[Congressional Record (Bound Edition), Volume 159 (2013), Part 5]
[House]
[Pages 6941-6944]
[From the U.S. Government Publishing Office, www.gpo.gov]




          RULEMAKING DEADLINE FOR EXEMPTING CERTAIN SECURITIES

  Mr. McHENRY. Madam Speaker, I move to suspend the rules and pass the 
bill (H.R. 701) to amend a provision of the Securities Act of 1933 
directing the Securities and Exchange Commission to add a particular 
class of securities to those exempted under such Act to provide a 
deadline for such action, as amended.
  The Clerk read the title of the bill.
  The text of the bill is as follows:

                                H.R. 701

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

     SECTION 1. RULEMAKING DEADLINE FOR EXEMPTING CERTAIN 
                   SECURITIES.

       Section 3(b)(2) of the Securities Act of 1933 (15 U.S.C. 
     77c(b)(2)) is amended in the matter preceding subparagraph 
     (A) by striking ``The Commission'' and inserting ``Not later 
     than October 31, 2013, the Commission''.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
North Carolina (Mr. McHenry) and the gentlewoman from California (Ms. 
Waters) each will control 20 minutes.
  The Chair recognizes the gentleman from North Carolina.


                             General Leave

  Mr. McHENRY. Madam Speaker, I ask unanimous consent that all Members 
have 5 legislative days within which to revise and extend their remarks 
and to submit extraneous materials for the Record on H.R. 701, as 
amended, currently under consideration.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from North Carolina?
  There was no objection.
  Mr. McHENRY. Madam Speaker, I yield myself such time as I may 
consume.
  My colleagues, this is a bipartisan, straightforward bill, and it had 
unanimous support within the Financial Services Committee.
  This bill codifies an intended deadline within the JOBS Act. This 
legislation simply puts a reasonable date for the deadline for an 
improved Regulation A, which came out of a bipartisan bill before the 
House of Representatives just over a year ago and then the JOBS Act the 
President signed more than a year ago. The deadline is very achievable, 
setting an October 31 deadline for the SEC to write regulations. It is 
nearly 19 months after the JOBS Act was signed into law, and it is, in 
fact, 5 months before the due date of the SEC's recurring review of a 
renewed Regulation A.
  Regulation A is a very interesting provision within securities 
regulation. It is a sensible and philosophically sound exemption that 
should help millions of small- and moderate-sized businesses, but it's 
actually unused by all small businesses. The JOBS Act language includes 
raising the cap on Regulation A securities offerings from $5 million to 
$50 million, which is existent in the law; but the act also requires 
that we have meaningful regulatory improvements to Regulation A so it 
can, in fact, be utilized by small businesses as it was intended.
  Stakeholders and academics have testified that Regulation A should be 
a covered security or that the SEC should radically simplify Reg A's 
registration and qualifications if small businesses are to ever use and 
utilize this well-intentioned exemption again. For proof of whether 
State exemption matters, merely look at the dominance of rule 506, even 
for issuances of $1 million, compared to those other exemptions; and 
let's just face it--the numbers speak for themselves.
  Additionally, other areas of critical consideration include quiet 
periods,

[[Page 6942]]

testing-the-waters activities, comment period turnaround, and even the 
number of Securities and Exchange Commission staff dedicated to small 
business exemptions. We've made that very clear to the Securities and 
Exchange Commission the concerns we have on those issues. The SEC must 
conduct a holistic review of Federal and State regulations on these 
matters to learn which have impeded entrepreneurs from accessing 
external capital, which is really the intention of Regulation A.
  If you look back at a GAO report, it asserted that, from 1997 to 
2011, the number of Regulation A filings decreased from 116 annually to 
19, and that's only the number of filings. To go to the next step of an 
offering, it's even further reduced. It reduced from 57 in 1998 to just 
one offering, under this important regulation, in 2011. Now, that's 
very disturbing. The same GAO report maintains that the SEC has never 
evaluated the abandonment of Regulation A, an exemption solely created 
to capitalize small- and moderate-sized businesses and to empower 
everyday investors. That's absurd. It's high time the SEC gets around 
to this and gets it done. That's what this bill is all about.
  The Small Business Administration asserts that there are more than 5 
million small businesses in the U.S. with fewer than 20 employees, 
representing 20 percent of our national employment, and that firms with 
fewer than 100 employees employ more than 36 percent of our national 
employment. These millions of small businesses do not utilize Reg. A or 
other exemptions actually intended for them. There are bad consequences 
for this because they are not able to get the capital they need to grow 
and prosper and to perhaps go from being small businesses to big 
businesses or from small businesses to more successful small 
businesses. They are the ones that are at a loss, and at a time of high 
unemployment we need to make sure that we are able to get those 
capital-starved businesses access to the moneys they need to grow and 
to prosper in these tough economic times.
  This is a bipartisan bill that has garnered the support of my 
colleagues from across the aisle, Ms. Eshoo and Mr. Scott, as well as 
the support of my colleagues on this side of the aisle, Mr. Schweikert 
and Mr. Garrett, who have long been proponents of these reforms and 
necessary changes.
  With that, I reserve the balance of my time.

                                               Chamber of Commerce


                              of the United States of America,

                                     Washington, DC, May 13, 2013.
       To the Members of the U.S. House of Representatives: The 
     U.S. Chamber of Commerce, the world's largest business 
     federation representing the interests of more than three 
     million businesses and organizations of all sizes, sectors, 
     and regions, as well as state and local chambers and industry 
     associations, and dedicated to promoting, protecting and 
     defending America's free enterprise system, strongly supports 
     H.R. 701, which would amend a provision of the Securities Act 
     of 1933 to help ensure the success of the JOBS Act, which 
     became law last year.
       H.R. 701 is a bi-partisan bill which would place a deadline 
     of October 31, 2013, for the Securities and Exchange 
     Commission to complete the changes to Regulation A as 
     required under the Jumpstart Our Business Startups Act 
     (``JOBS Act''). The bi-partisan JOBS Act mandates the 
     modernization of certain regulations critical to the capital 
     formation of emerging growth companies. The Chamber is 
     concerned that the pace of regulatory implementation is too 
     slow, and H.R. 701 would help ensure the timely 
     implementation of this legislation important to new 
     businesses.
       The Chamber believes H.R. 701 would help speed the 
     implementation of the JOBS Act, thereby assisting the capital 
     formation needed for robust economic growth and job creation. 
     The Chamber strongly supports H.R. 701.
           Sincerely,

                                              R. Bruce Josten,

                                         Executive Vice President,
     Government Affairs.
                                  ____



                                                   NASDAQ OMX,

                                      Washington, DC, May 7, 2013.
     Hon. Jeb Hensarling,
     Chairman, House Committee on Financial Services, Rayburn 
         House Office Building, Washington, DC.
       Dear Chairman Hensarling: Rep. Patrick McHenry has proposed 
     legislation, H.R. 701, which seeks to impose a deadline on 
     the Securities and Exchange Commission (SEC) for completion 
     of an important section of the JOBS Act signed into law on 
     April 5, 2012. Specifically, the legislation requires the SEC 
     to issue its rules with respect to Regulation A by October 
     31st of this year.
       NASDAQ OMX supports this legislation's goal to induce 
     timely action on a key feature of the JOBS Act. As rules are 
     finalized, small businesses should have the regulatory 
     certainty necessary to make critical capital funding 
     decisions that can allow them to grow and create jobs--the 
     purpose behind the JOBS Act and NASDAQ OMX's support of that 
     legislation.
       Please let me know if I can be of further service to the 
     Committee.
           Thank you,

                                            Terry G. Campbell,

                                                   Vice President,
     Global Government Relations.
                                  ____

                                                     Biotechnology


                                        Industry Organization,

                                     Washington, DC, May 13, 2013.
       Dear Member of Congress: On behalf of the Biotechnology 
     Industry Organization (BIO) and its more than 1,100 members, 
     I am writing in strong support of H.R. 701, sponsored by Rep. 
     Patrick McHenry. I urge swift consideration and passage of 
     this important legislation by the House of Representatives.
       H.R. 701 will speed the implementation of a key provision 
     in the Jumpstart Our Business Startups (JOBS) Act, which 
     passed both houses of Congress last year with broad, 
     bipartisan majorities. Title IV of the JOBS Act directed the 
     SEC to make revisions to Regulation A that will increase 
     access to capital for growing companies, including biotech 
     innovators.
       Before the JOBS Act was enacted, Regulation A allowed 
     companies to conduct direct public offerings of up to $5 
     million; the JOBS Act increased the offering limit to $50 
     million. Once this change is implemented, Regulation A will 
     spur fundraising for emerging biotech companies, for which a 
     $50 million capital influx could support groundbreaking 
     research and stimulate job creation.
       H.R. 701 will give the SEC a deadline to complete 
     rulemaking on Regulation A. The current delay at the SEC has 
     blunted the potential capital formation impact of the JOBS 
     Act at a time when research-intensive small businesses are in 
     dire need of funding for their innovative R&D. Changing the 
     eligibility threshold for Regulation A offerings will provide 
     a new source of private capital to finance the search for 
     cures and breakthrough medicines.
       BIO supports expeditious implementation of the JOBS Act. On 
     behalf of BIO's membership, I urge you to support H.R. 701 
     when it is considered by the House of Representatives.
           With Sincerest Regards,
                                               James C. Greenwood,
     President and CEO.
                                  ____



                                                      CONNECT,

                                                     May 15, 2013.
     Hon. Patrick McHenry
     U.S. Capitol,
     Washington, DC.
     Hon. David Scott
       Dear Representatives McHenry and Scott: As a leading voice 
     for tech start-ups and emerging companies, CONNECT 
     enthusiastically endorses your efforts to pass H.R. 701. This 
     straightforward legislation, to set an October 31 deadline 
     for the SEC to promulgate rules to implement the JOBS Act 
     increase for Regulation A offerings, is specifically targeted 
     to increase the flow of capital to start-up and emerging 
     companies which represent the best job-creating engine to 
     spur America's economic recovery.
       CONNECT was birthed out of the University of California--
     San Diego over twenty-five years ago with the mission to 
     propel creative ideas and emerging technologies to the 
     marketplace by training entrepreneurs and connecting them to 
     the comprehensive resources they need to sustain viability 
     and business vibrancy. Since 1985, CONNECT has assisted in 
     the formation and development of over 3,000 companies and is 
     recognized as one of the world's most successful regional 
     innovation development programs. CONNECT is the recipient of 
     the 2010 ``Innovation in Regional Innovation Clusters'' award 
     presented by the U.S. Department of Commerce.
       As you are well aware, one of the barriers to start-up 
     company growth is access to capital. Although the Reg A 
     offerings are supposed to help emerging companies get access 
     capital, the cost of compliance with regulatory burdens made 
     the $5 million cap unworkable. Congress was absolutely right 
     to pass the JOBS Act requiring the SEC to promulgate rules to 
     raise the cap to $50 million. Doing so will open new pathways 
     by which startups and emerging companies, including those 
     stuck in the proverbial ``valley of death,'' can access 
     capital, allowing them to grow and create new jobs. But more 
     than a year after this bipartisan triumph for innovators, the 
     SEC hasn't even published Reg A rules. H.R. 701 will fix this 
     and is urgently needed.
       There is much talk in Washington about helping start-ups, 
     but your bill takes tangible action toward achieving that 
     goal and ensuring the promise of the JOBS Act is realized. We 
     commend you for finding a bi-partisan solution that will have 
     real-world benefits for America's entrepreneurs and 
     innovators. CONNECT stands ready to assist

[[Page 6943]]

     you as the bill advances in the House and strongly encourages 
     Majority Leader Reid to promptly place the bill on the Senate 
     floor calendar.
           Sincerely,
                                    Timothy Tardibono, M.A., J.D.,
                                  Vice President of Public Policy.

  Ms. WATERS. Madam Speaker, I yield myself such time as I may consume.
  As you know, the Jumpstart Our Business Startups Act, or the JOBS Act 
as it is commonly known, was signed into law about 1 year ago. This 
bill received the support of both Democrats and Republicans on the 
Financial Services Committee.
  Some of us, including me, have some concerns about this legislation. 
We are basically taking a chance that investors will not be harmed, but 
we're taking a chance because we are so anxious to create jobs, and 
this legislation is possibly yet another approach to creating jobs.

                              {time}  1250

  This is not the American Jobs Act, but this is a jobs act. And I 
believe that my colleague on the opposite side of the aisle, Mr. 
McHenry, really believes that this is going to create jobs. So we're 
going to take a chance that this will create jobs.
  Regulation A currently allows certain companies to raise up to $5 
million a year through a streamlined, less costly registration process, 
providing smaller companies with much-needed capital without overly 
burdening them with registration requirements. In the JOBS Act, we 
raise that level to $50 million, thus providing small companies with a 
greater ability to develop new products and create much-needed jobs for 
their local economies.
  The JOBS Act did not set a deadline under which the Commission needed 
to complete this rulemaking. Given the tremendous workload the 
Commission is managing--including setting up new offices under the Wall 
Street Reform Act, regulating new markets such as the over-the-counter 
derivatives market, and completing various other rulemakings under the 
JOBS Act--it is understandable that the SEC has not yet completed the 
Regulation A update. H.R. 701 would basically require that the SEC 
complete the Regulation A rulemaking by October 31 of this year.
  While I am reluctant to impose accelerated rulemaking timetables on 
the Commission, given the resource constraints they face, I will 
support this bill and my colleagues are supporting this bill, 
particularly since we understand that the SEC has indicated that they 
will finish the rulemaking before October 31 anyway, even without this 
legislation.
  Finally, I would ask that my colleagues support adequate funding for 
the Commission so that they have the staff resources to carry out this 
and other outstanding rulemakings under both the Wall Street Reform Act 
and the JOBS Act. This is very important.
  The SEC has a great responsibility carrying out the rulemaking for 
all that we have placed on them. As I know that they like to do this 
rulemaking in a timely fashion, we must recognize that they don't have 
all the resources they need. So I hope that as we're taking a chance 
with our colleagues on the opposite side of the aisle, hoping that this 
bill is going to produce the kinds of jobs that have been indicated, we 
want our friends on the opposite side of the aisle to reciprocate with 
support for the SEC and the funding that they need.
  With that, Madam Speaker, I reserve the balance of my time.
  Mr. McHENRY. A 418 percent increase since the late nineties with the 
Securities and Exchange Commission in terms of funding, I think, is 
adequate; but I certainly appreciate my colleague's concerns.
  We passed this provision in the fall of 2011 in this House with a 
floor vote of 421-1. This enhances this provision and provides for a 
deadline that is 19 months after the original act was signed. I think 
that's more than generous and sufficient.
  With that, I would like to yield 2\1/2\ minutes to my colleague from 
Florida (Mr. Ross), who is a quite vocal proponent of getting capital 
to small business.
  Mr. ROSS. Madam Speaker, as my colleague mentioned earlier, the JOBS 
Act passed into law with broad bipartisan support.
  It hasn't been easy for Republicans and Democrats to agree on a lot 
of things; but when it came to directing the SEC to get out of the way 
and allow small public companies to raise capital and create jobs in 
America, we agreed.
  Over a year later, we're still waiting for the SEC to implement 
several portions of a bill that should have been noncontroversial. This 
isn't the first instance. In title II of this act, the SEC failed in a 
time certain to follow the will of Congress and promulgate rules. 
That's why we're here today.
  Now, it's unclear when the SEC is going to promulgate the rules under 
title IV, which will allow faster capital formation for smaller public 
companies. But like the job creators and the unemployed in my district, 
I'm tired of waiting. We're down here today urging Members to support 
legislation to require the SEC to do their job and implement the rules 
under this title by the end of October.
  It's disheartening that we have to waste taxpayer dollars to do this, 
but I urge Members to vote in favor of H.R. 701. Madam Speaker, it's 
time for the SEC and all the regulators to stop stalling and stop 
ignoring the will and direction of Congress. It's time for regulators 
to do their jobs so Americans can go back to work and do their jobs, 
and it's time that Congress hold all regulators accountable.
  Thank you, Mr. Chairman, for this bill.
  Ms. WATERS. Mr. Speaker, I ask unanimous consent that the gentleman 
from Texas (Mr. Al Green) control the time for the remainder of the 
debate.
  The SPEAKER pro tempore (Mr. Pittenger). Is there objection to the 
request of the gentlewoman from California?
  There was no objection.
  Mr. AL GREEN of Texas. Mr. Speaker, I continue to reserve the balance 
of my time.
  Mr. McHENRY. We're prepared to close.
  Mr. AL GREEN of Texas. I will await your closing.
  Mr. McHENRY. If the gentleman yields back his time, I will then 
close. As the majority party, we have the right to close.
  Mr. AL GREEN of Texas. I yield back the balance of my time.
  Mr. McHENRY. Mr. Speaker, I would like to just simply close by saying 
that we should help small businesses.
  When we have congressional Members acknowledging pop culture, as I 
did in committee, there is always a debate about that. But as Beyonce 
once said, ``If you like it, you should have put a ring on it.'' 
Likewise, we should put a deadline on it. That's what this bill is all 
about.
  As I close, I will not quote Jay-Z, but I will say we should help 
small businesses. And I ask my colleagues for their support as I yield 
back the balance of my time.
  Mr. DINGELL. Mr. Speaker, I rise in opposition to H.R. 701. While I 
applaud the bipartisan efforts of my colleagues to help small 
businesses grow and create jobs, the sting of the effects of financial 
deregulation is still too strong to allow me to support this bill.
  I voted against similar legislation in the 112th Congress because I 
think raising the Securities and Exchange Commission (SEC) Regulation A 
threshold is a bad idea. I note that Congress has raised this threshold 
five times already. In each of those instances, though, Congress 
approved a modest increase that was relative to the rate of inflation 
and the purchasing power of the dollar. H.R. 701 would mandate an 
unprecedented tenfold increase in the current threshold of $5 million 
to $50 million. Such an increase strikes me as grotesquely large, 
especially since inflation has risen only 165 percent since 1980.
  H.R. 701 will force the SEC--without additional appropriations--to do 
something that constitutes a tremendous incitement to perpetrate fraud 
on investors. I cannot in good conscience support this bill and urge my 
colleagues to vote it down.
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentleman from North Carolina (Mr. McHenry) that the House suspend the 
rules and pass the bill, H.R. 701, as amended.

[[Page 6944]]

  The question was taken.
  The SPEAKER pro tempore. In the opinion of the Chair, two-thirds 
being in the affirmative, the ayes have it.
  Mr. AL GREEN of Texas. 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.

                          ____________________