Improving Investment Research for Small and Emerging Issuers 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. 6139) to require the Securities and Exchange Commission to carry out a study to evaluate the issues affecting the provision of and reliance upon investment research into small issuers.

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 materials on this bill.

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

Mr. Speaker, initial public offerings, or IPOs, have historically been one of the most meaningful steps in the lifecycle of a company.

Going public was the ultimate goal for many entrepreneurs. You start a business from scratch, build it into a successful enterprise, and then open up an opportunity for the public to share in your success. Going public not only affords companies many benefits, including access to the capital markets, but IPOs are also important to the investing public. By completing an IPO, a company is able to raise much-needed capital for job creation and expansion opportunities, while allowing Main Street investors an opportunity to have an economic piece of the action and the ability to participate in the growth phase of a company.

However, over the past two decades, our Nation has experienced a 37 percent decline in the number of U.S.-listed companies. Equally troubling, we have seen the number of public companies fall to around 5,700. These statistics are concerning because they are similar to the data we saw in the 1980s when our economy was less than half of its current size.

For a myriad of reasons, the public model is no longer viewed as the most attractive means of raising capital. Instead, small and emerging growth companies are choosing to go public much later in their lifecycle or, frankly, choosing not to go public at all.

We must work to change that trajectory, in my mind. In speaking to the New York Economic Club, SEC Chairman Jay Clayton stated: ``Regardless of the cause, the reduction in the number of U.S.-listed public companies is a serious issue for our markets and the country more generally. To the extent companies are eschewing our public markets, the vast majority of Main Street investors will be unable to participate in their growth. The potential lasting effects of such an outcome to the economy and society are, in two words, not good.''

That is from SEC Chairman Jay Clayton.

I share Chairman Clayton's concerns. We need to ensure that our capital markets are open for innovators and job creators, and we must work to rightsize regulations for smaller companies as well.

One way that Congress worked to lift burdensome regulations and help small companies gain access to these capital markets was the bipartisan Jumpstart Our Business Startups Act, commonly known as the JOBS Act. Section 105 of the JOBS Act changed the ``gun-jumping rules'' to provide an exception from the definition of an offer to allow for the publication or distribution by a broker or dealer of a research report about an emerging growth company that is the subject of a proposed public offering.

However, few investment banks have published any pre-IPO research since passage of the JOBS Act, and research coverage, in general, on small issuers continues to be an issue. This negatively affects investor interest and awareness in a company as well as its trading liquidity and, therefore, does not allow the company to launch the way that it properly could.

This provision is intended to increase research, but, unfortunately, it has had the opposite effect, and, instead, there has been a significant decline--we have seen a significant decline over recent years in analyst research covering small public companies.

According to the U.S. Chamber, ``61 percent of all companies listed on a major exchange with less than $100 million market capitalization have no research coverage at all.''

For equities with a market cap below $750 million, the average number of research analysts covering that stock is one, while equities above $750 million

in market cap have an average of 12 research analysts covering the stock.

Additionally, the amount of research written on small companies has declined even as the percentage of individual ownership in small cap companies has gone up, has increased. Little or no research coverage generally corresponds with lower stock liquidity, and reduced research coverage may particularly be disadvantageous to individual investors who have limited research capabilities on their own.

In fact, one study published in June of 2017 in The Journal of Finance found that an increase in the number of analysts covering an industry improved the quality of analyst forecasts and information flow to investors. For that reason, it is important to examine current SEC rules and regulations affecting the ability of investment research coverage regarding these small issuers.

The Treasury report on Capital Markets recommended a holistic review of the rules and regulations regarding research, including the global settlement, to determine which provisions should be retained, amended, or removed.

Our bipartisan bill, the Improving Investment Research for Small and Emerging Issuers Act would direct the SEC to study and evaluate issues affecting the ability of emerging growth companies and other small issuers in obtaining research coverage, including SEC rules, FINRA rules, State and Federal liability concerns, the 2003 Global Research Analyst Settlements, and MiFID II.

And not later than 180 days after enactment of that, the SEC will be required to submit to Congress a report that includes the results of the study and recommendations to assist these emerging growth companies, or EGCs, and other small issuers to obtain research coverage.

Among the issues the SEC must consider are factors related to the demand for such research by institutional and retail investors, cost considerations for such research, and the impact on the availability of research coverage for small issuers due to a variety of market and regulatory conditions.

The SEC's report must include recommendations to increase the demand for, volume of, and quality of investment research into small issuers, including EGCs. This legislation is supported by Biotechnology Industry Organization, also known as BIO; the U.S. Chamber of Commerce; Nasdaq; the Securities Industry and Financial Markets Association, also known as SIFMA; and the National Venture Capital Association.

I thank the ranking member, Ms. Waters, for recognizing the importance of this research in our capital markets and working with me to address this issue and being a cosponsor of this.

So I urge all of my colleagues to support this bill, and I reserve the balance of my time.

Mr. Speaker, I want to, again, thank the ranking member for her work on this and being able to move forward on this very important issue. And I, again, want to encourage all of our friends on all sides, on both sides of the aisle, to be supportive of this. It is a very important thing as we figure out the situation with the IPOs here in the United States.

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.

Mr. Speaker, I thank the chairman for the opportunity to lead this effort.

Mr. Speaker, the United States has the strongest, deepest, and most liquid markets in the world, which has helped hardworking Americans save for everything from college, to home ownership, to retirement.

However, over time, our capital markets have become, frankly, less stable, less efficient, and less liquid due to the one-size-fits-all securities regulations currently in place. In fact, small and midsized companies, which are the heartbeat of the American economy, are struggling the most because of this outdated regulatory structure. They have the most difficult time obtaining the necessary capital and financial resources needed in order to expand and create jobs because they are drowning in regulation and increased compliance costs.

Although the bipartisan Jumpstart Our Business Startups Act, JOBS Act, back from a few years ago was an important first step in helping appropriately tailor regulation and promote capital formation, particularly for the small and emerging growth companies, it is clear that Congress needs to do more.

Today's bill, the JOBS and Investor Confidence Act, is a compilation of 32 bipartisan bills that will promote capital formation and ensure that our regulatory structure is appropriately tailored to allow the free flow of capital, strengthen job creation, and increase economic growth.

Mr. Speaker, our economy is finally starting to fire on all cylinders. With this reform-minded legislation, we can further unleash American innovation, economic growth, and job creation while providing greater investment opportunities for Mr. and Mrs. 401(k). Today, we can deliver some very commonsense regulatory relief, while also providing an important layer of investor protections, and make our capital markets even more efficient.

By voting in support of this important progrowth jobs package, we can open the door to innovation, enhance small-business job creation, and increase opportunity for hardworking Americans in west Michigan and across the Nation.

Mr. Speaker, I urge all my colleagues to support S. 488, the JOBS and Investor Confidence Act, and, again, I say thank you to the chairman, the ranking member, and my subcommittee chair as well for their work.