Subcommittee Advances 5 Bills to Promote Job Growth
October 6, 2011 -
Five bills that ease the regulatory burden on small businesses and emerging growth companies were approved by a Financial Services subcommittee yesterday.
The Small Company Job Growth and Regulatory Relief Act, introduced by Rep. Stephen Fincher
The proposals make it easier for entrepreneurs and small businesses to access capital so their companies can grow and create jobs.
“These proposals help create an environment that is pro-job, pro-market, and pro-growth,” said Financial Services Committee Chairman Spencer Bachus. “To get our economy moving again, we must break down government barriers that stand in the way of new business start-ups and jobs.”
Rep. Scott Garrett, the Chairman of the Capital Markets and Government Sponsored Enterprises Subcommittee that approved the bills, said, “American entrepreneurs are eager for Washington to take action to help foster a better environment for them to grow their businesses, invest for the future, and hire new workers. We answered their call today by passing five straightforward proposals to tear down unnecessary regulations and free up private capital.”
Responding to the sluggish economy, the Financial Services Committee has been at the forefront of developing legislative solutions to ensure entrepreneurs and small businesses have access to capital as well as identifying and correcting job-crushing provisions of the Dodd-Frank Act. Earlier this year, the Committee approved seven other bills designed to reduce excessive regulatory barriers to private sector growth.
The five bills approved by the Subcommittee on Wednesday are:
H.R. 2167, the Private Company Flexibility and Growth Act, introduced by Rep. David Schweikert
H.R. 2167 removes an impediment to capital formation for small companies by raising the shareholder threshold for mandatory registration with the SEC from 500 to 1,000 shareholders. The shareholder threshold was originally adopted in 1964 and has not been modernized since then. At a recent hearing, the Committee received testimony from witnesses regarding the impact the bill will have on the availability of credit for small companies, job creation, and economic growth.
Rep. Schweikert said: “I am excited that the subcommittee has passed this bi-partisan bill that unwinds red-tape on small businesses and allows for growth and job creation. Currently, many small businesses are forced to file as a public company due to an obscure 1964 regulation that requires companies with 499 shareholders and $10 million in assets to file with the SEC. This regulation severely limits the growth stages for companies, which need time and flexibility to develop. I introduced this bill because burdensome regulation cannot grow the economy nor can it create jobs. H.R. 2167 will help entrepreneurs grow their business, remain competitive, and create jobs.”
The legislation was approved on a voice vote.
H.R. 2940, the Access to Capital for Job Creators Act, introduced by Rep. Kevin McCarthy
H.R. 2940 removes the regulatory ban that prevents small, privately held companies from using advertisements to solicit investors for private offerings. Securities laws not only prohibit general solicitation and advertising but require investors to have an existing relationship with the company in order to meet SEC exemption requirements. This ban has limited the ability of small businesses to raise capital.
Majority Whip McCarthy said, “Small businesses are the engine of the American economy. In order to flourish, entrepreneurs and small business owners need fewer regulatory restrictions and greater access to capital to start and grow companies and get more people working. Unfortunately, onerous federal regulations dampen both innovation and access to capital because of the restrictions and compliance burden they place on these enterprises. That’s why I have introduced HR 2940, the Access to Capital for Job Creators Act, which removes the solicitation prohibition contained in Rule 506 of Regulation D of the Securities Act. This will give small businesses another way to access private capital by allowing them to widely seek funds from the entire pool of wealthy SEC accredited investors without requiring them to go through the full SEC registration process.”
H.R. 2940 was approved by a voice vote.
H.R. 2930, the Entrepreneur Access to Capital Act, introduced by Rep. Patrick McHenry
H.R. 2930 permits “crowdfunding” to finance new businesses by allowing companies to accept and pool donations up to $5 million without registering with the SEC. Crowdfunding is an innovative and lower-risk form of financing that enables several individuals to pool money to in a particular company. SEC regulations prohibiting general solicitation have acted as a barrier to crowdfunding developing and flourishing in the United States.
Rep. McHenry said, “It’s clear that we need new ideas to help provide small businesses and entrepreneurs the ability to create jobs. With so much difficulty obtaining capital in today’s economy, most business ideas never make it past the dinner table. This legislation will connect entrepreneurs with everyday investors to help get their businesses off the ground. I’m thankful the subcommittee was able to pass this crowdfunding legislation with bipartisan support and look forward to further discussing its merits in the full committee.”
H.R. 2930 was approved by a vote of 18 to 14.
This draft legislation expands the exemptions available to small companies from certain costly reporting requirements of the Sarbanes-Oxley Act. Since 2007 the SEC has exempted small companies with a market capitalization of less than $75 million. Market participants have repeatedly said the current SEC exemption provides no benefit since the threshold is too low.
Rep. Fincher said, “Today’s subcommittee passage of the Small Company Job Growth and Regulatory Relief Act committee draft is a first step in slicing through needless regulation to help small companies use their scarce resources to expand and create jobs. Expanding the Sarbanes-Oxley 404(b) exemptions will encourage more companies to go public in the United States, instead of abroad. My legislation will also create more opportunity for companies to raise desperately needed capital to reinvest and grow business, while still preserving the goal of Sarbanes-Oxley. I look forward to advancing with this legislation and seeing it go to a full committee vote.”
The bill was approved on a vote of 18 to 14.
H.R. 1965, introduced by Rep. Jim Himes
H.R. 1965 modifies regulations concerning registration and deregistration of small bank holding companies under securities laws. Current law prohibits community banks from deregistering if they have more than 300 shareholders. As a result, many community banks have had to buy back shares in order to meet deregistration requirements.
H.R. 1965 was approved by a voice vote.