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Fueling Capital and Growth on Main Street

Washington, May 23 -

The Subcommittee on Capital Markets, Securities, and Investments held a hearing today to review eleven legislative proposals to help fuel capital and growth on Main Street.

The legislative proposals considered were:

• H.R. 5054, the “Small Company Disclosure Simplification Act of 2018,” introduced by Rep. David Kustoff (R-TN), to provide an exemption for emerging growth companies and other smaller companies from the requirements to use Extensible Business Reporting Language (xBRL) for financial statements and other periodic reporting.

• H.R. 5756, introduced by Rep. Sean Duffy (R-WI), to require the Securities and Exchange Commission to adjust certain resubmission thresholds for shareholder proposals.

• H.R. 5877, the “Main Street Growth Act,” introduced by Rep. Tom Emmer (R-MN) to amend the Securities Exchange Act of 1934 to allow for the registration of venture exchanges.

• H.R. __, to direct the Securities and Exchange Commission to revise section 230.163 of title 17, United States Code, to apply the exemption offered in such section to communications made by underwriters and dealers acting by or on behalf of a well-known seasoned issuer.

• H.R. __, to direct the Securities and Exchange Commission to increase and align the smaller reporting company definition and nonaccelerated filer financial thresholds.

• H.R. __, to direct the Securities and Exchange Commission to conduct a study with respect to research coverage of small issuers before their initial public offerings.

• H.R. __, to remove the limitation on large accelerated filers qualifying as an emerging growth company.

• H.R. __, to provide a five year extension of certain exemptions and reduced disclosure requirements for companies that were emerging growth companies and would continue to be emerging growth companies but for the five-year restriction on emerging growth companies.

• H.R. __, the “Streamlining Disclosure Options to Reduce Redundant Disclosures to Investors Act,” to require the Securities and Exchange Commission to implement rules simplifying the quarterly financial reporting regime.

• H.R. __, to require the Securities and Exchange Commission to revise the definition of a qualifying portfolio company to include an emerging growth company, for purposes of the exemption from registration for venture capital fund advisers under the Investment Advisors Act of 1940.

• H.R. __, to amend the Investment Company Act of 1940 to increase the percentage of voting shares a diversified company may hold in a single issuer.

“It's time for Congress to advance a broader capital formation agenda.  Let’s continue to build upon the success of the bipartisan JOBS Act by advancing reforms that further modernize our nation's securities regulatory structure to ensure the free-flow of capital, boost job creation, and increase economic growth,” said Subcommittee Chairman Bill Huizenga (R-MI). “By doing this, the federal government can support innovation while rewarding hardworking Americans and laying the groundwork for the economy of the future.”

Topline Quotes from Witnesses

“While private markets are important in their own way and are undoubtedly popular with entrepreneurs, they are unable to match the broad access, liquidity, and other benefits of public markets. Even as they encourage innovation, policymakers should be concerned about the current trend of companies shunning public markets.” – Brett Paschke, Managing Director and Head of Capital Markets, William Blair, on behalf of the Securities Industry and Financial Markets Association

“These are not partisan bills. They should not be viewed as controversial. They are part of the natural process of responding to the ever-changing economy and adjusting rules based upon years of experience. This is a healthy process that has served to keep our markets modern and competitive.” – Edward Knight, Executive Vice President and General Counsel, NASDAQ

“I believe the proposals being considered before the Subcommittee today will support the growth of emerging, innovative companies, and continue to spur investment in breakthrough scientific discoveries, and ultimately lead to a new generation of therapies for patients across the country, and the world. I hope Congress recognizes the landmark success of the JOBS Act and its impact it has had on the biotechnology industry in the last six years. More importantly, I hope my testimony and this hearing today has shown that there is still work to be done in order to continue supporting the lifesaving innovative treatments companies like GlycoMimetics are developing today.” – Brian Hahn, Chief Financial Officer, GlycoMimetics, Inc., on behalf of the Biotechnology Innovation Organization

“I believe there are two significant consequences arising from the lack of IPOs and the decline in U.S. public companies: a decline in job creation and a loss of investment opportunities for retail investors. Every time a company chooses to sell itself rather than go public, there is a negative impact on the U.S. jobs market in terms of reduced potential new job creation and often there are job reductions once the companies fully merge. ... [D]ata provided by Professor Jay Ritter, a professor at the University of Florida who has been a prominent voice on the IPO market, posits that this lack of IPOs has cost the economy on average about two million new jobs a year. From what I have seen, many of these jobs can be the type that support middle class families and don’t necessarily require college degrees. ... The lack of IPOs has also had an impact on middle class retirement savings and retail investor portfolios. ... Yes, IPOs are risky to invest in, but they have also provided a fantastic opportunity for wealth creation to main street investors.” – Barry Eggers, Founding Partner, Lightspeed Venture Partners, on behalf of the National Venture Capital Association

“[T]he post-recession recovery over the last decade was extremely weak by historical standards. From 2010-2017, for example, gross domestic product (GDP) in the United States failed to achieve 3% growth in any given year, well below the post-World War II historical norm. To put the importance of 3% growth into perspective, if our economy moved from 2.5% growth to 3% growth, average annual incomes would rise by $4,200 and 1.2 million jobs would be created over the next decade. These are simply statistics, but underlying them is the opportunity for millions of Americans to create a better life for themselves and their families. ... Congress should not merely rest on its laurels, and should continue to pursue pro-growth and pro-opportunity policies that help growing businesses access capital.” – Thomas Quaadman, Vice President, Center for Capital Markets Competitiveness, U.S. Chamber of Commerce.