H.R. 1965: To amend the securities laws to establish certain thresholds for shareholder registration, and for other purposes

H.R. 1965

To amend the securities laws to establish certain thresholds for shareholder registration, and for other purposes

Rep. James A. Himes

November 2, 2011 (112th Congress, 1st Session)

Staff Contact

Floor Situation

On Wednesday, November 2, 2011, the House is scheduled to consider H.R. 1965, a bill to amend the securities laws to establish certain thresholds for shareholder registration, and for other purposes, under a suspension of the rules, requiring a two-thirds majority for passage.  H.R. 1965 was introduced by Rep. James Himes (D-CT) on May 24, 2011, and was referred to the House Committee on Financial Services.

Bill Summary

H.R. 1965 would amend the Securities Exchange Act of 1934 to modify the threshold at which an issuer of securities must register with the Securities and Exchange Commission (SEC).

The bill would set the holding threshold that requires registration of a class of equity security at greater than $10 million of assets for any company and 2,000 holders of record if the company is a bank or bank holding company.

Finally, H.R. 1965 would direct the Chief Economist and the Director of the Division of Corporation Finance of the Securities and Exchange Commission (SEC) to study and make a cost-benefit analysis of shareholder registration thresholds.


This bill is part of a package of legislation intended to improve small businesses’ access to capital by expanding equity financing options.  The alternative method, debt financing, is prohibitively difficult in light of tightened lending standards following the financial crisis of 2008-09.  Capital formation is necessary for business expansion and therefore job creation and sustained economic growth. 

Under current law, companies with assets greater than $10 million that have issued a class of security held by more than 500 people must register with the SEC if those securities are to be traded on a registered exchange.  These companies are therefore subject to the SEC’s reporting requirements.  While the asset threshold has been increased over the years to $10 million from the $1 million level initially set in 1964, the 500 shareholder requirement has never been updated.  

A press release from the bill’s sponsor, Rep. Jim Himes (D-CT), notes, the bill would “raise the number of shareholders permitted to invest in an institution before that entity must register with the SEC or ‘go public.’ Currently, both banks and private companies are subject to a 500 investor threshold, which limits the amount of capital they can raise before they must comply with the expensive reporting requirements associated with SEC registration.  Additionally, in the current economic climate, successful initial public offerings (IPOs) require substantial capital and management time, initially and on an ongoing basis, especially compared to when these regulations were first put in place.  [This bill would] give small companies and community banks the flexibility to remain private until they have the capital and capability to launch a successful IPO.”


The Congressional Budget Office (CBO) estimates that H.R. 1965 would have a negligible impact on the SEC’s workload, and any change in agency spending that is subject to appropriation would not be significant.  Enacting H.R. 1965 would not affect direct spending or revenues, therefore, pay-as-you-go procedures do not apply