[House Report 112-409]
[From the U.S. Government Publishing Office]
112th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 112-409
======================================================================
PROVIDING FOR CONSIDERATION OF THE BILL (H.R. 3606) TO INCREASE
AMERICAN JOB CREATION AND ECONOMIC GROWTH BY IMPROVING ACCESS TO THE
PUBLIC CAPITAL MARKETS FOR EMERGING GROWTH COMPANIES
_______
March 6, 2012.--Referred to the House Calendar and ordered to be
printed
_______
Mr. Sessions, from the Committee on Rules, submitted the following
R E P O R T
[To accompany H. Res. 572]
The Committee on Rules, having had under consideration
House Resolution 572, by a nonrecord vote, report the same to
the House with the recommendation that the resolution be
adopted.
SUMMARY OF PROVISIONS OF THE RESOLUTION
The resolution provides for consideration of H.R. 3606, the
Reopening American Capital Markets to Emerging Growth Companies
Act of 2011, under a structured rule. The resolution provides
one hour of general debate equally divided and controlled by
the chair and ranking minority member of the Committee on
Financial Services. The resolution waives all points of order
against consideration of the bill. The resolution provides that
an amendment in the nature of a substitute consisting of the
text of Rules Committee Print 112-17 shall be considered as
adopted and the bill, as amended, shall be considered as
original text for the purpose of amendment and shall be
considered as read. The resolution waives all points of order
against provisions in the bill, as amended. The resolution
makes in order only those further amendments printed in this
report. Each such amendment may be offered only in the order
printed in this report, may be offered only by a Member
designated in this report, shall be considered as read, shall
be debatable for the time specified in this report equally
divided and controlled by the proponent and an opponent, shall
not be subject to amendment, and shall not be subject to a
demand for division of the question in the House or in the
Committee of the Whole. The resolution waives all points of
order against the amendments printed in this report. Finally,
the resolution provides one motion to recommit with or without
instructions.
EXPLANATION OF WAIVERS
The waiver of all points of order against consideration of
the bill includes a waiver of clause 4(a) of rule XIII
requiring the three-day layover of committee reports. While the
Financial Services Committee filed H. Rept. 112-406, Part 1, on
March 1, 2012, the cost estimate for H.R. 3606 prepared by the
Congressional Budget Office (CBO) was not yet available. The
Committee on Financial Services filed H. Rept. 112-406, Part 2,
on March 6, 2012, which includes the CBO estimate. However, the
resolution provides that an amendment in the nature of a
substitute consisting of the text of Rules Committee Print 112-
17 shall be considered as adopted. The complete cost estimate
of Rules Committee Print 112-17 was made available on March 2,
2012.
Although the resolution waives all points of order against
provisions in the bill, as amended, the Committee is not aware
of any points of order. The waiver is prophylactic in nature.
Although the resolution waives all points of order against
the amendments printed in this report, the Committee is not
aware of any points of order. The waiver is prophylactic in
nature.
COMMITTEE VOTES
The results of each record vote on an amendment or motion
to report, together with the names of those voting for and
against, are printed below:
Rules Committee record vote No. 197
Motion by Mr. McGovern to report an open rule. Defeated: 4-
7
----------------------------------------------------------------------------------------------------------------
Majority Members Vote Minority Members Vote
----------------------------------------------------------------------------------------------------------------
Mr. Sessions.................................... Nay Ms. Slaughter..................... Yea
Ms. Foxx........................................ Nay Mr. McGovern...................... Yea
Mr. Woodall..................................... Nay Mr. Hastings of Florida........... Yea
Mr. Nugent...................................... Nay Mr. Polis......................... Yea
Mr. Scott of South Carolina..................... Nay
Mr. Webster..................................... Nay
Mr. Dreier, Chairman............................ Nay
----------------------------------------------------------------------------------------------------------------
SUMMARY OF THE AMENDMENTS MADE IN ORDER
1. Fincher (TN), Carney (DE): MANAGER'S AMENDMENT Would
make technical changes to the underlying bill. (10 minutes)
2. McIntyre (NC): Would adjust the Emerging Growth Company
definition for inflation, resulting in providing more
flexibility for businesses. (10 minutes)
3. Himes (CT), Capuano (MA): Would lower the gross annual
revenue cap from $1,000,000,000 to $750,000,000 for emerging
growth companies to remain eligible for the regulatory on-ramp
and strike the public float requirement for the on-ramp. (10
minutes)
4. Jackson Lee (TX): Would add a requirement that a company
not be considered an ``emerging growth company'' if it has
issued more than $1 billion in non-convertible debt over the
prior three years. (10 minutes)
5. Ellison (MN), Capuano (MA), Lynch (MA): Would require
Emerging Growth Companies to fully comply with say-on-pay and
golden parachute shareholder votes. (10 minutes)
6. Waters (CA), Capuano (MA): Would provide that if a
broker or dealer is underwriting an initial public offering
(IPO) for an emerging growth company (EGC) and providing
research to the public about such IPO, those research reports
need to be filed with the SEC, and the broker or dealer shall
be held to stricter liability for their comments. Would also
provide that if EGCs are communicating, either orally or in
writing, with potential investors before or following an
offering, they need to file those communications with the SEC.
(10 minutes)
7. Jackson Lee (TX): Would strike language that allows an
emerging growth company or its underwriter to communicate with
``institutions that are accredited investors.'' (10 minutes)
8. Jackson Lee (TX): Would establish new filing fee for Reg
S-K Forms to discourage frivolous filings. (10 minutes)
9. Connolly (VA): Would require the Securities and Exchange
Commission to perform a study, in consultation with the
Commodities Futures Trading Commission, of the effects on
emerging growth companies of financial speculation on domestic
oil and gasoline prices and to forward the results of that
study to Congress. (10 minutes)
10. McCarthy, Kevin (CA): Would clarify that general
advertising under this provision should only apply to
Regulation D rule 506 offerings, allow for general solicitation
in the secondary sale of these securities so long as only
qualified institutional buyers purchase the securities, and
provide consistency in interpretation that general advertising
should not cause these offerings to be considered public
offerings. (10 minutes)
11. McHenry (NC): Would, for Rule 506 of Regulation D,
provide an exemption from registration as a broker or dealer
for trading platforms that do not charge a fee in connection
with the purchase or sale of the security or permit general
solicitations, general advertisements, or similar or related
activities by issuers of such securities. Would also enable the
marketing of private shares to accredited investors through
platforms. (10 minutes)
12. Miller, Brad (NC), Schweikert (AZ): Would increase the
total number of investors and limit the number of non-
accredited investors allowed to be holders of record before
registration is required. (10 minutes)
13. Schweikert (AZ): Would authorize the Securities and
Exchange Commission to study whether or not it has the
authority to enforce anti-evasion provisions associated with
the shareholder threshold. (10 minutes)
14. Capuano (MA): Would require the SEC to conduct a study
to address anti-evasion concerns and determine if the term
``held of record'' should mean beneficial owner of the
security. (10 minutes)
15. Peters (MI): Would require publicly traded companies to
disclose on an annual basis the total number of employees they
have in each country and the percentage increase or decrease in
employment in each country. (10 minutes)
16. Capps (CA): Would require the Securities and Exchange
Commission to issue a report to the Congress one year after
enactment on the increase in initial public offerings that
resulted from the act, including specific increases in filings
by manufacturing and high-technology companies. (10 minutes)
17. Loebsack (IA): Would require information to be made
available online, and outreach to be conducted to small and
medium-sized businesses, women-owned businesses, veteran-owned
businesses, and minority-owned businesses to inform them about
changes put in place by this legislation. (10 minutes)
TEXT OF AMENDMENTS MADE IN ORDER
1. An Amendment To Be Offered by Representative Fincher of Tennessee or
His Designee, Debatable for 10 Minutes
Page 3, line 18, after ``(80)'' insert the following:
``Emerging growth company.--''.
Page 9, line 3, strike ``7201(a))'' and insert ``7201(a)))''.
Page 37, line 3, strike ``is amended'' and insert the
following: ``, as amended by section 302, is amended in
subparagraph (A)''.
Page 37, beginning on line 18, strike ``holders of their
securities are accredited investors or that''.
Page 38, line 16, strike ``, as such term is defined in
section 3(a)(6),''.
Page 38, line 18, strike ``section (2)'' and insert ``section
2''.
----------
2. An Amendment To Be Offered by Representative McIntyre of North
Carolina or His Designee, Debatable for 10 Minutes
Page 2, line 11, insert after ``$1,000,000,000'' the
following: ``(as such amount is indexed for inflation every 5
years by the Commission to reflect the change in the Consumer
Price Index for All Urban Consumers published by the Bureau of
Labor Statistics, setting the threshold to the nearest
1,000,000)''.
Page 2, line 18, insert after ``$1,000,000,000'' the
following: ``(as such amount is indexed for inflation every 5
years by the Commission to reflect the change in the Consumer
Price Index for All Urban Consumers published by the Bureau of
Labor Statistics, setting the threshold to the nearest
1,000,000)''.
Page 3, line 20, insert after ``$1,000,000,000'' the
following: ``(as such amount is indexed for inflation every 5
years by the Commission to reflect the change in the Consumer
Price Index for All Urban Consumers published by the Bureau of
Labor Statistics, setting the threshold to the nearest
1,000,000)''.
Page 4, line 3, insert after ``$1,000,000,000'' the
following: ``(as such amount is indexed for inflation every 5
years by the Commission to reflect the change in the Consumer
Price Index for All Urban Consumers published by the Bureau of
Labor Statistics, setting the threshold to the nearest
1,000,000)''.
----------
3. An Amendment To Be Offered by Representative Himes of Connecticut or
His Designee, Debatable for 10 Minutes
Page 2, line 11, strike ``$1,000,000,000'' and insert
``$750,000,000''.
Page 2, line 18, strike ``$1,000,000,000'' and insert
``$750,000,000''.
Page 2, line 18, add ``or'' at the end.
Page 3, line 5, strike ``; or'' and insert a period.
Page 3, strike lines 6 through 9.
Page 3, line 20, strike ``$1,000,000,000'' and insert
``$750,000,000''.
Page 4, line 3, strike ``$1,000,000,000'' and insert
``$750,000,000''.
Page 4, line 3, add ``or'' at the end.
Page 4, line 8, strike ``; or'' and insert a period.
Page 4, strike lines 9 through 12.
----------
4. An Amendment To Be Offered by Representative Jackson Lee of Texas or
Her Designee, Debatable for 10 Minutes
Page 3, line 5, strike ``or''.
Page 3, after line 5, insert the following:
``(C) the date on which such issuer has, during the
previous 3-year period, issued more than $1,000,000,000
in non-convertible debt; or''.
Page 3, line 6, strike ``(C)'' and insert ``(D)''.
Page 4, line 8, strike ``or''.
Page 4, after line 8, insert the following:
``(C) the date on which such issuer has, during the
previous 3-year period, issued more than $1,000,000,000
in non-convertible debt; or''.
Page 4, line 9, strike ``(C)'' and insert ``(D)''.
----------
5. An Amendment To Be Offered by Representative Ellison of Minnesota or
His Designee, Debatable for 10 Minutes
Page 5, strike line 7 and all that follows through page 6,
line 13 (and redesignate succeeding paragraphs accordingly).
----------
6. An Amendment To Be Offered by Representative Waters of California or
Her Designee, Debatable for 10 Minutes
Page 11, line 12, strike ``paragraph (10) of this subsection
and''.
Page 11, line 16, insert after the period the following:
``Any such research report published or distributed by a broker
or dealer that is participating or will participate in the
registered offering of the securities of the issuer shall be
filed with the Commission by the later of the date of the
filing of such registration statement or the date such report
is first published or distributed. Such research report shall
be deemed a prospectus under paragraph (10).''.
Page 13, line 18, after the first period insert the
following: ``Any written communication (as such term is defined
in section 203.405 of title 17, Code of Federal Regulations)
provided to potential investors in accordance with this
subsection shall be filed with the Commission by the later of
the date of the filing of such registration statement or the
date the written communication is first engaged in. Such
written communication shall be deemed a prospectus under
section 2(a)(10).''.
----------
7. An Amendment To Be Offered by Representative Jackson Lee of Texas or
Her Designee, Debatable for 10 Minutes
Page 13, line 10, strike ``or institutions that are
accredited investors''.
Page 13, line 11, strike ``terms are respectively'' and
insert ``term is''.
Page 13, line 12, strike ``and section 230.501(a)''.
----------
8. An Amendment To Be Offered by Representative Jackson Lee of Texas or
Her Designee, Debatable for 10 Minutes
Page 15, line 16, strike the quotation mark and final period
and after such line insert the following:
(3) Additional filing fee.--In order to discourage
frivolous filings with the Commission, the Commission
shall establish a fee that shall apply to any draft
registration statement submitted to the Commission for
confidential nonpublic review pursuant to paragraph
(1).
----------
9. An Amendment To Be Offered by Representative Connolly of Virginia or
His Designee, Debatable for 10 Minutes
Page 19, after line 2, insert the following new section (and
conform the table of contents accordingly):
SEC. 109. STUDY ON THE EFFECTS OF MARKET SPECULATION ON EMERGING GROWTH
COMPANIES.
(a) Study.--The Securities and Exchange Commission, in
consultation with the Commodity Futures Trading Commission,
shall carry out an ongoing study on the ability of emerging
growth companies to raise capital utilizing the exemptions
provided under this title and the amendments made by this
title, in light of--
(1) financial market speculation on domestic oil and
gasoline prices; and
(2) business cost increases caused by such
speculation.
(b) Report.--Not later than the end of the 60-year period
beginning on the date of the enactment of this Act, and
annually thereafter, the Securities and Exchange Commission
shall issue a report to the Congress containing all findings
and determinations made in carrying out the study required
under subsection (a).
----------
10. An Amendment To Be Offered by Representative McCarthy of California
or His Designee, Debatable for 10 Minutes
Page 19, beginning on line 6, strike ``(a) Removal of
Restriction.--'' and all that follows through line 11 and
insert the following:
(a) Modification of Rules.--
(1) Not later than 90
Page 19, line 23, insert after the period the following:
``Section 230.506 of title 17, Code of Federal Regulations, as
revised pursuant to this section, shall continue to be treated
as a regulation issued under section 4(2) of the Securities Act
of 1933 (15 U.S.C. 77d(2)).''
Page 19, after line 23, insert the following:
(2) Not later than 90 days after the date of
enactment of this Act, the Securities and Exchange
Commission shall revise subsection (d)(1) of section
230.144A of title 17, Code of Federal Regulations, to
provide that securities sold under such revised
exemption may be offered to persons other than
qualified institutional buyers, including by means of
general solicitation or general advertising, provided
that securities are sold only to persons that the
seller and any person acting on behalf of the seller
reasonably believe is a qualified institutional buyer.
(c) Consistency in Interpretation.--Section 4 of the
Securities Act of 1933 (15 U.S.C. 77d) is amended--
(1) by striking ``The provisions of section 5'' and
inserting ``(a) The provisions of section 5''; and
(2) by adding at the end the following:
``(b) Offers and sales exempt under section 230.506 of title
17, Code of Federal Regulations (as revised pursuant to section
201 of the Jumpstart Our Business Startups Act) shall not be
deemed public offerings under the Federal securities laws as a
result of general advertising or general solicitation.''.
----------
11. An Amendment To Be Offered by Representative McHenry of North
Carolina or His Designee, Debatable for 10 Minutes
Page 19, after line 23, insert the following:
(c) Explanation of Exemption.--Section 4 of the Securities
Act of 1933 (15 U.S.C. 77d) is amended--
(1) by striking ``The provisions of section 5'' and
inserting ``(a) The provisions of section 5''; and
(2) by adding at the end the following:
``(b)(1) With respect to securities offered and sold in
compliance with Rule 506 of Regulation D under this Act, no
person who meets the conditions set forth in paragraph (2)
shall be subject to registration as a broker or dealer pursuant
to section 15(a)(1) of this title, solely because--
``(A) that person maintains a platform or mechanism
that permits the offer, sale, purchase, or negotiation
of or with respect to securities, or permits general
solicitations, general advertisements, or similar or
related activities by issuers of such securities,
whether online, in person, or through any other means;
``(B) that person or any person associated with that
person co-invests in such securities; or
``(C) that person or any person associated with that
person provides ancillary services with respect to such
securities.
``(2) The exemption provided in paragraph (1) shall apply to
any person described in such paragraph if--
``(A) such person and each person associated with
that person receives no compensation in connection with
the purchase or sale of such security;
``(B) such person and each person associated with
that person does not have possession of customer funds
or securities in connection with the purchase or sale
of such security; and
``(C) such person is not subject to a statutory
disqualification as defined in section 3(a)(39) of this
title and does not have any person associated with that
person subject to such a statutory disqualification.
``(3) For the purposes of this subsection, the term
`ancillary services' means--
``(A) the provision of due diligence services, in
connection with the offer, sale, purchase, or
negotiation of such security, so long as such services
do not include, for separate compensation, investment
advice or recommendations to issuers or investors; and
``(B) the provision of standardized documents to the
issuers and investors, so long as such person or entity
does not negotiate the terms of the issuance for and on
behalf of third parties and issuers are not required to
use the standardized documents as a condition of using
the service.''.
----------
12. An Amendment To Be Offered by Representative Miller of North
Carolina or His Designee, Debatable for 10 Minutes
Page 36, line 25, strike ``by 1,000 persons, and'' and insert
``by either--
``(i) 2,000 persons, or
``(ii) 500 persons who are not accredited
investors (as such term is defined by the
Commission), and''.
----------
13. An Amendment To Be Offered by Representative Schweikert of Arizona
or His Designee, Debatable for 10 Minutes
Page 37, after line 22, insert the following:
SEC. 504. COMMISSION STUDY OF ENFORCEMENT AUTHORITY UNDER RULE 12G5-1.
The Securities and Exchange Commission shall examine its
authority to enforce Rule 12g5-1 to determine if new
enforcement tools are needed to enforce the anti-evasion
provision contained in subsection (b)(3) of the rule, and
shall, not later than 120 days after the date of enactment of
this Act transmit its recommendations to Congress.
The table of contents in section 2 of the bill is amended by
inserting after the item relating to section 503 the following
new item:
Sec. 504. Commission study of enforcement authority under Rule 12g5-1
----------
14. An Amendment To Be Offered by Representative Capuano of
Massachusetts or His Designee, Debatable for 10 Minutes
Page 37, after line 22, insert the following (and amend the
table of contents accordingly):
SEC. 504. STUDY, REPORT, AND RULEMAKING.
(a) Study.--The Securities and Exchange Commission shall
conduct a study regarding whether the term ``held of record''
(as defined pursuant to section 12(g)(5) of the Securities
Exchange Act of 1934) should be changed--
(1) to mean the beneficial owner of the security; and
(2) to address anti-evasion concerns, such as those
described under section 240.12g5-1(b)(3) of title 17,
Code of Federal Regulations.
(b) Report.--Not later than 6 months after the date of the
enactment of this Act, the Commission shall submit a report to
the Congress containing the conclusions of the study carried
out under subsection (a).
(c) Rulemaking.--If, based on the study conducted pursuant to
subsection (a), the Commission concludes that a change to the
definition of the term ``held of record'' is necessary and
appropriate in the public interest and for the protection of
investors, then, not later than 1 year after the date of the
enactment of this Act, the Commission shall revise such
definition.
----------
15. An Amendment To Be Offered by Representative Peters of Michigan or
His Designee, Debatable for 10 Minutes
At the end of the bill insert the following:
TITLE VII--REQUIRED DISCLOSURE OF NUMBER OF DOMESTIC AND FOREIGN
EMPLOYEES
SEC. 701. REQUIRED DISCLOSURE OF NUMBER OF DOMESTIC AND FOREIGN
EMPLOYEES.
Section 13 of the Securities Exchange Act of 1934 (15 U.S.C.
78m) is amended by adding at the end the following new
subsection:
``(r) Disclosure of Number of Domestic and Foreign
Employees.--
``(1) In general.--Beginning the first full fiscal
year that begins after the date of enactment of this
subsection, each issuer required to file reports with
the Commission pursuant to subsection (a) shall
disclose annually to the Commission and to
shareholders--
``(A) the total number of employees of the
issuer and each consolidated subsidiary of the
issuer who are domiciled in the United States
and listed by number in each State;
``(B) the total number of such employees
physically working in and domiciled in any
country other than the United States, listed by
number in each country; and
``(C) the percentage increase or decrease in
the numbers required under subparagraphs (A)
and (B) from the previous reporting year.
``(2) Exemptions.--
``(A) Newer public companies.--An issuer
shall not be subject to the requirement under
paragraph (1) for the first 5 years after the
issuer is first required to file reports with
the Commission pursuant to subsection (a).
``(B) Emerging growth companies.--An issuer
that is an emerging growth company shall not be
subject to the requirement under paragraph (1).
``(3) Regulations.--The Commission may promulgate
such regulations as it considers necessary to implement
the requirement set forth in paragraph (1).''.
Amend the table of contents in section 2 by adding at the end
the following new items:
TITLE VII--REQUIRED DISCLOSURE OF NUMBER OF DOMESTIC AND FOREIGN
EMPLOYEES
Sec. 701. Required disclosure of number of domestic and foreign
employees
____________________________________________________
16. An Amendment To Be Offered by Representative Capps of California or
Her Designee, Debatable for 10 Minutes
Add at the end the following (and conform the table of
contents accordingly):
TITLE VII--REPORT ON IPOS AND MANUFACTURING
SEC. 701. REPORT.
After the end of the 1-year period beginning on the date of
the enactment of this Act, the Securities and Exchange
Commission shall issue a report to the Congress on the increase
in initial public offerings that resulted from this Act and the
amendments made by this Act, including the specific increases
in offerings by companies in the manufacturing industry and the
high technology industry.
----------
17. An Amendment To Be Offered by Representative Loebsack of Iowa or
His Designee, Debatable for 10 Minutes
Add at the end the following (and conform the table of
contents accordingly):
TITLE VII--OUTREACH ON CHANGES TO THE LAW
SEC. 701. OUTREACH BY THE COMMISSION.
The Securities and Exchange Commission shall provide online
information and conduct outreach to inform small and medium
sized businesses, women owned businesses, veteran owned
businesses, and minority owned businesses of the changes made
by this Act.