[House Report 115-544]
[From the U.S. Government Publishing Office]


115th Congress      }                                {         Report
                        HOUSE OF REPRESENTATIVES
 2d Session         }                                {         115-544
======================================================================



 
                 REGULATION AT IMPROVEMENT ACT OF 2017

                                _______
                                

February 2, 2018.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

Mr. Hensarling, from the Committee on Financial Services, submitted the 
                               following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 4263]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 4263) to amend the Securities Act of 1933 with 
respect to small company capital formation, and for other 
purposes, having considered the same, report favorably thereon 
without amendment and recommend that the bill do pass.

                          Purpose and Summary

    On November 11, 2017, Representative Tom MacArthur 
introduced the ``Regulation A+ Improvement Act'' to increase 
the amount that companies can offer and sell under Securities 
and Exchange Commission (SEC) Regulation A, Tier 2 (aka 
Regulation A+) from $50 million to $75 million, to be adjusted 
for inflation by the SEC every 2 years to the nearest $10,000.

                  Background and Need for Legislation

    Despite the expansion of Regulation A+ to $50 million has 
been a successful provision of the Jumpstart Our Business 
Startups or JOBS Act (P.L. 112-106), a further expansion of 
this exemption will alleviate disproportionate regulatory 
burdens on small and emerging businesses that are a key source 
of innovation and job creation in our economy.
    Title IV of the JOBS Act directed the SEC to issue rules to 
update its Regulation A (Reg A), which exempted small offerings 
of up to $5 million within a 12-month period from federal 
registration. Even though these small offerings are exempted 
under Reg A from federal registration, they remain subject to 
state securities law registration and qualification 
requirements. Historically, a limited number of issuers used 
the Reg A exemption. From 2009 through 2012, there were 19 
qualified Reg A offerings for a total offering amount of 
approximately $73 million. During the same period, there were 
approximately 27,870 offerings for a total offering amount of 
approximately $26 billion that were eligible to take advantage 
of the Reg A exemption but did not.
    The updated JOBS Act exemption, now known as Reg A+, 
increased the amount companies could offer from $5 million to 
$50 million within a 12-month period. Reg A+ would also preempt 
state registration and qualification requirements. The SEC 
proposed rules to implement Title IV on December 18, 2013, and 
the comment period closed on March 24, 2014. The SEC received 
more than 100 comment letters. On September 25, 2014, 
Representatives Scott Garrett and Patrick McHenry wrote the SEC 
to endorse its Reg A+ preemption proposal, pointing out that 
preemption ``provides for a consistency of regulation for 
national offerings'' and that it would allow ``small and 
medium-sized businesses to undertake Reg A+ offerings while 
avoiding the prohibitively expensive complexities of complying 
with up to 50 different state regulators and associated 
regulations.''
    On March 25, 2015, the SEC approved the final rule to 
implement Title IV of the JOBS Act. The final rule provides for 
two tiers of offerings: Tier 1, for offerings of securities of 
up to $20 million in a 12-month period, with not more than $6 
million in offers by selling security-holders that are 
affiliates of the issuer; and Tier 2, for offerings of 
securities of up to $50 million in a 12-month period, with not 
more than $15 million in offers by selling security-holders 
that are affiliates of the issuer. Both tiers are subject to 
certain basic requirements, while Tier 2 offerings are also 
subject to additional disclosure and ongoing reporting 
requirements. The final rule also provides for the preemption 
of state securities law registration and qualification 
requirements for securities offered or sold to ``qualified 
purchasers'' in Tier 2 offerings. By May 2016, the SEC had 
qualified over 30 Reg A+ offerings for companies seeking over 
$500 million in capital.
    Title IV also requires the SEC to re-evaluate and increase 
the $50 million offering threshold within two years of 
enactment and every two years thereafter and to explain to 
Congress if it chooses not to raise the offering threshold. On 
April 5, 2016, SEC staff informed the Financial Services 
Committee that the $50 million threshold would remain in place 
through 2018 because of a lack of information available on Reg 
A+ offerings since the rule was finalized in 2015.
    This delay is unnecessary. Since the amendments to Reg A 
became effective in June 2015, the rate of Reg A+ securities 
offerings has increased. As of October 2016, prospective 
issuers have publicly filed offering statements for 147 
Regulation A+ offerings, seeking up to $2.6 billion in 
financing. Of these, the SEC qualified approximately 81 
offerings seeking up to $1.5 billion, and $190 million has been 
reported raised, though this understates the true amount raised 
due to reporting time frames. As a comparison, in the 12 months 
leading up to June 18, 2015, there were approximately 51 
filings seeking to raise $159 million, including 12 qualified 
filings seeking to raise up to $34 million. Average issuers 
were seeking $18 million in a given, qualified offering, the 
average for Tier 2 was $26 million and the average for Tier 1 
was $10 million, still well below the thresholds for each Tier. 
Despite the increase in offerings after the adoption of Reg A+, 
companies making Reg A+ offerings sought significantly lower 
amounts of capital than companies making use of other 
exemptions, such as Regulation D.
    During the comment period for Reg A+, the SEC received 
comments that Reg A+ should be expanded beyond the $50 million 
threshold. Former SEC Commissioner Dan Gallagher also expressed 
disappointment that the Tier 2 offering threshold was not 
raised from the statutory floor of $50 million provided in the 
JOBS Act, stating, ``Three years after the [JOBS Act] was 
enacted, [the SEC] should have exercised our clear authority 
under the JOBS Act to raise the offering limit to $75 
million.''
    By answering these calls to expand Reg A+, H.R. 4263 will 
make it possible for even more small issuers to reap of the 
benefits of reduced registration requirements. Hester Peirce, a 
Senior Fellow at the Mercatus Center, stated during a Financial 
Services Committee hearing on the Financial CHOICE Act that:

          The CHOICE Act's changes to the JOBS Act would 
        increase the options to companies seeking capital 
        privately or through public offerings, and the changes 
        would expand opportunities for investors and employees 
        to participate in companies' prosperity. Examples 
        include making available to more companies the JOBS 
        Act's balanced approach to capital-raising under 
        Regulation A and its test-the-waters provision. Prior 
        to the JOBS Act's changes to Regulation A, that 
        provision languished unused by companies, so it is 
        important to revisit different avenues for raising 
        capital frequently to ensure their continued 
        usefulness. In its October 2017 report on Capital 
        Markets, the Department of the Treasury included a 
        recommendation that the Tier 2 offering limit be 
        increased to $75 million, which would allow private 
        companies to consider a ``mini-IPO'' under Reg A+ as a 
        potentially less costly alternative to raise capital.

    Finally, H.R. 4263 is consistent with the Department of 
Treasury's recommendation in its October 2017 report on Capital 
Markets, issued pursuant to President Trump's February 3, 2017 
Executive Order 13772, that the Tier 2 offering limit be 
increased to $75 million because such would allow private 
companies to consider a ``mini-IPO'' under regulation A+ as a 
potentially less costly alternative to raise capital.

                                Hearings

    The Committee on Financial Services held hearings examining 
matters relating to H.R. 4263 on April 26, 2017, April 28, 
2017, March 22, 2017, July 18, 2017 and November 3, 2017.

                        Committee Consideration

    The Committee on Financial Services met in open session on 
November 14, 2017, November, 15, 2017, and ordered H.R. 4263 to 
be reported favorably to the House without amendment by a 
recorded vote of 37 yeas to 23 nays (Record vote no. FC-111), a 
quorum being present.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. The 
sole recorded vote was on a motion by Chairman Hensarling to 
report the bill favorably to the House without amendment. The 
motion was agreed to by a recorded vote of 37 yeas to 23 nays 
(Record vote no. FC-111), a quorum being present.


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the findings and recommendations of 
the Committee based on oversight activities under clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
are incorporated in the descriptive portions of this report.

                    Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee states that H.R. 4263 
will allow small business to have greater access to the capital 
that they need to grow by increasing the offering amount that 
companies can offer under Tier 2 of Regulation A.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of new budget authority, entitlement 
authority, or tax expenditures or revenues contained in the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to section 402 of the Congressional 
Budget Act of 1974.

                 Congressional Budget Office Estimates

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                  Washington, DC, January 31, 2018.
Hon. Jeb Hensarling,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 4263, the 
Regulation At Improvement Act of 2017.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Stephen 
Rabent.
            Sincerely,
                                                Keith Hall,
                                                          Director.
    Enclosure.

H.R. 4263--Regulation At Improvement Act of 2017

    Under current law, certain companies offering less than $50 
million in securities over a 12-month period are exempt from 
some disclosure and registration requirements enforced by the 
Securities and Exchange Commission (SEC). Securities offered 
under that exemption also are exempt from state registration 
requirements. H.R. 4263 would raise to $75 million the maximum 
amount companies can offer and sell under that exemption and 
would direct the SEC to adjust that amount for inflation every 
two years.
    Using information from the SEC, CBO estimates that 
implementing H.R. 4263 would cost less than $500,000 for the 
agency to amend its rules. Moreover, the SEC is authorized to 
collect fees sufficient to offset its annual appropriation; 
therefore, CBO estimates that the net effect on discretionary 
spending would be negligible, assuming appropriation actions 
consistent with that authority.
    Enacting H.R. 4263 would not affect direct spending or 
revenues; therefore, pay-as-you-go procedures do not apply.
    CBO estimates that enacting H.R. 4263 would not increase 
net direct spending or on-budget deficits in any of the four 
consecutive 10-year periods beginning in 2028.
    H.R. 4263 contains no intergovernmental mandates as defined 
in the Unfunded Mandates Reform Act (UMRA).
    If the SEC increases fees to offset the costs of amending 
its rules as required by the bill, H.R. 4263 would increase the 
cost of an existing mandate on private entities required to pay 
those fees. CBO estimates that the incremental cost of the 
mandate would be small and below the annual threshold for 
private-sector mandates established in UMRA ($156 million in 
2017, adjusted annually for inflation).
    The CBO staff contacts for this estimate are Stephen Rabent 
(for federal costs) and Rachel Austin (for mandates). The 
estimate was approved by H. Samuel Papenfuss, Deputy Assistant 
Director for Budget Analysis.

                       Federal Mandates Statement

    This information is provided in accordance with section 423 
of the Unfunded Mandates Reform Act of 1995.
    The Committee has determined that the bill does not contain 
Federal mandates on the private sector. The Committee has 
determined that the bill does not impose a Federal 
intergovernmental mandate on State, local, or tribal 
governments.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of the section 
102(b)(3) of the Congressional Accountability Act.

                         Earmark Identification

    With respect to clause 9 of rule XXI of the Rules of the 
House of Representatives, the Committee has carefully reviewed 
the provisions of the bill and states that the provisions of 
the bill do not contain any congressional earmarks, limited tax 
benefits, or limited tariff benefits within the meaning of the 
rule.

                    Duplication of Federal Programs

    In compliance with clause 3(c)(5) of rule XIII of the Rules 
of the House of Representatives, the Committee states that no 
provision of the bill establishes or reauthorizes: (1) a 
program of the Federal Government known to be duplicative of 
another Federal program; (2) a program included in any report 
from the Government Accountability Office to Congress pursuant 
to section 21 of Public Law 111-139; or (3) a program related 
to a program identified in the most recent Catalog of Federal 
Domestic Assistance, published pursuant to the Federal Program 
Information Act (Pub. L. No. 95-220, as amended by Pub. L. No. 
98-169).

                   Disclosure of Directed Rulemaking

    Pursuant to section 3(i) of H. Res. 5, (115th Congress), 
the following statement is made concerning directed 
rulemakings: The Committee estimates that the bill requires no 
directed rulemakings within the meaning of such section.

             Section-by-Section Analysis of the Legislation


Section 1. Short title

    This section cites H.R. 4263 as the ``Regulation At 
Improvement Act of 2017''

Section 2. Jobs Act-Related Exemption

    This section amends section 3(b) of the Securities Act of 
1933 to increase the eligible offerings amount from $50,000,000 
to $75,000,000 while being adjusted for inflation for every 2 
years to the nearest $10,000.

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, and existing law in which no 
change is proposed is shown in roman):

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, and existing law in which no 
change is proposed is shown in roman):

                         SECURITIES ACT OF 1933


TITLE I

           *       *       *       *       *       *       *



                          exempted securities

  Sec. 3. (a) Except as hereinafter expressly provided, the 
provisions of this title shall not apply to any of the 
following classes of securities:
          (1) Reserved.
          (2) Any security issued or guaranteed by the United 
        States or any Territory thereof, or by the District of 
        Columbia, or by any State of the United States, or by 
        any political subdivision of a State or Territory, or 
        by any public instrumentality of one or more States or 
        Territories, or by any person controlled or supervised 
        by and acting as an instrumentality of the Government 
        of the United States pursuant to authority granted by 
        the Congress of the United States; or any certificate 
        of deposit for any of the foregoing; or any security 
        issued or guaranteed by any bank; or any security 
        issued by or representing an interest in or a direct 
        obligation of a Federal Reserve bank; or any interest 
        or participation in any common trust fund or similar 
        fund that is excluded from the definition of the term 
        ``investment company'' under section 3(c)(3) of the 
        Investment Company Act of 1940; or any security which 
        is an industrial development bond (as defined in 
        section 103(c)(2) of the Internal Revenue Code of 1954) 
        the interest on which is excludable from gross income 
        under section 103(a)(1) of such Code if, by reason of 
        the application of paragraph (4) or (6) of section 
        103(c) of such Code (determined as if paragraphs 
        (4)(A), (5), and (7) were not included in such section 
        103(c)), paragraph (1) of such section 103(c) does not 
        apply to such security; or any interest or 
        participation in a single trust fund, or in a 
        collective trust fund maintained by a bank, or any 
        security arising out of a contract issued by an 
        insurance company, which interest, participation, or 
        security is issued in connection with (A) a stock 
        bonus, pension, or profit-sharing plan which meets the 
        requirements for qualification under section 401 of the 
        Internal Revenue Code of 1954, (B) an annuity plan 
        which meets the requirements for the deduction of the 
        employer's contributions under section 404(a)(2) of 
        such Code, (C) a governmental plan as defined in 
        section 414(d) of such Code which has been established 
        by an employer for the exclusive benefit of its 
        employees or their beneficiaries for the purpose of 
        distributing to such employees or their beneficiaries 
        the corpus and income of the funds accumulated under 
        such plan, if under such plan it is impossible, prior 
        to the satisfaction of all liabilities with respect to 
        such employees and their beneficiaries, for any part of 
        the corpus or income to be used for, or diverted to, 
        purposes other than the exclusive benefit of such 
        employees or their beneficiaries, or (D) a church plan, 
        company, or account that is excluded from the 
        definition of an investment company under section 
        3(c)(14) of the Investment Company Act of 1940, other 
        than any plan described in subparagraph (A), (B), (C), 
        or (D) of this paragraph (i) the contributions under 
        which are held in a single trust fund or in a separate 
        account maintained by an insurance company for a single 
        employer and under which an amount in excess of the 
        employer's contribution is allocated to the purchase of 
        securities (other than interests or participations in 
        the trust or separate account itself) issued by the 
        employer or any company directly or indirectly 
        controlling, controlled by, or under common control 
        with the employer, (ii) which covers employees some or 
        all of whom are employees within the meaning of section 
        401(c)(1) of such Code (other than a person 
        participating in a church plan who is described in 
        section 414(e)(3)(B) of the Internal Revenue Code of 
        1986), or (iii) which is a plan funded by an annuity 
        contract described in section 403(b) of such Code 
        (other than a retirement income account described in 
        section 403(b)(9) of the Internal Revenue Code of 1986, 
        to the extent that the interest or participation in 
        such single trust fund or collective trust fund is 
        issued to a church, a convention or association of 
        churches, or an organization described in section 
        414(e)(3)(A) of such Code establishing or maintaining 
        the retirement income account or to a trust established 
        by any such entity in connection with the retirement 
        income account). The Commission, by rules and 
        regulations or order, shall exempt from the provisions 
        of section 5 of this title any interest or 
        participation issued in connection with a stock bonus, 
        pension, profit-sharing, or annuity plan which covers 
        employees some or all of whom are employees within the 
        meaning of section 401(c)(1) of the Internal Revenue 
        Code of 1954, if and to the extent that the Commission 
        determines this to be necessary or appropriate in the 
        public interest and consistent with the protection of 
        investors and the purposes fairly intended by the 
        policy and provisions of this title. For purposes of 
        this paragraph, a security issued or guaranteed by a 
        bank shall not include any interest or participation in 
        any collective trust fund maintained by a bank; and the 
        term ``bank'' means any national bank, or any banking 
        institution organized under the laws of any State, 
        territory, or the District of Columbia, the business of 
        which is substantially confined to banking and is 
        supervised by the State or territorial banking 
        commission or similar official; except that in the case 
        of a common trust fund or similar fund, or a collective 
        trust fund, the term ``bank'' has the same meaning as 
        in the Investment Company Act of 1940;
          (3) Any note, draft, bill of exchange, or banker's 
        acceptance which arises out of a current transaction or 
        the proceeds of which have been or are to be used for 
        current transactions, and which has a maturity at the 
        time of issuance of not exceeding nine months, 
        exclusive of days of grace, or any renewal thereof the 
        maturity of which is likewise limited;
          (4) Any security issued by a person organized and 
        operated exclusively for religious, educational, 
        benevolent, fraternal, charitable, or reformatory 
        purposes and not for pecuniary profit, and no part of 
        the net earnings of which inures to the benefit of any 
        person, private stockholder, or individual, or any 
        security of a fund that is excluded from the definition 
        of an investment company under section 3(c)(10)(B) of 
        the Investment Company Act of 1940;
          (5) Any security issued (A) by a savings and loan 
        association, building and loan association, cooperative 
        bank, homestead association, or similar institution, 
        which is supervised and examined by State or Federal 
        authority having supervision over any such institution; 
        or (B) by (i) a farmer's cooperative organization 
        exempt from tax under section 521 of the Internal 
        Revenue Code of 1954, (ii) a corporation described in 
        section 501(c)(16) of such Code and exempt from tax 
        under section 501(a) of such Code, or (iii) a 
        corporation described in section 501(c)(2) of such Code 
        which is exempt from tax under section 501(a) of such 
        Code and is organized for the exclusive purpose of 
        holding title to property, collecting income therefrom, 
        and turning over the entire amount thereof, less 
        expenses, to an organization or corporation described 
        in clause (i) or (ii);
          (6) Any interest in a railroad equipment trust. For 
        purposes of this paragraph ``interest in a railroad 
        equipment trust'' means any interest in an equipment 
        trust, lease, conditional sales contract, or other 
        similar arrangement entered into, issued, assumed, 
        guaranteed by, or for the benefit of, a common carrier 
        to finance the acquisition of rolling stock, including 
        motive power;
          (7) Certificates issued by a receiver or by a trustee 
        in bankruptcy, with the approval of the court;
          (8) Any insurance or endowment policy or annuity 
        contract or optional annuity contract, issued by a 
        corporation subject to the supervision of the insurance 
        commissioner, bank commissioner, or any agency or 
        officer performing like functions, of any State or 
        Territory of the United States or the District of 
        Columbia;
          (9) Except with respect to a security exchanged in a 
        case under title 11, any security exchanged by the 
        issuer with its existing security holders exclusively 
        where no commission or other remuneration is paid or 
        given directly or indirectly for soliciting such 
        exchange;
          (10) Except with respect to a security exchanged in a 
        case under title 11, any security which is issued in 
        exchange for one or more bona fide outstanding 
        securities, claims or property interests, or partly in 
        such exchange and partly for cash, where the terms and 
        conditions of such issuance and exchange are approved, 
        after a hearing upon the fairness of such terms and 
        conditions at which all persons to whom it is proposed 
        to issue securities in such exchange shall have the 
        right to appear, by any court, or by any official or 
        agency of the United States, or by any State or 
        Territorial banking or insurance commission or other 
        governmental authority expressly authorized by law to 
        grant such approval;
          (11) Any security which is a part of an issue offered 
        and sold only to persons resident within a single State 
        or Territory, where the issuer of such security is a 
        person resident and doing business within or, if a 
        corporation, incorporated by and doing business within, 
        such State or Territory.
          (12) Any equity security issued in connection with 
        the acquisition by a holding company of a bank under 
        section 3(a) of the Bank Holding Company Act of 1956 or 
        a savings association under section 10(e) of the Home 
        Owners' Loan Act, if--
                  (A) the acquisition occurs solely as part of 
                a reorganization in which security holders 
                exchange their shares of a bank or savings 
                association for shares of a newly formed 
                holding company with no significant assets 
                other than securities of the bank or savings 
                association and the existing subsidiaries of 
                the bank or savings association;
                  (B) the security holders receive, after that 
                reorganization, substantially the same 
                proportional share interests in the holding 
                company as they held in the bank or savings 
                association, except for nominal changes in 
                shareholders' interests resulting from lawful 
                elimination of fractional interests and the 
                exercise of dissenting shareholders' rights 
                under State or Federal law;
                  (C) the rights and interests of security 
                holders in the holding company are 
                substantially the same as those in the bank or 
                savings association prior to the transaction, 
                other than as may be required by law; and
                  (D) the holding company has substantially the 
                same assets and liabilities, on a consolidated 
                basis, as the bank or savings association had 
                prior to the transaction.
        For purposes of this paragraph, the term ``savings 
        association'' means a savings association (as defined 
        in section 3(b) of the Federal Deposit Insurance Act) 
        the deposits of which are insured by the Federal 
        Deposit Insurance Corporation.
          (13) Any security issued by or any interest or 
        participation in any church plan, company or account 
        that is excluded from the definition of an investment 
        company under section 3(c)(14) of the Investment 
        Company Act of 1940.
          (14) Any security futures product that is--
                  (A) cleared by a clearing agency registered 
                under section 17A of the Securities Exchange 
                Act of 1934 or exempt from registration under 
                subsection (b)(7) of such section 17A; and
                  (B) traded on a national securities exchange 
                or a national securities association registered 
                pursuant to section 15A(a) of the Securities 
                Exchange Act of 1934.
  (b) Additional Exemptions.--
          (1) Small issues exemptive authority.--The Commission 
        may from time to time by its rules and regulations, and 
        subject to such terms and conditions as may be 
        prescribed therein, add any class of securities to the 
        securities exempted as provided in this section, if it 
        finds that the enforcement of this title with respect 
        to such securities is not necessary in the public 
        interest and for the protection of investors by reason 
        of the small amount involved or the limited character 
        of the public offering; but no issue of securities 
        shall be exempted under this subsection where the 
        aggregate amount at which such issue is offered to the 
        public exceeds $5,000,000.
          (2) Additional issues.--The Commission shall by rule 
        or regulation add a class of securities to the 
        securities exempted pursuant to this section in 
        accordance with the following terms and conditions:
                  (A) The aggregate offering amount of all 
                securities offered and sold within the prior 
                12-month period in reliance on the exemption 
                added in accordance with this paragraph shall 
                not exceed [$50,000,000] $75,000,000, adjusted 
                for inflation by the Commission every 2 years 
                to the nearest $10,000 to reflect the change in 
                the Consumer Price Index for All Urban 
                Consumers published by the Bureau of Labor 
                Statistics.
                  (B) The securities may be offered and sold 
                publicly.
                  (C) The securities shall not be restricted 
                securities within the meaning of the Federal 
                securities laws and the regulations promulgated 
                thereunder.
                  (D) The civil liability provision in section 
                12(a)(2) shall apply to any person offering or 
                selling such securities.
                  (E) The issuer may solicit interest in the 
                offering prior to filing any offering 
                statement, on such terms and conditions as the 
                Commission may prescribe in the public interest 
                or for the protection of investors.
                  (F) The Commission shall require the issuer 
                to file audited financial statements with the 
                Commission annually.
                  (G) Such other terms, conditions, or 
                requirements as the Commission may determine 
                necessary in the public interest and for the 
                protection of investors, which may include--
                          (i) a requirement that the issuer 
                        prepare and electronically file with 
                        the Commission and distribute to 
                        prospective investors an offering 
                        statement, and any related documents, 
                        in such form and with such content as 
                        prescribed by the Commission, including 
                        audited financial statements, a 
                        description of the issuer's business 
                        operations, its financial condition, 
                        its corporate governance principles, 
                        its use of investor funds, and other 
                        appropriate matters; and
                          (ii) disqualification provisions 
                        under which the exemption shall not be 
                        available to the issuer or its 
                        predecessors, affiliates, officers, 
                        directors, underwriters, or other 
                        related persons, which shall be 
                        substantially similar to the 
                        disqualification provisions contained 
                        in the regulations adopted in 
                        accordance with section 926 of the 
                        Dodd-Frank Wall Street Reform and 
                        Consumer Protection Act (15 U.S.C. 77d 
                        note).
          (3) Limitation.--Only the following types of 
        securities may be exempted under a rule or regulation 
        adopted pursuant to paragraph (2): equity securities, 
        debt securities, and debt securities convertible or 
        exchangeable to equity interests, including any 
        guarantees of such securities.
          (4) Periodic disclosures.--Upon such terms and 
        conditions as the Commission determines necessary in 
        the public interest and for the protection of 
        investors, the Commission by rule or regulation may 
        require an issuer of a class of securities exempted 
        under paragraph (2) to make available to investors and 
        file with the Commission periodic disclosures regarding 
        the issuer, its business operations, its financial 
        condition, its corporate governance principles, its use 
        of investor funds, and other appropriate matters, and 
        also may provide for the suspension and termination of 
        such a requirement with respect to that issuer.
          (5) Adjustment.--Not later than 2 years after the 
        date of enactment of the Small Company Capital 
        Formation Act of 2011 and every 2 years thereafter, the 
        Commission shall review the offering amount limitation 
        described in paragraph (2)(A) and shall increase [such 
        amount as] such amount, in addition to the adjustment 
        for inflation provided for under such paragraph (2)(A), 
        as the Commission determines appropriate. If the 
        Commission determines not to increase [such amount, it] 
        such amount, in addition to the adjustment for 
        inflation provided for under such paragraph (2)(A), it 
        shall report to the Committee on Financial Services of 
        the House of Representatives and the Committee on 
        Banking, Housing, and Urban Affairs of the Senate on 
        its reasons for not increasing the amount.
  (c) The Commission may from time to time by its rules and 
regulations and subject to such terms and conditions as may be 
prescribed therein, add to the securities exempted as provided 
in this section any class of securities issued by a small 
business investment company under the Small Business Investment 
Act of 1958 if it finds, having regard to the purposes of that 
Act, that the enforcement of this Act with respect to such 
securities is not necessary in the public interest and for the 
protection of investors.

           *       *       *       *       *       *       *


                             MINORITY VIEWS

    H.R. 4263 would increase the limit established by the Jump 
Start Our Business Startups (JOBS) Act for Regulation A+ 
offerings from $50 million to $75 million, and adjust it for 
inflation every two years. Such an increase is unnecessary, not 
supported by the data, and potentially harmful.
    First, the SEC only recently implemented Regulation A+, 
which became effective in June 2015 to allow companies claiming 
Tier 2 status to raise $50 million from the public with less 
regulatory requirements and oversight than a registered 
offering. The limited data so far suggests that there is no 
need to raise that $50 million limit. An SEC study of 
Regulation A+ offerings between June 19, 2015 and October 31, 
2016 found that the average issuer was only seeking up to 
approximately $18 million and issuers were generally small, 
early stage companies with limited collateral, no revenue, and 
no net income. According to SEC staff, as of August 31, 2017 
only thirty-six percent of the 144 issuers using Tier 2 sought 
the maximum amount. However, only 7 percent of the 44 issuers 
that have actually completed their Tier 2 offerings have raised 
the maximum amount.
    Second, Congress specifically acknowledged that it may be 
appropriate to raise the Regulation A+ limit in the JOBS Act in 
the future by requiring the SEC to review the offering limit 
every two years, and if it determines not to increase the 
limit, to report its reasons to Congress. On April 5, 2016, the 
SEC sent Congress its report, which stated: ``[g]iven the short 
period of time that the final rules have been in effect and in 
light of the limited number of Regulation A+ offerings 
qualified and completed to date, the Commission does not 
believe that the information currently reported by companies on 
the amount of capital raised pursuant to Regulation A+ is 
sufficient to determine whether it would be appropriate to 
propose an increase in the Tier 2 $50 million offering limit.'' 
The SEC is due to conduct additional analysis of the offering 
limit next April.
    Finally, the bill arbitrarily increases the offering limit 
without any additional investor protections. According to 
Americans for Financial Reform, which opposes the bill, 
``[i]ncreasing the $50 million cap will only further reduce 
incentives for companies to enter public markets, which is 
harmful since public markets offer greater investor protection 
and liquidity.'' Indeed, under the current system, six Tier 2 
issuers have already listed their shares on an exchange, 
becoming true public companies. This positive development 
suggests that Regulation A+ is working as intended and 
expanding it could discourage companies from becoming public. 
The bill is also opposed by Public Citizen and Consumer 
Federation of America.
    For all of these reasons, we oppose H.R. 4263.

                                   Michael E. Capuano.
                                   Stephen F. Lynch.
                                   Carolyn B. Maloney.
                                   Nydia M. Velazquez.
                                   Brad Sherman.
                                   Daniel T. Kildee.
                                   Maxine Waters.
                                   Al Green.
                                   Gwen Moore.
                                   Gregory W. Meeks.
                                   Vicente Gonzalez.
                                   Emanuel Cleaver.

                                  [all]