its global competitive edge whether it is in business or 
human development. America must stay at the forefront of innovation, 
productivity and expertise. No matter how economically, militarily or 
culturally strong a Nation has become, it will certainly begin its 
decline when it rests on the laurels of its past accomplishments and 
ceases to stay ahead of the competition.
  H.R. 2868 was introduced by me and my good friend and colleague from 
New York, Vito Fossella, toward the goal of maintaining America's 
competitive business advantage. Although Mr. Fossella and I may be on 
opposite sides of the aisle, we stand in the same space when it comes 
to our support for American businesses and American markets.
  Recently, Mayor Michael Bloomberg of New York City and Senator 
Charles Schumer commissioned a study on ``Sustaining New York's and the 
U.S.'s Global Financial Services Leadership.'' In the executive summary 
of that study, it states, ``The U.S. financial markets, with New York 
at the center, are still the world's largest and are among the most 
important by many measures.''
  The United States is home to more of the world's top financial 
services institutions than any other country. Six of the top 10 
financial institutions by market capitalization are based in the New 
York area, and U.S.-based firms still head the global investment 
banking revenue rankings.
  In terms of global financial stock, the United States remains the 
largest market, well ahead of Europe, Japan and the rest of Asia, 
although the financial stock in other regions is now growing faster 
than it is here in the United States. The United States generates more 
revenues from financial services than any other region. But once again, 
the rest of the world is challenging that leadership in a hotly 
contested investment banking and sales and trading markets.

                              {time}  1215

  To sum up that paragraph with a phrase that Satchel Paige is known 
for: ``Don't look back. Someone might be gaining on you.''
  To further quote the study, the study says: ``The choice of venue for 
IPOs offers the most dramatic illustration of the interplay between 
these factors. The world's corporations no longer turn primarily to 
stock exchanges in the United States, such as the New York Stock 
Exchange or NASDAQ, to raise capital internationally.'' It continues to 
say: ``The IPO market offers other examples of jurisdictional arbitrage 
working against the United States, with very small-cap companies in the 
United States increasingly favoring London's Alternative Investment 
Market over NASDAQ,'' and I add here the American Stock Exchange. 
``American private equity firms are choosing to list on European 
exchanges.''
  Mr. Speaker, in this study, leading financial services executives who 
were interviewed indicated that ``the legal environment and regulatory 
framework in particular were critical to potential issuers considering 
whether to enter the U.S. markets.'' The implementation of Sarbanes-
Oxley was part of the United States regulatory framework that was cited 
as a concern for

[[Page 27981]]

issuers in considering the markets in which they would list.
  This is why earlier this year I introduced H.R. 1508, the COMPETE Act 
of 2007, to improve the implementation of section 404 of Sarbanes-
Oxley. My office has worked closely with the PCAOB and the SEC to 
review and discuss the regulatory reforms of SOX. We hope it will 
improve the implementation of the law.
  Toward continuing my efforts to improve our regulatory environment, 
H.R. 2868 will make a technical change to the 1996 National Securities 
Market Improvement Act that would allow the American Stock Exchange and 
NASDAQ to offer a tier 2 level listing if they so choose. This would 
allow these exchanges to compete more directly with the London 
Alternative Investment Market and the Toronto Stock Exchange. It will 
help us keep our competitive advantage and lead.
  Mr. Speaker, I would also like to thank Chairman Frank for moving 
this bill through the committee. I would also like to give special 
thanks to my cosponsor, Mr. Fossella, for the work of his office, 
particularly Ryan McKee. I also want to thank Lawranne Stewart and 
Deborah Silberman of Mr. Frank's staff, and of course Mr. Jameel 
Johnson, my chief of staff.
  Mr. Speaker, I reserve the balance of my time.
  Mr. FOSSELLA. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, let me at the outset thank my colleague from New York 
(Mr. Meeks) without whom this legislation would not be possible. As he 
has mentioned, while we are on opposite sides of the aisle, we share 
the common goal of ensuring that the U.S. remain the envy of the world 
when it comes not just to capital markets but also the place where 
people can come, investors can come, entrepreneurs can exist and find 
capital and make this country even better and stronger.
  Of course, we share the common purpose of representing the greatest 
city in the world, New York, which has always been and shall continue 
to be the financial capital of the world. I would also like to thank 
the chairman of the committee, Mr. Frank, and especially the ranking 
member, Mr. Bachus, for bringing this bill to the floor, again, without 
whom this would not be possible.
  Over the past year or more there has been a new and rightly placed 
focus on the competitiveness of the United States capital markets. As 
emerging international markets continue to grow, the natural and 
historical attraction to the U.S. capital markets has given way to the 
considerations of a broader scale. In short, the U.S. is no longer the 
only game in town.
  Over the past several years, as my good friend Mr. Meeks has 
indicated, several reports have been published that argue the 
regulatory and legal environment in the U.S. serve as negative 
considerations when market participants choose where to raise capital 
or headquarter a global business. With new markets popping up across 
the globe, investors and businesses now have more options, and 
increasingly we are seeing them choose alternatives to the U.S., such 
as Hong Kong, Singapore, and London.
  We have seen an increasing number of U.S. companies, in particular 
small companies, raise capital on foreign exchanges, in particular, 
London's Alternative Investment Market, or, as known commonly, AIM. 
Clearly, the United States remains the global financial leader. 
Overall, I believe we can be optimistic about the future growth and 
success of the American capital markets. However, in a constantly 
evolving and ever-innovative global marketplace, we cannot take our 
leadership for granted, nor ignore indicators that the U.S. competitive 
edge is diminishing. As lawmakers, we have a critical responsibility to 
ensure the U.S. remains at the forefront of the financial markets.
  Strong capital markets are not a success realized by Wall Street and 
investment bankers exclusively. Strong markets mean jobs, economic 
growth and retirement security for people across the United States. We 
cannot control the evolution of overseas markets or their ability to 
compete in a global marketplace, nor should we want to. What we can 
control, however, is our ability to respond and to adapt to changing 
circumstances with innovation and flexibility that will allow our 
markets and market-makers to maintain their competitive edge.
  This bill, the Small Cap Competitive Listing Act, is an important and 
reasonable step toward achieving that goal. In order to compete in an 
increasingly global and highly competitive marketplace, exchanges both 
domestic and international have developed additional listing tiers, 
with lower listing standards to expand opportunities for smaller 
companies. Particularly for small cap companies, an opportunity to list 
on a developmental tier is an important component to their ability to 
raise the capital necessary to grow their business and to continue to 
innovate.
  Mr. Speaker, in 1996, Congress passed the National Securities Market 
Improvement Act in an effort to streamline the regulatory process and 
eliminate duplication. Common sense. This act included an important 
provision that granted preemption from State security regulation to the 
national exchanges: the New York Stock Exchange, NASDAQ, and the 
American Stock Exchange. Because these listings were national in scope 
on the major U.S. exchanges, Congress deferred regulation to the 
Securities and Exchange Commission. However, as the markets have 
evolved, that legislation has created a legislative barrier to the 
establishment of developmental tiers on national exchanges.
  Because developmental tiers have less stringent listing standards, 
securities offered on those exchanges should in fact be subject to 
State regulatory oversight in addition to the SEC oversight. The 
legislation provides the national exchanges a legislative pathway that 
currently exists for regional domestic exchanges and foreign exchanges 
to offer a marketplace for small cap companies. By allowing the 
national exchange to establish this new tier, it will grant small cap 
companies a new alternative to London's AIM market and to other 
marketplaces that may be less regulated and less transparent.
  This legislation represents sound policy. It puts all of our domestic 
exchanges on equal footing and removes a roadblock to progress. In 
addition, the bill represents an important approach to addressing 
American competitiveness. It grants the flexibility to develop new 
offerings without creating a regulatory race to the bottom. These new 
tiers would be subject to State security regulations, and any proposed 
new listing will be subject to oversight and approval from the SEC. 
Additionally, investor protections are upheld. As public companies, 
small cap companies seeking to list on a developmental tier will be 
required to fully comply with U.S. securities laws.
  Let me just say in closing, Mr. Speaker, I want to thank Mr. Meeks. 
We here in Congress, regardless of our party affiliation or where we 
are from, know that this country is the engine of the world, and we 
want to keep it such. We understand that financial markets, in 
particular the securities industry, is a vital component of our 
national economy.
  And it is not just about Wall Street. As mentioned, many of us, 
whether you are from Queens, Brooklyn or Staten Island, many of our 
constituents benefit from a vibrant financial service industry. Much of 
that tax revenue disproportionately in New York City goes to fund 
schools and parks and roads. This is just a small way in which we can 
maintain that competitive edge, give entrepreneurs and small companies 
the opportunity to access our capital markets, put us on equal footing 
to compete with London's AIM and other emerging market exchanges across 
the world, and understand that the American people, the American 
businessman and woman, can compete with anyone if given the tools and 
the barriers are diminished.
  Mr. Speaker, I have no speakers. Mr. Meeks, thank you very much. As 
well, I would like to add my thanks to his staff and that of Mr. Frank, 
Mr. Bachus, and on my staff, Ryan McKee, and

[[Page 27982]]

urge my colleagues to adopt the underlying legislation.
  With that, I yield back the balance of my time.
  Mr. MEEKS of New York. Mr. Speaker, again, I would like to thank Mr. 
Fossella for all of his hard work, because that is what we are talking 
about. We are talking about basically the backbone of America has 
always been its small businesses. So when we have these firms, we want 
them to invest and grow their businesses right here in the United 
States of America.
  It makes great sense, because as they are investing and expanding 
their businesses, it creates jobs for Americans. When you look at the 
services, the financial services in particular, that is where the jobs 
are being created, that is where we are the most competitive, and that 
is where we have got to stay and keep our competitive edge. It makes 
great sense for us to make sure that tomorrow continues to be the great 
day for our financial services industry, because it is the key to the 
economic security, as well as to the jobs of tomorrow for many of our 
young people.
  Mr. Speaker, I urge all of my colleagues to vote for this bill. It 
makes great sense, and it helps us maintain the competitive edge and 
helps us maintain being the financial capital of the world.
  Mrs. MALONEY of New York. Mr. Speaker, I rise today in support of 
H.R. 2868, bipartisan legislation that would enhance the 
competitiveness of U.S. capital markets by allowing exchanges to 
establish developmental tiers to expand listing opportunities in the 
U.S. for smaller companies.
  H.R. 2868 would remove the barrier to creating developmental listing 
tiers on several of the major exchanges in the U.S. by amending Section 
18 of the National Securities Markets Improvement Act (NSMIA). Under 
the bill, all securities listed on a developmental tier would be 
subject to Securities and Exchange Commission (SEC) oversight and state 
blue-sky regulations in an effort to uphold investor protections.
  Right now, the inability to develop an additional, developmental tier 
can be a significant impediment to an exchange's ability to compete in 
the global marketplace. These barriers make our markets less 
competitive for small cap listings and can drive companies to list 
outside the United States.
  London's Alternative Investment Market (AIM) for example, is 
attracting capital worldwide and recruiting U.S. IPO's. According to a 
recent International Herald Tribune report, companies listed on 
London's AIM raised $30 billion in capital in 2006. The exchange has 
tripled its number of listed companies to 1,640 since 2000, with about 
one-third of them international. A total of 63 companies worth about 
$11 billion are from the United States--the highest representation on 
AIM.
  The U.S. must take the necessary steps to maintain our capital 
markets as the premiere choice for companies large and small, within 
our country and throughout the world. The New York Stock Exchange 
(NYSE) previously offered a developmental tier through Arca, but is 
currently in the process of getting out of that business, while the 
AMEX has expressed an interest in developing a second tier.
  I am proud to co-sponsor H.R. 2868, which was introduced by my 
esteemed colleagues from New York, Congressman Meeks and Congressman 
Fosella. I urge all of my colleagues to support this important 
legislation, level the playing field, and ensure our domestic exchanges 
can compete in the global marketplace.
  Mr. MEEKS of New York. Mr. Speaker, I yield back the balance of my 
time.
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentleman from New York (Mr. Meeks) that the House suspend the rules 
and pass the bill, H.R. 2868, 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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