H.R. 701: to amend a provision of the Securities Act of 1933 directing the Securities and Exchange Commission to add a particular class of securities to those exempted under such Act to provide a deadline for such action

H.R. 701

to amend a provision of the Securities Act of 1933 directing the Securities and Exchange Commission to add a particular class of securities to those exempted under such Act to provide a deadline for such action

Date
May 15, 2013 (113th Congress, 1st Session)

Staff Contact
Communications

Floor Situation

On Wednesday, May 15, 2013, the House is scheduled to consider H.R. 701, a bill to amend a provision of the Securities Act of 1933 directing the Securities and Exchange Commission to add a particular class of securities to those exempted under such Act to provide a deadline for such action,under a suspension of the rules. The bill was introduced on February 14, 2013 by Rep. Patrick McHenry (R-NC) and referred to the Committee on Financial Services, which held a mark-up and reported the bill by voice vote.

Bill Summary

In short, H.R. 701 sets a deadline of October 31, 2013 for the SEC to finalize certain rules required by Title IV of the JOBS Act (P.L. 112-106).  

Background

One of the most important components of job creation is access to capital.  Without it, businesses cannot expand and hire more workers.  To help small companies more easily access capital, on March 27, 2012, the House passed the JOBS Act by a vote of 380-41 (Roll no. 132) and sent it to the President, who signed it into law on April 5, 2012 (P.L. 112-106).  The JOBS Act was a package of bi-partisan bills from the Financial Services Committee, which created a new transitional status for small businesses to encourage them to go public and help them raise equity capital.  This transitional status allows a company to go public, and therefore access capital markets, while temporarily lowering the reporting requirements compared to what a larger company would be required to produce.

Title IV of the JOBS Act was based on H.R. 1070, which passed the House in the 112th Congress on November 2, 2011 by a vote of 421-1 (Roll no. 820).  Title IV amended the Securities Act of 1933 to raise the Regulation A exemption limit from $5 million to $50 million.  The SEC created Regulation A exemptions from registration as a way for small companies to more easily and effectively access U.S. capital markets.  Over the last two decades, however, the low $5 million threshold became increasingly unrealistic and the number of companies applying under Regulation A exemptions dropped precipitously.  While the SEC had the authority to raise the exemption limit, they had not done so since the early 1990s.  By raising the limit, Title IV of the JOBS Act eased the regulatory burden for emerging companies and allowed Regulation A to fulfill its originally intended purpose.

H.R. 701 amends Title IV of the JOBS Act to impose a deadline of October 31, 2013 for the SEC to make these changes.

Cost

CBO estimates that, “implementing H.R. 701 would have a negligible effect on the [SEC’s] workload. As a result, CBO estimates that implementing H.R. 701 would not significantly affect discretionary spending. Furthermore, under current law, the agency is authorized to collect fees sufficient to offset its operating costs each year; therefore, we estimate that the net cost to the SEC would be negligible, assuming appropriation actions consistent with that authority.”