financialservices.house.gov

Cmte Financial Services (R)
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Subcommittee Reviews Legislation to Enhance Capital Formation

Washington, Dec 2 -

The Financial Services Capital Markets and Government Sponsored Enterprises Subcommittee held a hearing today to review legislative proposals that are designed to improve U.S. capital markets.

Subcommittee Chairman Scott Garrett (R-NJ) said in his opening statement, “While the recent finalization of the ‘Reg A plus’ and Crowdfunding rules means that the major rulemakings required by the JOBS Act are now completed, I think there is broad agreement that more can and should be done to help bring our capital markets into the 21st century. A number of the bills before us today do just that, and I want to thank the sponsors on both sides of the aisle for their work on these issues.”

Key Takeaways:

• The Congressionally mandated three-part mission of the Securities and Exchange Commission is to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation

• The SEC overly relies on its own administrative proceedings to litigate enforcement actions, rather than bring the case before a federal district court, to enjoy a “home court” advantage and denies respondents’ due process rights.

Topline Witness Quotes:

“We…believe Congress needs to put a permanent structure in place at the SEC to give a stronger voice to small businesses and capital formation issues. The SEC Small Business Advocate Act is the favored approach by the industry to create this new structure.” - Chris Mathieu, Chief Financial Officer, Horizon Technology Finance Corporation

“The Chamber has also been concerned about the SEC’s focus on its mission of promoting capital   formation and competition. Too often, the SEC had failed to keep its rules current, forcing Congress to step in. Accordingly, the Chamber has been supportive of the Subcommittee’s efforts in these areas, including the Jumpstart Our Business Startups Act (“JOBS Act”) and other legislative efforts including disclosure modernization, improving the process for private placements and use of business development corporations.” – Tom Quaadman, Senior Vice President, Center for Capital Markets Competitiveness, U.S. Chamber of Commerce

“Any policy that increases the flow of innovation capital to emerging companies could lead to funding for a new life-saving medicine – while any policy that diverts capital to unnecessary and costly regulatory burdens could lead to the same treatment being left on the laboratory shelf.” – Brian Hahn, Chief Financial Officer, GlycoMimetics, Inc.

“Separate and apart from these complaints about the fairness of the [SEC's] proceedings, the agency's push to administrative proceedings raises a concern that it is on a mission systematically to substitute its interpretation of the federal securities laws for that of the federal judiciary.” – Joseph A. Grundfest,  William A. Franke Professor of Law and Business, Stanford Law School