H.R. 4638 – Reading Mode

Union Calendar No. 474

114th CONGRESS

2d Session

H. R. 4638

[Report No. 114–609]

IN THE HOUSE OF REPRESENTATIVES

February 26, 2016

Mr. Garrett (for himself and Mr. Chabot) introduced the following bill; which was referred to the Committee on Financial Services

June 8, 2016

Reported with an amendment, committed to the Committee of the Whole House on the State of the Union, and ordered to be printed

Strike out all after the enacting clause and insert the part printed in italic

For text of introduced bill, see copy of bill as introduced on February 26, 2016

A BILL

To amend the Securities Exchange Act of 1934 to allow for the creation of venture exchanges to promote liquidity of venture securities, and for other purposes.

Short title

This Act may be cited as the Main Street Growth Act.

Venture exchanges

(a)

Securities Exchange Act of 1934

Section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f) is amended by adding at the end the following:

(m)

Venture exchange

(1)

Registration

(A)

In general

A national securities exchange may elect to be treated (or for a listing tier of such exchange to be treated) as a venture exchange by notifying the Commission of such election, either at the time the exchange applies to be registered as a national securities exchange or after registering as a national securities exchange.

(B)

Determination time period

With respect to a securities exchange electing to be treated (or for a listing tier of such exchange to be treated) as a venture exchange—

(i)

at the time the exchange applies to be registered as a national securities exchange, such application and election shall be deemed to have been approved by the Commission unless the Commission denies such application before the end of the 6-month period beginning on the date the Commission received such application; and

(ii)

after registering as a national securities exchange, such election shall be deemed to have been approved by the Commission unless the Commission denies such approval before the end of the 6-month period beginning on the date the Commission received notification of such election.

(2)

Powers and restrictions

A venture exchange—

(A)

may only constitute, maintain, or provide a market place or facilities for bringing together purchasers and sellers of venture securities;

(B)

may determine the increment to be used for quoting and trading venture securities on the exchange;

(C)

shall disseminate last sale and quotation information on terms that are fair and reasonable and not unreasonably discriminatory;

(D)

may choose to carry out periodic auctions for the sale of a venture security instead of providing continuous trading of the venture security; and

(E)

may not extend unlisted trading privileges to any venture security.

(3)

Exemptions from certain national security exchange regulations

A venture exchange shall not be required to—

(A)

comply with any of sections 242.600 through 242.612 of title 17, Code of Federal Regulations;

(B)

comply with any of sections 242.300 through 242.303 of title 17, Code of Federal Regulations;

(C)

submit any data to a securities information processor; or

(D)

use decimal pricing.

(4)

Treatment of certain exempted securities

A security that is exempt from registration pursuant to section 3(b) of the Securities Act of 1933 shall be exempt from section 12(a) of this title with respect to the trading of such security on a venture exchange, if the issuer of such security is in compliance with all disclosure obligations of such section 3(b) and the regulations issued under such section.

(5)

Definitions

For purposes of this subsection:

(A)

Early-stage, growth company

(i)

In general

The term early-stage, growth company means an issuer—

(I)

that has not made an initial public offering of any securities of the issuer; and

(II)

with a market capitalization of $1,000,000,000 (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) or less.

(ii)

Treatment when market capitalization exceeds threshold

(I)

In general

In the case of an issuer that is an early-stage, growth company the securities of which are traded on a venture exchange, such issuer shall not cease to be an early-stage, growth company by reason of the market capitalization of such issuer exceeding the threshold specified in clause (i)(II) until the end of the period of 24 consecutive months during which the market capitalization of such issuer exceeds $2,000,000,000 (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).

(II)

Exemptions

If an issuer would cease to be an early-stage, growth company under subclause (I), the venture exchange may, at the request of the issuer, exempt the issuer from the market capitalization requirements of this subparagraph for the 1-year period that begins on the day after the end of the 24-month period described in such subclause. The venture exchange may, at the request of the issuer, extend the exemption for 1 additional year.

(B)

Venture security

The term venture security means—

(i)

securities of an early-stage, growth company that are exempt from registration pursuant to section 3(b) of the Securities Act of 1933; and

(ii)

securities of an emerging growth company.

(b)

Securities Act of 1933

Section 18(b)(1) of the Securities Act of 1933 (15 U.S.C. 77r(b)(1)) is amended—

(1)

in subparagraph (B), by striking or at the end;

(2)

in subparagraph (C), by striking the period and inserting ; or; and

(3)

by adding at the end the following:

(D)

a venture security, as defined under section 6(m)(5) of the Securities Exchange Act of 1934.

(c)

Sense of Congress

It is the sense of the Congress that the Securities and Exchange Commission should—

(1)

when necessary or appropriate in the public interest and consistent with the protection of investors, make use of the Commission’s general exemptive authority under section 36 of the Securities Exchange Act of 1934 (15 U.S.C. 78mm) with respect to the provisions added by this section; and

(2)

if the Commission determines appropriate, create an Office of Venture Exchanges within the Commission’s Division of Trading and Markets.

(d)

Rule of construction

Nothing in this section or the amendments made by this section shall be construed to impair or limit the construction of the antifraud provisions of the securities laws (as defined in section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a))) or the authority of the Securities and Exchange Commission under those provisions.

(e)

Effective date for tiers of existing national securities exchanges

In the case of a securities exchange that is registered as a national securities exchange under section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f) on the date of the enactment of this Act, any election for a listing tier of such exchange to be treated as a venture exchange under subsection (m) of such section shall not take effect before the date that is 180 days after such date of enactment.

June 8, 2016

Reported with an amendment, committed to the Committee of the Whole House on the State of the Union, and ordered to be printed