Modernizing Disclosures for Investors Act

Mr. Speaker, I move to suspend the rules and pass the bill (S. 488) to increase the threshold for disclosures required by the Securities and Exchange Commission relating to compensatory benefit plans, and for other purposes, as amended.

Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days in which to revise and extend their remarks and include extraneous material on this bill.

Mr. Speaker, I yield myself as much time as I may consume.

Mr. Speaker, two things that are vital to the American economy: number one, 3 percent economic growth, and number two, competing with China.

Three percent economic growth, Mr. Speaker, is so important because, when you look at the history of America, if you look at jobs that are created, if you look at increasing incomes, if you look at decreasing unemployment, this happens in our 3 percent-plus growth years, and that is why it is so great that America is once again seeing 3 percent-plus economic growth.

But, Mr. Speaker, can we keep it?

There are some alarming trends that we have to arrest, and that is that, unfortunately, entrepreneurship, that is, launching new businesses, recently hit a generational low. Companies that are going public--and 90 percent of the jobs that a company creates happen after they go public, IPOs, initial public offerings--they have been in a decline, a 20-year decline, and they have reached a new low.

If we look at what China is trying to do with their 2025 program, Mr. Speaker, and dominate the world in high tech and then we turn around and we see that China has over a third of the world's IPOs, America-- our decline is now down to 11 percent--has got to change.

So thus, today, we are taking up the JOBS and Investor Confidence Act, also known as the JOBS Act 3.0.

What we are trying to do, Mr. Speaker, number one, we are doing it on a bipartisan basis, but we are trying to ensure that our entrepreneurs at least don't face the challenge of having the capital they need to launch their companies, because, Mr. Speaker, when we have more small businesses that are launching new enterprises and going public and staying public, these are the Amazons and the Googles and the Microsofts of the future.

So, again, Members on both sides of the aisle have come together because, historically, capital formation has been a bipartisan issue here. We have come together, Democrat and Republican, to make sure that these small

businesses get this start. And we try to treat the whole capital formation ecosystem, from venture capital with the HALOS Act and helping accredited investors be able to bring their capital to the table, to early growth companies and how they have to handle the very expensive 404(b) Sarbanes-Oxley provision, to the stages of companies going public, but once they go public, Mr. Speaker, the ability to stay public, and so we have a venture exchange bill to make sure that they can concentrate their liquidity in one area.

So this is important. It is important to keep 3 percent economic growth. It is important that America's garages have fewer old cars, more new startups.

I want to thank Members on both sides of the aisle, but I especially want to thank the ranking member, the gentlewoman from California, working so strongly and fervently and on a good, bipartisan, cooperative basis to produce the JOBS and Investor Confidence Act.

Mr. Speaker, I expect that we can have a strong bipartisan vote on the floor, and I reserve the balance of my time.

Mr. Speaker, I yield 2 minutes to the gentleman from Michigan (Mr. Huizenga), the chairman of the Capital Markets, Securities, and Investments Subcommittee, the real leader of this capital formation package on the Republican side of the aisle, and also the sponsor of two provisions of the bill: H.R. 477, the Small Business Mergers, Acquisitions, Sales, and Brokerage Simplification Act, and H.R. 6139, the Improving Investment Research for Small and Emerging Issuers Act.

Mr. Speaker, I yield 1 minute to the gentleman from Ohio (Mr. Chabot), who is the chairman of the House Small Business Committee and who has sponsored a very important provision in the package, H.R. 79, the Helping Angels Lead Our Startups Act.

Mr. Speaker, I yield 1 minute to the gentlewoman from Missouri (Mrs. Wagner), the chair of our Oversight and Investigations Subcommittee, also the lead sponsor of an important provision in this package of bills, H.R. 5970, the Modernizing Disclosure for Investors Act.

Mr. Speaker, I yield 1 minute to the gentleman from Kentucky (Mr. Barr), the chair of our Monetary Policy and Trade Subcommittee.

Mr. Speaker, I yield 1 minute to the gentleman from Illinois (Mr. Hultgren), who is the vice-chairman of our Capital Markets, Securities, and Investment Subcommittee.

Mr. Hultgren is the lead sponsor of two provisions of the bill, H.R. 5749, the Options Market Stability Act, and H.R. 6319, the Expanding Investment in Small Businesses Act.

Mr. Speaker, I yield 1 minute to the gentleman from Wisconsin (Mr. Duffy), who is the chairman of our Housing and Insurance Subcommittee. Mr. Duffy is the sponsor of a provision of this bill, H.R. 4537, the International Insurance Standards Act.

Mr. Speaker, I yield 1 minute to the gentleman from North Carolina (Mr. Pittenger), who is the vice-chairman of the Financial Services Subcommittee on Terrorism and Illicit Finance.

Mr. Speaker, I yield 1 minute to the gentleman from Pennsylvania (Mr. Rothfus), the vice chairman of our Financial Institutions Subcommittee, who is also the lead Republican sponsor of one of the bills in the package, H.R. 6069, the Fight Illicit Networks and Detect Trafficking Act.

Mr. Speaker, I yield 1 minute to the gentleman from California (Mr. Sherman), a senior Democrat on the committee and the lead sponsor of the bill.

Mr. Speaker, I yield 1 minute to the gentleman from Texas (Mr. Williams), the vice chairman of the Financial Services Subcommittee on Monetary Policy and Trade.

Mr. Speaker, I yield 1 minute to the gentleman from Arkansas (Mr. Hill), the majority whip of the committee and also the lead sponsor of H.R. 5783, the Cooperate with Law Enforcement Agencies and Watch Act, and who worked, also, extensively on H.R. 1585, the Fair Investment Opportunities for Professional Experts Act.

Mr. Speaker, I yield 1 minute to the gentleman from Minnesota (Mr. Emmer), who is the lead sponsor of a very important provision in the package, H.R. 5877, the Main Street Growth Act.

Mr. Speaker, I yield 1 minute to the gentleman from Georgia (Mr. Loudermilk), who is the lead sponsor of two provisions in the package: H.R. 3555, the Exchange Regulatory Improvement Act, and H.R. 5953, the earlier referenced BUILD Act.

Mr. Speaker, I yield 1 minute to the gentleman from North Carolina (Mr. Budd), the lead sponsor of one of the provisions in the bill, H.R. 3903, the Encouraging Public Offerings Act.

Mr. Speaker, I yield the gentlewoman from California an additional 30 seconds.

Mr. Speaker, may I inquire how much time I have remaining.

Mr. Speaker, I yield myself the balance of my time.

Indeed, Mr. Speaker, some would say the ranking member and I can't agree even on the time of day. I was told when this debate started that thunderstorms came over Washington, D.C., it was that monumental of an achievement.

But in seriousness, I do want to offer my thanks and my gratitude to the ranking member. She and her staff worked very constructively with us on this bill and the preceding important bill, the CFIUS reform, which we are still trying to work out our differences on with the Senate. But, long story short, we came together.

This is going to be an important day for small business. It is an important day for 3 percent economic growth, which is so important to American families.

I, too, want to echo how important the work of our staffs is. Particularly on the majority side, I wish to thank Kevin Edgar and Fritz Vaughan and their staff for their contribution.

This is going to make a difference, ultimately, because small businesses one day become big businesses. This will make a difference in economic growth for all Americans.

Mr. Speaker, I urge all Members to support the JOBS and Investor Confidence Act of 2018, and I yield back the balance of my time.

Mr. Speaker, on that I demand the yeas and nays.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, this bill is an example of true bipartisanship. I want to thank Chairman Hensarling, the members of the Financial Services Committee, and the staff on both sides of the aisle for their work on this legislative package.

S. 488, the JOBS and Investor Confidence Act of 2018, is evidence that Democrats and Republicans can come together to strengthen our Nation's small businesses and entrepreneurs, bolster investor confidence, protect consumers, promote financial stability, and counter human and drug trafficking.

S. 488 helps small businesses grow by encouraging capital formation and requires the Securities and Exchange Commission to consider unique issues facing rural small businesses and small investment advisers. When entrepreneurs are looking to retire, S. 488 allows them to easily sell their businesses.

The bill also requires several rulemakings and studies to encourage small businesses to go public, including by protecting them from excessive underwriting fees.

Main Street investors and consumers also benefit from S. 488. One provision, which I authored, cracks down on corporate insiders engaged in illegal insider trading.

Democrats also led provisions to enhance disclosures about outsized insider voting power.

The bill also creates a task force at the SEC to protect seniors and their financial best interests.

Additionally, the bill helps nonprofits, like Habitat for Humanity, continue to extend affordable mortgages to low-income families aspiring to the dream of homeownership.

Thanks to Mr. Ellison, the legislation enables millions of Americans with thin credit files to improve and build their credit by allowing alternative types of data, like the on-time payment of rent and utilities, to be included in their credit reports without preempting State law.

S. 488 also improves financial stability. The bill directs regulators to improve the calculation for bank capital held to offset risk in the options and derivatives markets so that riskier products are covered by more capital

Finally, S. 488 strengthens our government's efforts to stop drug and human trafficking by preventing criminals who engage in these unconscionable acts from accessing the financial system.

There are several provisions that we did not reach bipartisan agreement on in time, including reforms to private offerings under regulation D that requires issuers to file disclosures before their first sell and after the termination of the offering. I am pleased that the chairman has offered to continue working on this and other issues with me, and I hope that the Senate has its own chance to make these and other changes.

Throughout my work on this legislation, I insisted that nothing could be included that would weaken Dodd-Frank's financial reforms, harm consumers, or provide giveaways to Wall Street. Instead, building on the bipartisan work of the Financial Services Committee, S. 488 includes measures that will help small businesses grow and protect hardworking Americans who entrust their savings to the capital markets.

Mr. Speaker, I again thank my colleagues for their strong bipartisan support on this legislation, and I reserve the balance of my time.

Mr. Speaker, I yield 2 minutes to the gentlewoman from New York (Mrs. Carolyn B. Maloney), the ranking member of our Capital Markets, Securities, and Investment Subcommittee of the Financial Services Committee, and the leading sponsor and Democratic cosponsor of several of the bills in this package.

Mr. Speaker, I yield 2 minutes to the gentleman from Georgia (Mr. David Scott), a senior member of the Financial Services Committee and the leading Democratic cosponsor of several of the bills in this package.

Mr. Speaker, I yield an additional 30 seconds to the gentleman.

Mr. Speaker, I yield 2 minutes to the gentleman from Connecticut (Mr. Himes), a member of the Financial Services Committee, the chair of the New Democrat Coalition, and the author of one of the bills in this package that ensures companies aren't paying excessive fees to go public.

Mr. Speaker, I yield 2 minutes to the gentleman from Illinois (Mr. Foster), who is a member of the Financial Services Committee and a leading Democratic cosponsor on several of the bills in this package.

Mr. Speaker, I yield the gentleman from Illinois an additional 20 seconds.

Will the Speaker please check the minutes again? We have calculated differently, and we think I have 9 minutes.

I am sorry. What is the Chair saying about the time that I have remaining?

Mr. Speaker, I yield 2 minutes to the gentlewoman from Ohio (Mrs. Beatty), who is a member of the Financial Services Committee who helped ensure that this bill cracks down on the use of digital currency in human trafficking.

Mr. Speaker, I yield 2 minutes to the gentleman from New Jersey (Mr. Gottheimer), who is a member of the Financial Services Committee and author of one of the bills in this package.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I continue to reserve the balance of my time.

Mr. Speaker, I have no further requests for time, and I yield myself the remainder of my time to close.

I once again thank my colleagues for their outstanding bipartisan work on this carefully crafted bipartisan legislation. S. 488, the JOBS and Investor Confidence Act of 2018, is an example of Members on both sides of the aisle working together to support our Nation's small businesses and investors.

S. 488 facilitates access to capital for small businesses, increases protections for consumers and investors, fights the scourge of drug and human trafficking, and promotes financial stability.

S. 488 is supported by institutional investors, angel investors, venture capitalists, biotech companies, credit unions, small businesses, entrepreneurs, and exchanges. This bill will help entrepreneurs, small businesses, and investors to thrive in our economy.

Finally, I would like to thank Mr. Hensarling for his foresight in knowing that this was possible because both sides of the aisle really support small businesses. It was Mr. Hensarling who said: Given that we do both support small businesses, why can't we come together around a package where we have already shown our support on individual bills either in committee or on the floor and put it all together?

He did that. He provided that leadership. I joined with him.

Our staffs are to be congratulated because they worked very hard on both sides of the aisle to work out any concerns that we may have, any differences that we may have. They did a magnificent job, and they are responsible for helping us to understand what certainly is and was possible.

So despite this, if I may say, there are many onlookers who never thought this could happen. There are many pundits, those who come from special interests, those who come from right here in the House on both sides of the aisle, who are still questioning.

Mr. Speaker, I had one inquiry from one of the magazines, I believe it was, who said: Tell me what happened in the background, what was really going on. How did this all come together?

I want the gentleman from Texas to know I told him it is none of his business. It really happened, and we are pleased about it. We worked very hard on that.

Mr. Speaker, I thank Mr. Hensarling and all of the members who worked so hard to make this happen, and I yield back the balance of my time.

Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 5970) to require the Securities and Exchange Commission to implement rules simplifying the quarterly financial reporting regime, as amended.

Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days in which to revise and extend their remarks and include extraneous material on the bill.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, I commend my colleague, Mrs. Wagner, from Missouri for her work on this very important bill. This is part of a series of bills that we have seen, not just today but throughout the time that we have put forth on the Capital Markets Subcommittee, as well as the Financial Services Committee overall, because we know that there is no one thing that has ground the gears of our economy to a halt or to slow it down, and there is also no one magic thing that can happen or be passed that will suddenly spring it to life. It is a little like throwing sand in the gears of a machine. Over time, it just gets harder and harder and harder for that machine to grind on.

We are here through a whole series of bills, both today and at other times, to add a little oil to the machine, to try to make sure that our capital markets are continuing to move and to be the envy of the world. We know, Mr. Speaker, that our capital markets here in the United States have been and continue to be the envy of the world, and they are a vibrant ecosystem fueling America's economic growth and generating millions of private sector jobs.

These capital markets provide financing and needed resources to the smallest startups and to the very largest of the international companies that we have here in the United States. However, smaller companies have often been penalized for their size.

As we have talked about in previous bills, the number of IPOs, or initial public offerings, that have occurred in the United States have plummeted. We have tried to fix that or tried to help improve that through things like the JOBS Act, but these small companies still face significant regulatory and market impediments that disincentivize them from accessing capital via the public markets.

The Federal securities laws require that most SEC registrants disclose certain information on an ongoing basis, including a quarterly report on what is called the form 10Q. Form 10Q includes condensed financial information and

other data prepared by a company and reviewed, though generally unaudited, by its independent auditor.

The purpose is to provide a continuing view of the company's financial position during the year. The report must be filed for each of the first three fiscal quarters of the company's fiscal year.

The SEC's current corporate disclosure system imposes a number of outdated, duplicative, burdensome, and unnecessary requirements on U.S. companies diverting private sector resources toward regulatory compliance and away from innovation, growth, and job creation, where it really should be. Moreover, this outdated disclosure regime leads to unnecessarily long, complicated, and often immaterial public company disclosures, resulting in widespread investor confusion and, potentially, suboptimal investment decisions.

While the SEC has often recognized the need to study and streamline the corporate disclosure regime, it has recently been Congress that has actually spurred them on in this regard. Through provisions such as the JOBS Act and the FAST Act, the SEC is required to study current regulations and then eliminate these outdated, duplicative, and unnecessary disclosure obligations.

Form 10Q can create extreme administrative costs. A 2011 report of the IPO Task Force found that 92 percent of public companies said that ``administrative burden of public reporting'' was a significant challenge to completing an IPO and becoming a public company.

We have talked about, Mr. Speaker, earlier, that lack of ability for retail investors, the Joe and Jane investor, to have the same opportunity that some sort of well-financed, professional investor or fund that is out there is going to have.

We need to allow them to have access into these pools of companies so that they may catch the upside of so many of these companies that are seeing extreme growth. That is the reason why we need to have these IPOs.

In addition to filing forms 10K annually and 10Q quarterly, companies must file current reports on form 8K, often within 4 business days after the occurrence of specified events; these are things that could move their stock price, for example, and is relevant disclosure that needs to happen. They are then required to file these form 8Ks.

In other words, by the time a quarterly report is filed, many material events have already been reported by a company through these 8Ks; and according to widespread economic views regarding efficiency of markets, that information has then been priced into the cost of an equity. Granting early growth companies the option of issuing a press release or other short form that includes earnings results, as opposed to a full 10Q form, would provide investors with important quarterly financial information but reduce unnecessary burdens and complexities associated with the current quarterly reporting system.

Again, it is extremely important that investors have access to that information. This bill does nothing to diminish that. In fact, it makes it more approachable and more accessible to the average investor.

Nonetheless, this bill does not require any action by the SEC to change the 10Q reporting regime. It simply requires the SEC to consider the issue and report back to Congress on it. In doing so, the SEC can consider the substantial costs of these financial disclosures and aim to modernize the disclosure process in a manner that encourages investors to make more efficient use of the information filed with the

Mr. Speaker, it has been a long afternoon. We have covered a lot of territory, eight different bills, I think, today. As I had said earlier, there is no magic bill that is going to somehow cure or remedy some of the challenges that our capital markets have seen over the last number of years, but this is a step towards that.

H.R. 5970 and so many of these other bills are important steps that this House is taking on a very bipartisan basis. I commend everybody who has worked on this--Mr. Gottheimer and Mrs. Wagner in this particular case--and I look forward to continuing to work with my colleagues across the aisle to search for true solutions in policy and to set aside the politics of what needs to happen.

Mr. Speaker, I urge my colleagues to vote in favor of H.R. 5970, and I yield back the balance of my time.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, robust and regular disclosures by public companies, such as the detailed quarterly financial information filed on a form 10Q, make our markets more attractive to investors by enabling informed investment decisions and ensuring shareholders can hold corporate boards accountable for practices that may undermine the value of the company.

Standardized quarterly financial reporting on form 10Q also provides a means for regulators to conduct efficient and effective oversight of public companies and protect investors from fraud and other corporate misconduct.

When investors have faith in the integrity of our markets, they are more likely to entrust their capital to public companies, thereby providing opportunities for economic growth and job creation.

The benefits of quarterly reporting are well recognized by the investor community. In a June 2016 letter to the SEC's Division of Corporate Finance, the SEC's Investor Advisory Committee wrote, ``The current degree, quality, and frequency of disclosure for U.S. issuers overall is appropriate and a source of strength for the U.S. capital markets. The current system greatly benefits retirees, pension funds, endowments, and households that are directly and indirectly market participants.''

Additionally, in May and June of this year, investors and investor advocacy groups wrote to the Financial Services Committee expressing their support for the SEC's current quarterly reporting regime, including the form 10Q.

According to CalPERS, the largest public pension fund in the United States with more than $350 billion in global assets, ``10Qs provide substantial and important information and serve as a great historical resource. Any modification of standard quarterly filings should be preceded by significant study with ample opportunity for investor input.''

While some business groups have called for the elimination of the 10Q as a cost-saving measure for corporations, I agree that any attempt to alter the existing quarterly reporting requirements first requires a careful and balanced study that considers the impact of any changes on investors and our markets.

H.R. 5970, as amended, requires the SEC to conduct such a study, to include consideration of the benefits of form 10Q reporting to the SEC, public companies, investors, market researchers, and other market participants.

I support the bill as amended, and I thank Mr. Gottheimer and Mrs. Wagner for working together to develop a bipartisan approach to the study. I hope that the SEC takes this study as an opportunity to hear from investors about the disclosures they find important and ensure that our public markets and the companies which seek to access them continue to enjoy the benefits of comprehensive and standardized financial disclosure.

Mr. Speaker, I yield back the balance of my time.

Mr. Speaker, I thank Ranking Member Waters for yielding.

I want to begin by recognizing the good work of the ranking member and the chairman and their staffs in compiling this capital formation package. I want to compliment the legislative skill shown by the ranking member and her staff in securing minority bills in this package, which I recognize involved a lot of give and take.

We are a long ways from where this Chamber was a little over 13 months ago when we voted in a very partisan manner on the Financial CHOICE Act. I am proud to support this package which contains a number of priorities which I supported in committee and on the floor.

I worked on two of these bills with my colleagues, Congressmen Hill and Hultgren. While I know that there are many others who contributed to this package, I want to thank in particular Katelynn Bradley, Katy Strohmaier, and Lisa Peto of the ranking member's staff for helping draft these amendments that led to unanimous support for these two bills in committee.

First, the Options Markets Stability Act would direct the banking regulators to write rules to provide far more accurate circulations of counterparty credit risk for options and derivatives. Under the current exposure method used today, banks that centrally clear trades today on behalf of their clients must hold capital against the total notional value of any positions without regard for the way hedges offset risk.

This bill directs the regulators to implement a framework that incentivizes central clearing of options and derivatives, which is a major part of our response in the Dodd-Frank bill that has provided financial stability for the last 8 years.

The second bill is the Cooperate With Law Enforcement Agencies and Watch Act. This bill creates a safe harbor for financial institutions and money service businesses from the Bank Secrecy Act so long as they have a letter from law enforcement asking for a specific account to be kept open. Law enforcement agencies often send these letters so that they can follow the money and obtain crucial evidence in investigations. This bill will encourage bank cooperation with these letters which are otherwise optional because it eliminates a situation of technical noncompliance.

Other provisions in this package will improve transparency in markets which drives investor demand from around the world.

Other provisions in this bill will simply make our capital markets work better.

I applaud the bipartisanship of the ranking member and the chairman, and I look forward to further improvements in the regulatory landscape as our markets evolve.

Mr. Speaker, I urge all of my colleagues to support this bill.