[House Report 118-88]
[From the U.S. Government Publishing Office]


118th Congress    }                                     {       Report
                        HOUSE OF REPRESENTATIVES
 1st Session      }                                     {       118-88

======================================================================

 
 TO AMEND THE FEDERAL SECURITIES LAWS TO SPECIFY THE PERIODS FOR WHICH 
FINANCIAL STATEMENTS ARE REQUIRED TO BE PROVIDED BY AN EMERGING GROWTH 
                    COMPANY, AND FOR OTHER PURPOSES

                                _______
                                

  June 5, 2023.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

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

                              R E P O R T

                        [To accompany H.R. 2608]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 2608) to amend the Federal securities laws to 
specify the periods for which financial statements are required 
to be provided by an emerging growth company, and for other 
purposes, having considered the same, reports favorably thereon 
with an amendment and recommends that the bill as amended do 
pass.
    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

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

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

                          Purpose and Summary

    Introduced on April 13, 2023, by Representative Patrick 
McHenry, H.R. 2608, a bill to amend the Federal securities laws 
to specify the periods for which financial statements are 
required to be provided by an emerging growth company, and for 
other purposes, would establish that an Emerging Growth Company 
(EGC), as well as any issuer that went public using EGC 
disclosure obligations, only needs to provide two years of 
audited financial statements.

                  Background and Need for Legislation

    In some instances, misconceptions have occurred relating to 
the JOBS Act of 2012's accommodation allowing an EGC to provide 
only two years of audited financial statements in its IPO 
registration statement. Not for any earlier period. This has 
occurred occasionally, for example, in the case of acquired 
company financial statements and for follow-on offerings 
involving an EGC that lost its EGC status during IPO 
registration.
    This bill updates the EGC financial statement accommodation 
to clarify that an EGC need not provide financial statements 
for a period earlier than the two years of audited financial 
statements required in its IPO registration statement. This 
update would increase efficiency by ensuring that EGCs can 
consistently rely on the JOBS Act's scaled disclosure 
accommodation by eliminating aberrational results that have 
sometimes required burdensome and unnecessary financial 
statement obligations. Absent this clarification, in some 
scenarios EGC issuers have needed to provide audited financial 
statements for financial periods preceding the earliest period 
in their IPO registration statements. This bill would clearly 
establish that an EGC need not, under any circumstances, 
provide financial statements for any period preceding the 
earliest period required to be presented in the IPO 
registration statement.

                                Hearing

    The Subcommittee on Capital Markets of the Committee on 
Financial Services held a hearing examining matters relating to 
H.R. 2608 on March 9, 2023.

                        Committee Consideration

    The Committee on Financial Services met in open session on 
April 26, 2023, and ordered H.R. 2608 to be reported favorably 
to the House as amended by a recorded vote of 41 ayes to 0 nays 
(Record vote no. FC-41), a quorum being present. Before the 
question was called to order the bill favorably reported, the 
Committee adopted an amendment in the nature of a substitute 
offered by Mr. McHenry by voice vote.

                            Committee Votes

    Clause 2(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the order to report legislation and amendments thereto. H.R. 
2608 was ordered reported favorably to the House as amended by 
a recorded vote of 41 ayes to 0 nays (Record vote no. FC-41), a 
quorum being present.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                      Committee Oversight Findings

    Pursuant to clause 3(c) 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 goal of H.R. 2608 is to establish 
that an Emerging Growth Company (EGC), as well as any issuer 
that went public using EGC disclosure obligations, only needs 
to provide two years of audited financial statements.

   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 1973.

                 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:

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    H.R. 2608 would change the reporting period for financial 
statements submitted to the Securities and Exchange Commission 
(SEC) by an emerging growth company (EGC) or former EGC when it 
acquires another company. The bill would ensure that EGCs and 
former EGCs submit financial statements for their target 
companies that cover a reporting period that does not exceed 
the earliest audited period for the EGC or former EGC, as 
presented in connection with an initial public offering. Under 
current law, when reporting to the SEC, acquiring companies 
(including EGCs) must submit up to two years of financial 
statements for their target companies.
    Using information about the cost of similar provisions, CBO 
estimates that it would cost the SEC an insignificant amount to 
issue rules to implement the bill. However, because the 
commission is authorized to collect fees each year to offset 
its annual appropriation, CBO expects that the net effect on 
discretionary spending over the 2023-2028 period would be 
negligible, assuming appropriation actions consistent with that 
authority.
    If the SEC increases fees to offset the costs associated 
with implementing the bill, H.R. 2608 would increase the cost 
of an existing mandate on private entities required to pay 
those assessments. CBO estimates that the incremental cost of 
that mandate would be small and fall below the annual threshold 
established in the Unfunded Mandates Reform Act (UMRA) for 
private-sector mandates ($198 million in 2023, adjusted 
annually for inflation).
    H.R. 2608 contains no intergovernmental mandates as defined 
in UMRA.
    The CBO staff contact for this estimate is David Hughes. 
The estimate was reviewed by Ann E. Futrell, Senior Adviser for 
Budget Analysis.
                                         Phillip L. Swagel,
                             Director, Congressional Budget Office.

                       Federal Mandates Statement

    This information is provided in accordance with section 423 
of the Unfunded Mandates Reform Act of 1995.
    Per the estimate from CBO, H.R. 2608 could increase the 
cost of an existing mandate on private entities if the SEC 
increased costs to implement the bill. However, this increase 
would still fall below the annual threshold for private-sector 
mandates as defined in the Unfunded Mandates Reform Act.
    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 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 a program of 
the Federal Government known to be duplicative of another 
Federal program, including any program that was included in a 
report to Congress pursuant to section 21 of the Public Law 
111-139 or the most recent Catalog of Federal Domestic 
Assistance.

             Section-by-Section Analysis of the Legislation


Section 1. Financial statement reporting requirements for Emerging 
        Growth Companies

    This section amends the Securities Act of 1933 and the 
Securities Act of 1934 to state that an Emerging Growth Company 
(EGC), as well as any issuer that went public using EGC 
disclosure obligations, does not need to provide financial 
statements or acquired company financial statements for any 
period prior to the earliest audited period the EGC provided in 
connection with its initial public offering (two years of 
audited financial statements).

         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 below, as prepared by the 
Office of Legislative Counsel.

         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 italics, and existing law in which no 
change is proposed is shown in roman):

                         SECURITIES ACT OF 1933


TITLE I--

           *       *       *       *       *       *       *



             information required in registration statement

  Sec. 7.
  (a) Information Required in Registration Statement.--
          (1) In general.--The registration statement, when 
        relating to a security other than a security issued by 
        a foreign government, or political subdivision thereof, 
        shall contain the information, and be accompanied by 
        the documents, specified in Schedule A, and when 
        relating to a security issued by a foreign government, 
        or political subdivision thereof, shall contain the 
        information, and be accompanied by the documents, 
        specified in Schedule B; except that the Commission may 
        by rules or regulations provide that any such 
        information or document need not be included in respect 
        of any class of issuers or securities if it finds that 
        the requirement of such information or document is 
        inapplicable to such class and that disclosure fully 
        adequate for the protection of investors is otherwise 
        required to be included within the registration 
        statement. If any accountant, engineer, or appraiser, 
        or any person whose profession gives authority to a 
        statement made by him, is named as having prepared or 
        certified any part of the registration statement, or is 
        named as having prepared or certified a report or 
        valuation for use in connection with the registration 
        statement, the written consent of such person shall be 
        filed with the registration statement. If any such 
        person is named as having prepared or certified a 
        report or valuation (other than a public official 
        document or statement) which is used in connection with 
        the registration statement, but is not named as having 
        prepared or certified such report or valuation for use 
        in connection with the registration statement, the 
        written consent of such person shall be filed with the 
        registration statement unless the Commission dispenses 
        with such filing as impracticable or as involving undue 
        hardship on the person filing the registration 
        statement. Any such registration statement shall 
        contain such other information, and be accompanied by 
        such other documents, as the Commission may by rules or 
        regulations require as being necessary or appropriate 
        in the public interest or for the protection of 
        investors.
          (2) Treatment of emerging growth companies.--An 
        emerging growth company--
                  (A) need not present more than 2 years of 
                audited financial statements in order for the 
                registration statement of such emerging growth 
                company with respect to an initial public 
                offering of its common equity securities to be 
                effective, and in any other registration 
                statement to be filed with the Commission, an 
                emerging growth company need not present 
                selected financial data in accordance with 
                section 229.301 of title 17, Code of Federal 
                Regulations, for any period prior to the 
                earliest audited period presented in connection 
                with its initial public offering; [and]
                  (B) need not present acquired company 
                financial statements or information otherwise 
                required under section 210.3-05 or section 
                210.8-04 of title 17, Code of Federal 
                Regulations, or any successor thereto, for any 
                period prior to the earliest audited period of 
                the emerging growth company presented in 
                connection with its initial public offering 
                and, thereafter, in no event shall an issuer 
                that was an emerging growth company but is no 
                longer an emerging growth company be required 
                to present financial statements of the issuer 
                (or acquired company financial statements or 
                information otherwise required under section 
                210.3-05 or section 210.8-04 of title 17, Code 
                of Federal Regulations, or any successor 
                thereto) for any period prior to the earliest 
                audited period of the emerging growth company 
                presented in connection with its initial public 
                offering; and
                  [(B)] (C) may not be required to comply with 
                any new or revised financial accounting 
                standard until such date that a company that is 
                not an issuer (as defined under section 2(a) of 
                the Sarbanes-Oxley Act of 2002 (15 U.S.C. 
                7201(a))) is required to comply with such new 
                or revised accounting standard, if such 
                standard applies to companies that are not 
                issuers.
  (b)(1) The Commission shall prescribe special rules with 
respect to registration statements filed by any issuer that is 
a blank check company. Such rules may, as the Commission 
determines necessary or appropriate in the public interest or 
for the protection of investors--
          (A) require such issuers to provide timely 
        disclosure, prior to or after such statement becomes 
        effective under section 8, of (i) information regarding 
        the company to be acquired and the specific application 
        of the proceeds of the offering, or (ii) additional 
        information necessary to prevent such statement from 
        being misleading;
          (B) place limitations on the use of such proceeds and 
        the distribution of securities by such issuer until the 
        disclosures required under subparagraph (A) have been 
        made; and
          (C) provide a right of rescission to shareholders of 
        such securities.
  (2) The Commission may, as it determines consistent with the 
public interest and the protection of investors, by rule or 
order exempt any issuer or class of issuers from the rules 
prescribed under paragraph (1).
  (3) For purposes of paragraph (1) of this subsection, the 
term ``blank check company'' means any development stage 
company that is issuing a penny stock (within the meaning of 
section 3(a)(51) of the Securities Exchange Act of 1934) and 
that--
          (A) has no specific business plan or purpose; or
          (B) has indicated that its business plan is to merge 
        with an unidentified company or companies.
  (c) Disclosure Requirements.--
          (1) In general.--The Commission shall adopt 
        regulations under this subsection requiring each issuer 
        of an asset-backed security to disclose, for each 
        tranche or class of security, information regarding the 
        assets backing that security.
          (2) Content of regulations.--In adopting regulations 
        under this subsection, the Commission shall--
                  (A) set standards for the format of the data 
                provided by issuers of an asset-backed 
                security, which shall, to the extent feasible, 
                facilitate comparison of such data across 
                securities in similar types of asset classes; 
                and
                  (B) require issuers of asset-backed 
                securities, at a minimum, to disclose asset-
                level or loan-level data, if such data are 
                necessary for investors to independently 
                perform due diligence, including--
                          (i) data having unique identifiers 
                        relating to loan brokers or 
                        originators;
                          (ii) the nature and extent of the 
                        compensation of the broker or 
                        originator of the assets backing the 
                        security; and
                          (iii) the amount of risk retention by 
                        the originator and the securitizer of 
                        such assets.
          (3) Data standards for asset-backed securities 
        disclosures.--
                  (A) Requirement.--The Commission shall, by 
                rule, adopt data standards for all disclosures 
                required under this subsection.
                  (B) Consistency.--The data standards required 
                under subparagraph (A) shall incorporate, and 
                ensure compatibility with (to the extent 
                feasible), all applicable data standards 
                established in the rules promulgated under 
                section 124 of the Financial Stability Act of 
                2010, including, to the extent practicable, by 
                having the characteristics described in clauses 
                (i) through (vi) of subsection (c)(1)(B) of 
                such section 124.
  (d) Registration Statement for Asset-backed Securities.--Not 
later than 180 days after the date of enactment of this 
subsection, the Commission shall issue rules relating to the 
registration statement required to be filed by any issuer of an 
asset-backed security (as that term is defined in section 
3(a)(77) of the Securities Exchange Act of 1934) that require 
any issuer of an asset-backed security--
          (1) to perform a review of the assets underlying the 
        asset-backed security; and
          (2) to disclose the nature of the review under 
        paragraph (1).

           *       *       *       *       *       *       *

                              ----------                              


                    SECURITIES EXCHANGE ACT OF 1934


TITLE I--REGULATION OF SECURITIES EXCHANGES

           *       *       *       *       *       *       *



                registration requirements for securities

  Sec. 12. (a) It shall be unlawful for any member, broker, or 
dealer to effect any transaction in any security (other than an 
exempted security) on a national securities exchange unless a 
registration is effective as to such security for such exchange 
in accordance with the provisions of this title and the rules 
and regulations thereunder. The provisions of this subsection 
shall not apply in respect of a security futures product traded 
on a national securities exchange.
  (b) A security may be registered on a national securities 
exchange by the issuer filing an application with the exchange 
(and filing with the Commission such duplicate originals 
thereof as the Commission may require), which application shall 
contain--
          (1) Such information, in such detail, as to the 
        issuer and any person directly or indirectly 
        controlling or controlled by, or under direct or 
        indirect common control with, the issuer, and any 
        guarantor of the security as to principal or interest 
        or both, as the Commission may by rules and regulations 
        require, as necessary or appropriate in the public 
        interest or for the protection of investors, in respect 
        of the following:
                  (A) the organization, financial structures, 
                and nature of the business;
                  (B) the terms, position, rights, and 
                privileges of the different classes of 
                securities outstanding;
                  (C) the terms on which their securities are 
                to be, and during the preceding three years 
                have been, offered to the public or otherwise;
                  (D) the directors, officers, and 
                underwriters, and each security holder of 
                record holding more than 10 per centum of any 
                class of any equity security of the issuer 
                (other than an exempted security), their 
                remuneration and their interests in the 
                securities of, and their material contracts 
                with, the issuer and any person directly or 
                indirectly controlling or controlled by, or 
                under direct or indirect common control with, 
                the issuer;
                  (E) remuneration to others than directors and 
                officers exceeding $20,000 per annum;
                  (F) bonus and profit-sharing arrangements;
                  (G) management and service contracts;
                  (H) options existing or to be created in 
                respect of their securities;
                  (I) material contracts, not made in the 
                ordinary course of business, which are to be 
                executed in whole or in part at or after the 
                filing of the application or which were made 
                not more than two years before such filing, and 
                every material patent or contract for a 
                material patent right shall be deemed a 
                material contract;
                  (J) balance sheets for not more than the 
                three preceding fiscal years, certified if 
                required by the rules and regulations of the 
                Commission by a registered public accounting 
                firm;
                  (K) profit and loss statements for not more 
                than the three preceding fiscal years, 
                certified if required by the rules and 
                regulations of the Commission by a registered 
                public accounting [firm;] firm, provided that 
                the application of an emerging growth company 
                need not present acquired company financial 
                statements or information otherwise required 
                under section 210.3-05 or section 210.8-04 of 
                title 17, Code of Federal Regulations, or any 
                successor thereto, for any period prior to the 
                earliest audited period of the emerging growth 
                company presented in connection with its 
                application and, thereafter, in no event shall 
                an issuer that was an emerging growth company 
                but is no longer an emerging growth company be 
                required to present financial statements of the 
                issuer (or acquired company financial 
                statements or information otherwise required 
                under section 210.3-05 or section 210.8-04 of 
                title 17, Code of Federal Regulations, or any 
                successor thereto) for any period prior to the 
                earliest audited period of the emerging growth 
                company presented in connection with any 
                application under subsection (b) of this 
                section; and
                  (L) any further financial statements which 
                the Commission may deem necessary or 
                appropriate for the protection of investors.
          (2) Such copies of articles of incorporation, bylaws, 
        trust indentures, or corresponding documents by 
        whatever name known, underwriting arrangements, and 
        other similar documents of, and voting trust agreements 
        with respect to, the issuer and any person directly or 
        indirectly controlling or controlled by, or under 
        direct or indirect common control with, the issuer as 
        the Commission may require as necessary or appropriate 
        for the proper protection of investors and to insure 
        fair dealing in the security.
          (3) Such copies of material contracts, referred to in 
        paragraph (1)(I) above, as the Commission may require 
        as necessary or appropriate for the proper protection 
        of investors and to insure fair dealing in the 
        security.
  (c) If in the judgment of the Commission any information 
required under subsection (b) of this section is inapplicable 
to any specified class or classes of issuers, the Commission 
shall require in lieu thereof the submission of such other 
information of comparable character as it may deem applicable 
to such class of issuers.
  (d) If the exchange authorities certify to the Commission 
that the security has been approved by the exchange for listing 
and registration, the registration shall become effective 
thirty days after the receipt of such certification by the 
Commission or within such shorter period of time as the 
Commission may determine. A security registered with a national 
securities exchange may be withdrawn or stricken from listing 
and registration in accordance with the rules of the exchange 
and, upon such terms as the Commission may deem necessary to 
impose for the protection of investors, upon application by the 
issuer or the exchange to the Commission; whereupon the issuer 
shall be relieved from further compliance with the provisions 
of this section and section 13 of this title and any rules or 
regulations under such sections as to the securities so 
withdrawn or stricken. An unissued security may be registered 
only in accordance with such rules and regulations as the 
Commission may prescribe as necessary or appropriate in the 
public interest or for the protection of investors.
  (e) Notwithstanding the foregoing provisions of this section, 
the Commission may by such rules and regulations as it deems 
necessary or appropriate in the public interest or for the 
protection of investors permit securities listed on any 
exchange at the time the registration of such exchange as a 
national securities exchange becomes effective, to be 
registered for a period ending not later than July 1, 1935, 
without complying with the provisions of this section.
  (f)(1)(A) Notwithstanding the preceding subsections of this 
section, any national securities exchange, in accordance with 
the requirements of this subsection and the rules hereunder, 
may extend unlisted trading privileges to--
          (i) any security that is listed and registered on a 
        national securities exchange, subject to subparagraph 
        (B); and
          (ii) any security that is otherwise registered 
        pursuant to this section, or that would be required to 
        be so registered except for the exemption from 
        registration provided in subparagraph (B) or (G) of 
        subsection (g)(2), subject to subparagraph (E) of this 
        paragraph.
  (B) A national securities exchange may not extend unlisted 
trading privileges to a security described in subparagraph 
(A)(i) during such interval, if any, after the commencement of 
an initial public offering of such security, as is or may be 
required pursuant to subparagraph (C).
  (C) Not later than 180 days after the date of enactment of 
the Unlisted Trading Privileges Act of 1994, the Commission 
shall prescribe, by rule or regulation, the duration of the 
interval referred to in subparagraph (B), if any, as the 
Commission determines to be necessary or appropriate for the 
maintenance of fair and orderly markets, the protection of 
investors and the public interest, or otherwise in furtherance 
of the purposes of this title. Until the earlier of the 
effective date of such rule or regulation or 240 days after 
such date of enactment, such interval shall begin at the 
opening of trading on the day on which such security commences 
trading on the national securities exchange with which such 
security is registered and end at the conclusion of the next 
day of trading.
  (D) The Commission may prescribe, by rule or regulation such 
additional procedures or requirements for extending unlisted 
trading privileges to any security as the Commission deems 
necessary or appropriate for the maintenance of fair and 
orderly markets, the protection of investors and the public 
interest, or otherwise in furtherance of the purposes of this 
title.
  (E) No extension of unlisted trading privileges to securities 
described in subparagraph (A)(ii) may occur except pursuant to 
a rule, regulation, or order of the Commission approving such 
extension or extensions. In promulgating such rule or 
regulation or in issuing such order, the Commission--
          (i) shall find that such extension or extensions of 
        unlisted trading privileges is consistent with the 
        maintenance of fair and orderly markets, the protection 
        of investors and the public interest, and otherwise in 
        furtherance of the purposes of this title;
          (ii) shall take account of the public trading 
        activity in such securities, the character of such 
        trading, the impact of such extension on the existing 
        markets for such securities, and the desirability of 
        removing impediments to and the progress that has been 
        made toward the development of a national market 
        system; and
          (iii) shall not permit a national securities exchange 
        to extend unlisted trading privileges to such 
        securities if any rule of such national securities 
        exchange would unreasonably impair the ability of a 
        dealer to solicit or effect transactions in such 
        securities for its own account, or would unreasonably 
        restrict competition among dealers in such securities 
        or between such dealers acting in the capacity of 
        market makers who are specialists and such dealers who 
        are not specialists.
  (F) An exchange may continue to extend unlisted trading 
privileges in accordance with this paragraph only if the 
exchange and the subject security continue to satisfy the 
requirements for eligibility under this paragraph, including 
any rules and regulations issued by the Commission pursuant to 
this paragraph, except that unlisted trading privileges may 
continue with regard to securities which had been admitted on 
such exchange prior to July 1, 1964, notwithstanding the 
failure to satisfy such requirements. If unlisted trading 
privileges in a security are discontinued pursuant to this 
subparagraph, the exchange shall cease trading in that 
security, unless the exchange and the subject security 
thereafter satisfy the requirements of this paragraph and the 
rules issued hereunder.
  (G) For purposes of this paragraph--
          (i) a security is the subject of an initial public 
        offering if--
                  (I) the offering of the subject security is 
                registered under the Securities Act of 1933; 
                and
                  (II) the issuer of the security, immediately 
                prior to filing the registration statement with 
                respect to the offering, was not subject to the 
                reporting requirements of section 13 or 15(d) 
                of this title; and
          (ii) an initial public offering of such security 
        commences at the opening of trading on the day on which 
        such security commences trading on the national 
        securities exchange with which such security is 
        registered.
  (2)(A) At any time within 60 days of commencement of trading 
on an exchange of a security pursuant to unlisted trading 
privileges, the Commission may summarily suspend such unlisted 
trading privileges on the exchange. Such suspension shall not 
be reviewable under section 25 of this title and shall not be 
deemed to be a final agency action for purposes of section 704 
of title 5, United States Code. Upon such suspension--
          (i) the exchange shall cease trading in the security 
        by the close of business on the date of such 
        suspension, or at such time as the Commission may 
        prescribe by rule or order for the maintenance of fair 
        and orderly markets, the protection of investors and 
        the public interest, or otherwise in furtherance of the 
        purposes of this title; and
          (ii) if the exchange seeks to extend unlisted trading 
        privileges to the security, the exchange shall file an 
        application to reinstate its ability to do so with the 
        Commission pursuant to such procedures as the 
        Commission may prescribe by rule or order for the 
        maintenance of fair and orderly markets, the protection 
        of investors and the public interest, or otherwise in 
        furtherance of the purposes of this title.
  (B) A suspension under subparagraph (A) shall remain in 
effect until the Commission, by order, grants approval of an 
application to reinstate, as described in subparagraph (A)(ii).
  (C) A suspension under subparagraph (A) shall not affect the 
validity or force of an extension of unlisted trading 
privileges in effect prior to such suspension.
  (D) The Commission shall not approve an application by a 
national securities exchange to reinstate its ability to extend 
unlisted trading privileges to a security unless the Commission 
finds, after notice and opportunity for hearing, that the 
extension of unlisted trading privileges pursuant to such 
application is consistent with the maintenance of fair and 
orderly markets, the protection of investors and the public 
interest, and otherwise in furtherance of the purposes of this 
title. If the application is made to reinstate unlisted trading 
privileges to a security described in paragraph (1)(A)(ii), the 
Commission--
          (i) shall take account of the public trading activity 
        in such security, the character of such trading, the 
        impact of such extension on the existing markets for 
        such a security, and the desirability of removing 
        impediments to and the progress that has been made 
        toward the development of a national market system; and
          (ii) shall not grant any such application if any rule 
        of the national securities exchange making application 
        under this subsection would unreasonably impair the 
        ability of a dealer to solicit or effect transactions 
        in such security for its own account, or would 
        unreasonably restrict competition among dealers in such 
        security or between such dealers acting in the capacity 
        of marketmakers who are specialists and such dealers 
        who are not specialists.
  (3) Notwithstanding paragraph (2), the Commission shall by 
rules and regulations suspend unlisted trading privileges in 
whole or in part for any or all classes of securities for a 
period not exceeding twelve months, if it deems such suspension 
necessary or appropriate in the public interest or for the 
protection of investors or to prevent evasion of the purposes 
of this title.
  (4) On the application of the issuer of any security for 
which unlisted trading privileges on any exchange have been 
continued or extended pursuant to this subsection, or of any 
broker or dealer who makes or creates a market for such 
security, or of any other person having a bona fide interest in 
the question of termination or suspension of such unlisted 
trading privileges, or on its own motion, the Commission shall 
by order terminate, or suspend for a period not exceeding 
twelve months, such unlisted trading privileges for such 
security if the Commission finds, after appropriate notice and 
opportunity for hearing, that such termination or suspension is 
necessary or appropriate in the public interest or for the 
protection of investors.
  (5) In any proceeding under this subsection in which 
appropriate notice and opportunity for hearing are required, 
notice of not less than ten days to the applicant in such 
proceeding, to the issuer of the security involved, to the 
exchange which is seeking to continue or extend or has 
continued or extended unlisted trading privileges for such 
security, and to the exchange, if any, on which such security 
is listed and registered, shall be deemed adequate notice, and 
any broker or dealer who makes or creates a market for such 
security, and any other person having a bona fide interest in 
such proceeding, shall upon application be entitled to be 
heard.
  (6) Any security for which unlisted trading privileges are 
continued or extended pursuant to this subsection shall be 
deemed to be registered on a national securities exchange 
within the meaning of this title. The powers and duties of the 
Commission under this title shall be applicable to the rules of 
an exchange in respect to any such security. The Commission 
may, by such rules and regulations as it deems necessary or 
appropriate in the public interest or for the protection of 
investors, either unconditionally or upon specified terms and 
conditions, or for stated periods, exempt such securities from 
the operation of any provision of section 13, 14, or 16 of this 
title.
  (g)(1) Every issuer which is engaged in interstate commerce, 
or in a business affecting interstate commerce, or whose 
securities are traded by use of the mails or any means or 
instrumentality of interstate commerce shall--
          (A) within 120 days after the last day of its first 
        fiscal year ended on which the issuer has total assets 
        exceeding $10,000,000 and a class of equity security 
        (other than an exempted security) held of record by 
        either--
          (i) 2,000 persons, or
          (ii) 500 persons who are not accredited investors (as 
        such term is defined by the Commission), and
          (B) in the case of an issuer that is a bank, a 
        savings and loan holding company (as defined in section 
        10 of the Home Owners' Loan Act), or a bank holding 
        company, as such term is defined in section 2 of the 
        Bank Holding Company Act of 1956 (12 U.S.C. 1841), not 
        later than 120 days after the last day of its first 
        fiscal year ended after the effective date of this 
        subsection, on which the issuer has total assets 
        exceeding $10,000,000 and a class of equity security 
        (other than an exempted security) held of record by 
        2,000 or more persons,
register such security by filing with the Commission a 
registration statement (and such copies thereof as the 
Commission may require) with respect to such security 
containing such information and documents as the Commission may 
specify comparable to that which is required in an application 
to register a security pursuant to subsection (b) of this 
section. Each such registration statement shall become 
effective sixty days after filing with the Commission or within 
such shorter period as the Commission may direct. Until such 
registration statement becomes effective it shall not be deemed 
filed for the purposes of section 18 of this title. Any issuer 
may register any class of equity security not required to be 
registered by filing a registration statement pursuant to the 
provisions of this paragraph. The Commission is authorized to 
extend the date upon which any issuer or class of issuers is 
required to register a security pursuant to the provisions of 
this paragraph.
  (2) The provisions of this subsection shall not apply in 
respect of--
          (A) any security listed and registered on a national 
        securities exchange.
          (B) any security issued by an investment company 
        registered pursuant to section 8 of the Investment 
        Company Act of 1940.
          (C) any security, other than permanent stock, 
        guaranty stock, permanent reserve stock, or any similar 
        certificate evidencing nonwithdrawable capital, issued 
        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.
          (D) any security of an issuer 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 private 
        shareholder 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.
          (E) any security of an issuer which is a 
        ``cooperative association'' as defined in the 
        Agricultural Marketing Act, approved June 15, 1929, as 
        amended, or a federation of such cooperative 
        associations, if such federation possesses no greater 
        powers or purposes than cooperative associations so 
        defined.
          (F) any security issued by a mutual or cooperative 
        organization which supplies a commodity or service 
        primarily for the benefit of its members and operates 
        not for pecuniary profit, but only if the security is 
        part of a class issuable only to persons who purchase 
        commodities or services from the issuer, the security 
        is transferable only to a successor in interest or 
        occupancy of premises serviced or to be served by the 
        issuer, and no dividends are payable to the holder of 
        the security.
          (G) any security issued by an insurance company if 
        all of the following conditions are met:
                  (i) Such insurance company is required to and 
                does file an annual statement with the 
                Commissioner of Insurance (or other officer or 
                agency performing a similar function) of its 
                domiciliary State, and such annual statement 
                conforms to that prescribed by the National 
                Association of Insurance Commissioners or in 
                the determination of such State commissioner, 
                officer or agency substantially conforms to 
                that so prescribed.
                  (ii) Such insurance company is subject to 
                regulation by its domiciliary State of proxies, 
                consents, or authorizations in respect of 
                securities issued by such company and such 
                regulation conforms to that prescribed by the 
                National Association of Insurance 
                Commissioners.
                  (iii) After July 1, 1966, the purchase and 
                sales of securities issued by such insurance 
                company by beneficial owners, directors, or 
                officers of such company are subject to 
                regulation (including reporting) by its 
                domiciliary State substantially in the manner 
                provided in section 16 of this title.
          (H) any interest or participation in any collective 
        trust funds maintained by a bank or in a separate 
        account maintained by an insurance company which 
        interest or participation is issued in connection with 
        (i) a stock-bonus, pension, or profit-sharing plan 
        which meets the requirements for qualification under 
        section 401 of the Internal Revenue Code of 1954, (ii) 
        an annuity plan which meets the requirements for 
        deduction of the employer's contribution under section 
        404(a)(2) of such Code, or (iii) 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.
  (3) The Commission may by rules or regulations or, on its own 
motion, after notice and opportunity for hearing, by order, 
exempt from this subsection any security of a foreign issuer, 
including any certificate of deposit for such a security, if 
the Commission finds that such exemption is in the public 
interest and is consistent with the protection of investors.
  (4) Registration of any class of security pursuant to this 
subsection shall be terminated ninety days, or such shorter 
period as the Commission may determine, after the issuer files 
a certification with the Commission that the number of holders 
of record of such class of security is reduced to less than 300 
persons, or, in the case of a bank, a savings and loan holding 
company (as defined in section 10 of the Home Owners' Loan 
Act), or a bank holding company, as such term is defined in 
section 2 of the Bank Holding Company Act of 1956 (12 U.S.C. 
1841), 1,200 persons persons. The Commission shall after notice 
and opportunity for hearing deny termination of registration if 
it finds that the certification is untrue. Termination of 
registration shall be deferred pending final determination on 
the question of denial.
  (5) For the purposes of this subsection the term ``class'' 
shall include all securities of an issuer which are of 
substantially similar character and the holders of which enjoy 
substantially similar rights and privileges. The Commission may 
for the purpose of this subsection define by rules and 
regulations the terms ``total assets'' and ``held of record'' 
as it deems necessary or appropriate in the public interest or 
for the protection of investors in order to prevent 
circumvention of the provisions of this subsection. For 
purposes of this subsection, a security futures product shall 
not be considered a class of equity security of the issuer of 
the securities underlying the security futures product. For 
purposes of determining whether an issuer is required to 
register a security with the Commission pursuant to paragraph 
(1), the definition of ``held of record'' shall not include 
securities held by persons who received the securities pursuant 
to an employee compensation plan in transactions exempted from 
the registration requirements of section 5 of the Securities 
Act of 1933.
          (6) Exclusion for persons holding certain 
        securities.--The Commission shall, by rule, exempt, 
        conditionally or unconditionally, securities acquired 
        pursuant to an offering made under section 4(6) of the 
        Securities Act of 1933 from the provisions of this 
        subsection.
  (h) The Commission may by rules and regulations, or upon 
application of an interested person, by order, after notice and 
opportunity for hearing, exempt in whole or in part any issuer 
or class of issuers from the provisions of subsection (g) of 
this section or from section 13, 14, or 15(d) or may exempt 
from section 16 any officer, director, or beneficial owner of 
securities of any issuer, any security of which is required to 
be registered pursuant to subsection (g) hereof, upon such 
terms and conditions and for such period as it deems necessary 
or appropriate, if the Commission finds, by reason of the 
number of public investors, amount of trading interest in the 
securities, the nature and extent of the activities of the 
issuer, income or assets of the issuer, or otherwise, that such 
action is not inconsistent with the public interest or the 
protection of investors. The Commission may, for the purposes 
of any of the above-mentioned sections or subsections of this 
title, classify issuers and prescribe requirements appropriate 
for each such class.
  (i) In respect of any securities issued by banks and savings 
associations the deposits of which are insured in accordance 
with the Federal Deposit Insurance Act, the powers, functions, 
and duties vested in the Commission to administer and enforce 
sections 10A(m), 12, 13, 14(a), 14(c), 14(d), 14(f), and 16 of 
this Act, and sections 302, 303, 304, 306, 401(b), 404, 406, 
and 407 of the Sarbanes-Oxley Act of 2002, (1) with respect to 
national banks and Federal savings associations, the accounts 
of which are insured by the Federal Deposit Insurance 
Corporation are vested in the Comptroller of the Currency, (2) 
with respect to all other member banks of the Federal Reserve 
System are vested in the Board of Governors of the Federal 
Reserve System, and (3) with respect to all other insured banks 
and State savings associations, the accounts of which are 
insured by the Federal Deposit Insurance Corporation, are 
vested in the Federal Deposit Insurance Corporation. The 
Comptroller of the Currency, the Board of Governors of the 
Federal Reserve System, and the Federal Deposit Insurance 
Corporation shall have the power to make such rules and 
regulations as may be necessary for the execution of the 
functions vested in them as provided in this subsection. In 
carrying out their responsibilities under this subsection, the 
agencies named in the first sentence of this subsection shall 
issue substantially similar regulations to regulations and 
rules issued by the Commission under sections 10A(m), 12, 13, 
14(a), 14(c), 14(d), 14(f) and 16 of this Act, and sections 
302, 303, 304, 306, 401(b), 404, 406, and 407 of the Sarbanes-
Oxley Act of 2002, unless they find that implementation of 
substantially similar regulations with respect to insured banks 
and insured institutions are not necessary or appropriate in 
the public interest or for protection of investors, and publish 
such findings, and the detailed reasons therefor, in the 
Federal Register. Such regulations of the above-named agencies, 
or the reasons for failure to publish such substantially 
similar regulations to those of the Commission, shall be 
published in the Federal Register within 120 days of the date 
of enactment of this subsection, and, thereafter, within 60 
days of any changes made by the Commission in its relevant 
regulations and rules.
  (j) The Commission is authorized, by order, as it deems 
necessary or appropriate for the protection of investors to 
deny, to suspend the effective date of, to suspend for a period 
not exceeding twelve months, or to revoke the registration of a 
security, if the Commission finds, on the record after notice 
and opportunity for hearing, that the issuer of such security 
has failed to comply with any provision of this title or the 
rules and regulations thereunder. No member of a national 
securities exchange, broker, or dealer shall make use of the 
mails or any means or instrumentality of interstate commerce to 
effect any transaction in, or to induce the purchase or sale 
of, any security the registration of which has been and is 
suspended or revoked pursuant to the preceding sentence.
  (k) Trading Suspensions; Emergency Authority.--
          (1) Trading suspensions.--If in its opinion the 
        public interest and the protection of investors so 
        require, the Commission is authorized by order--
                  (A) summarily to suspend trading in any 
                security (other than an exempted security) for 
                a period not exceeding 10 business days, and
                  (B) summarily to suspend all trading on any 
                national securities exchange or otherwise, in 
                securities other than exempted securities, for 
                a period not exceeding 90 calendar days.
        The action described in subparagraph (B) shall not take 
        effect unless the Commission notifies the President of 
        its decision and the President notifies the Commission 
        that the President does not disapprove of such 
        decision. If the actions described in subparagraph (A) 
        or (B) involve a security futures product, the 
        Commission shall consult with and consider the views of 
        the Commodity Futures Trading Commission.
          (2) Emergency orders.--
                  (A) In general.--The Commission, in an 
                emergency, may by order summarily take such 
                action to alter, supplement, suspend, or impose 
                requirements or restrictions with respect to 
                any matter or action subject to regulation by 
                the Commission or a self-regulatory 
                organization under the securities laws, as the 
                Commission determines is necessary in the 
                public interest and for the protection of 
                investors--
                          (i) to maintain or restore fair and 
                        orderly securities markets (other than 
                        markets in exempted securities);
                          (ii) to ensure prompt, accurate, and 
                        safe clearance and settlement of 
                        transactions in securities (other than 
                        exempted securities); or
                          (iii) to reduce, eliminate, or 
                        prevent the substantial disruption by 
                        the emergency of--
                                  (I) securities markets (other 
                                than markets in exempted 
                                securities), investment 
                                companies, or any other 
                                significant portion or segment 
                                of such markets; or
                                  (II) the transmission or 
                                processing of securities 
                                transactions (other than 
                                transactions in exempted 
                                securities).
                  (B) Effective period.--An order of the 
                Commission under this paragraph shall continue 
                in effect for the period specified by the 
                Commission, and may be extended. Except as 
                provided in subparagraph (C), an order of the 
                Commission under this paragraph may not 
                continue in effect for more than 10 business 
                days, including extensions.
                  (C) Extension.--An order of the Commission 
                under this paragraph may be extended to 
                continue in effect for more than 10 business 
                days if, at the time of the extension, the 
                Commission finds that the emergency still 
                exists and determines that the continuation of 
                the order beyond 10 business days is necessary 
                in the public interest and for the protection 
                of investors to attain an objective described 
                in clause (i), (ii), or (iii) of subparagraph 
                (A). In no event shall an order of the 
                Commission under this paragraph continue in 
                effect for more than 30 calendar days.
                  (D) Security futures.--If the actions 
                described in subparagraph (A) involve a 
                security futures product, the Commission shall 
                consult with and consider the views of the 
                Commodity Futures Trading Commission.
                  (E) Exemption.--In exercising its authority 
                under this paragraph, the Commission shall not 
                be required to comply with the provisions of--
                          (i) section 19(c); or
                          (ii) section 553 of title 5, United 
                        States Code.
          (3) Termination of emergency actions by president.--
        The President may direct that action taken by the 
        Commission under paragraph (1)(B) or paragraph (2) of 
        this subsection shall not continue in effect.
          (4) Compliance with orders.--No member of a national 
        securities exchange, broker, or dealer shall make use 
        of the mails or any means or instrumentality of 
        interstate commerce to effect any transaction in, or to 
        induce the purchase or sale of, any security in 
        contravention of an order of the Commission under this 
        subsection unless such order has been stayed, modified, 
        or set aside as provided in paragraph (5) of this 
        subsection or has ceased to be effective upon direction 
        of the President as provided in paragraph (3).
          (5) Limitations on review of orders.--An order of the 
        Commission pursuant to this subsection shall be subject 
        to review only as provided in section 25(a) of this 
        title. Review shall be based on an examination of all 
        the information before the Commission at the time such 
        order was issued. The reviewing court shall not enter a 
        stay, writ of mandamus, or similar relief unless the 
        court finds, after notice and hearing before a panel of 
        the court, that the Commission's action is arbitrary, 
        capricious, an abuse of discretion, or otherwise not in 
        accordance with law.
          (6) Consultation.--Prior to taking any action 
        described in paragraph (1)(B), the Commission shall 
        consult with and consider the views of the Secretary of 
        the Treasury, the Board of Governors of the Federal 
        Reserve System, and the Commodity Futures Trading 
        Commission, unless such consultation is impracticable 
        in light of the emergency.
          (7) Definition.--For purposes of this subsection, the 
        term ``emergency'' means--
                  (A) a major market disturbance characterized 
                by or constituting--
                          (i) sudden and excessive fluctuations 
                        of securities prices generally, or a 
                        substantial threat thereof, that 
                        threaten fair and orderly markets; or
                          (ii) a substantial disruption of the 
                        safe or efficient operation of the 
                        national system for clearance and 
                        settlement of transactions in 
                        securities, or a substantial threat 
                        thereof; or
                  (B) a major disturbance that substantially 
                disrupts, or threatens to substantially 
                disrupt--
                          (i) the functioning of securities 
                        markets, investment companies, or any 
                        other significant portion or segment of 
                        the securities markets; or
                          (ii) the transmission or processing 
                        of securities transactions.
  (l) It shall be unlawful for an issuer, any class of whose 
securities is registered pursuant to this section or would be 
required to be so registered except for the exemption from 
registration provided by subsection (g)(2)(B) or (g)(2)(G) of 
this section, by the use of any means or instrumentality of 
interstate commerce, or of the mails, to issue, either 
originally or upon transfer, any of such securities in a form 
or with a format which contravenes such rules and regulations 
as the Commission may prescribe as necessary or appropriate for 
the prompt and accurate clearance and settlement of 
transactions in securities. The provisions of this subsection 
shall not apply to variable annuity contracts or variable life 
policies issued by an insurance company or its separate 
accounts.

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