House Financial Services Committee Markup of Legislation

• All the bills considered were favorably reported out of Committee.

• H.R. 5970, the “Modernizing Disclosures for Investors Act”

• An Amendment in the Nature of a Substitute offered by Mrs. Wagner.

• H.R. 6130, the “Helping Startups Continue to Grow Act”
• H.R. 6139, the “Improving Investment Research for Small and Emerging Issuers Act”

H.R. 5970, the “Modernizing Disclosures for Investors Act”
Rep. Ann Wagner (R-Mo.) introduced her bill and her Amendment in the Nature of a Substitute, which would change H.R. 5970 to require the Securities Exchange Commission (SEC) to conduct a study on the costs and benefits of requiring reporting companies to use Form 10-Q, including for investors, as well as an analysis of possible replacements or alternatives to form 10-Q and those alternatives impact on investors and markets. Ranking Member Waters (D-Calif.) expressed support for the amendment, but not the original bill.

The measure was favorably reported by a vote of 56-0.

H.R. 6139, the “Improving Investment Research for Small and Emerging Issuers Act”
Rep. Bill Huizenga (R-Mich.) introduced his bill by discussing the declining number of public companies and the sluggish market for initial public offerings (IPOs). Huizenga pivoted to discuss the importance of research coverage and noted that despite provisions in the Jumpstart Our Business Startups (JOBS) Act of 2012 allowing it, pre-IPO research has not materialized. Additionally, he noted many small issuers have no research coverage at all, and that issuers with less than $750 million in market cap have an average of one research analyst covering them. H.R. 6139 would require the SEC to study the market for investment research and the impediments small issuers face in acquiring research coverage. Waters also expressed support for the bill.

The measure was favorably reported by a vote of 58-0.

H.R. 6130, the “Helping Startups Continue to Grow Act”
Rep. Keith Rothfus (R-Pa.) introduced his bill, which would extend the JOBS Act on-ramp to ten years for companies that would otherwise qualify as an emerging growth company (EGC). Rothfus argued that many EGCs are still pre-revenue and that by extending the on-ramp, companies can continue to invest in their technology and future growth. Huizenga and other members of the majority defended the bill.

Waters opposed H.R. 6130 for giving companies up to a decade to avoid compliance with important corporate governance and accounting requirements, including requirements on executive compensation. Waters argued that the JOBS Act only gave companies a five-year period of scaled disclosure, and that further extensions risked creating a “two-tiered” disclosure system. Other members of the minority opposed the bill as well.

The measure was favorably reported by a vote of 32-24.

 

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