Middle Market IPO Cost Act

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

Mr. Chair, I rise today in strong opposition to H.R. 2799, a bill that would cause significant long-term harm to both small businesses trying to raise money and mom-and-pop investors trying to save for their retirements.

A primary reason our capital markets are the envy of the world is because investors have confidence in the financial products that they are investing in. That confidence is hard won to be sure. It is the result of a robust disclosure regime that has been in place for decades and requires public companies to transparently and accurately tell investors about the inner workings of their businesses, their financials, and the risk involved with purchasing their shares.

Investor confidence is also rooted in strong legal protections for investors and their right to have a say in the company's direction through the proxy process.

And importantly, investor confidence is based on having a strong enforcer, the Securities and Exchange Commission, or SEC, that sets clear rules of the road, and keeps fraudsters out of the system.

While our capital markets are far from perfect, trillions of dollars are invested every year because investors are confident that they won't be ripped off.

Unfortunately, the bill before us today threatens to undermine that investor confidence.

First, H.R. 2799 would expand the number of companies that are able to offer securities without needing to register with the SEC or provide critical disclosures to ordinary investors.

This expansion will only benefit moderate to large companies rather than the small businesses this act purports to help. By exempting more companies from public SEC registration requirements, this bill expands the size of the private securities markets, which are growing rapidly and already outnumber the public securities markets 2-1.

Second, this bill makes it easier for financial middlemen to peddle opaque, illiquid, and high-risk private securities to retail investors who won't receive the information they need to make informed investment decisions.

This isn't democratizing finance or creating investment opportunities; this is Wall Street creating another target to dump its bottom-of-the-barrel investment products onto retail investors.

Private securities, compared to public securities, are significantly more risky and more volatile, less transparent, harder to cash out, and have fewer legal protections.

The bottom-of-the-barrel private securities that will be sold to retail investors as a result of this bill are especially dangerous because they will only be offered to retail investors after private equity and venture capital funds have already passed on them. It is important to notice that 90 percent of startups fail and private equity would love to dump these stocks on your constituents.

Third, H.R. 2799 undermines the ability of State securities regulators to help small businesses raise capital and stop fraudsters. State securities regulators are on the front line of our capital markets, investigating complaints of investor fraud, enforcing State securities laws, educating investors about their rights, and helping small businesses raise money to fund their goals and comply with the law. We should not preempt States by blocking these important overseers from doing their jobs.

To summarize, H.R. 2799 is a Wall Street wish list that collectively exempts big corporations and investment funds from transparency and accountability while gutting critical legal safeguards for Main Street investors. By weakening investor protections in numerous ways, this bill would allow fraud to proliferate and retirees and other mom-and- pop investors to be ripped off by bad actors.

This bill would ultimately harm confidence in our capital markets while doing nothing to assist the very small businesses the bill purports to help. In fact, as investors lose confidence in our markets, small businesses will see their capital costs rise, not fall.

I want to thoroughly debunk the notion that this bill somehow helps small businesses because the truth is that it would do just the opposite. I am very supportive of small businesses.

In fact, I have worked extensively this Congress with Chair McHenry on bipartisan ways that we can help small businesses raise capital. We have worked together to strengthen crowdfunding and to change the rules on accredited investors. There are several policy solutions that we have agreed on that represent targeted ways to increase capital formation without harming investor protection.

In fact, we worked together to pass 13 bills last year that represent bipartisan, commonsense reforms that support small businesses, enabling those who are knowledgeable about the risks of private securities to make informed investments, while ensuring robust investor protections.

Most of these bills also passed under suspension on the House floor, so there is a bipartisan way forward on this issue, but instead of working with Democrats to get these bipartisan bills to the President's desk, Republicans have packaged together this toxic combination of partisan bills and are focusing their time and energy here.

Mr. Chair, Democrats on the Financial Services Committee voted unanimously to oppose this bill at a markup last April. I urge all of my colleagues to unanimously reject it on the floor today.

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

Mr. Chair, I yield such time as she may consume to the gentlewoman from New York (Ms. Velazquez), the ranking member of the Small Business Committee.

Mr. Chair, I yield 4 minutes to the gentleman from California (Mr. Sherman), who is also the ranking member of the Subcommittee on Capital Markets.

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

Let's be clear. This Wall Street wish list bill is going nowhere in the Senate, but we have several bipartisan bills that support small businesses and retail investors that actually have a chance of getting into law.

Chair McHenry and I have worked together for several years on legislation to strengthen our capital markets, going back to the JOBS Act and our efforts on crowdfunding and legislation to support angel investors.

In fact, this Congress, we worked extensively together on 13 bipartisan bills, including my bill, H.R. 2796, the Promoting Opportunities for Non-Traditional Capital Formation Act, which requires the SEC's Office of the Advocate for Small Business Capital Formation to provide educational resources and host events to promote capital- raising options for underrepresented small businesses and businesses in rural areas and to meet annually with representatives of State securities commissions; Mr. Meeks' bill, H.R. 2795, the Enhancing Multi-Class Share Disclosures Act, which requires an issuer with the multi-class share structure to disclose certain information regarding the voting power of specified persons; Mr. Himes' bill, H.R. 2812, the Middle Market IPO Underwriting Cost Act, which requires the SEC to study the costs encountered by small- and medium-sized companies when undertaking initial public offerings and certain offerings exempt from securities registration requirements; and Mr. Gottheimer's bill, H.R. 2593, the Senior Security Act, which establishes a senior investor task force within the SEC. The task force must report on topics relating to investors over the age of 65 and make recommendations for actions to address problems encountered by senior investors.

Committee Democrats also supported several more Republican bills that help promote capital formation. We could have worked together to get these all included in the NDAA, but Chair McHenry knows why that didn't happen--Republicans blocked all of these bills from being added.

Today, Republicans are pivoting to a completely partisan approach to the issue with this bill. This is par for the course with extreme MAGA Republicans who prefer to pander to their base instead of actually getting things done.

When Republicans are done wasting their time on this extreme MAGA bill, Democrats will be ready to get to work on solutions that actually have a chance of making a difference for small businesses and retail investors.

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

Mr. Chair, the following organizations oppose this bill: the North American Securities Administrators Association, Consumer Federation of America, AFL-CIO, AFSCME, Communications Workers of America, SEIU, Steelworkers, Transport Workers Union of America, Americans for Financial Reform, Public Citizen, Center for American Progress, and Main Street Alliance.

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

Mr. Chair, I have no further speakers, and I yield myself the balance of my time.

Mr. Chair, in all my years in Congress, this is one of the worst examples I have ever seen of a Wall Street wish list masquerading as a lifeline for small businesses and ordinary investors.

Let me be clear. This bill does nothing to help small businesses. It only helps big business avoid transparency and accountability, and that is why the Biden administration opposes this bill.

This bill does nothing to help ordinary investors. It only helps make it easier for investors to be duped by conflicted middlemen into purchasing some of the riskiest securities out there.

Under this bill, these middlemen will have free rein to mask critical details about investment risk and target elderly people and others with what they claim is a great investment opportunity that will help them build wealth but, in reality, is a fraud.

For example, these middlemen will be able to take the failing businesses off private equity balance sheets and offload them onto Main Street investors.

This bill also hinders small businesses' ability to raise money by preempting State law and preventing State securities regulators from doing their job.

Mr. Chair, we see this bill for what it is: a Wall Street wish list that throws Main Street investors under the bus.

Mr. Chair, I urge my colleagues to vote for Main Street, not Wall Street, by voting ``no'' on this bill. I yield back the balance of my time.

Mr. Chair, I claim the time in opposition.

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

This amendment sponsored by Mr. Lawler codifies a controversial Trump-era SEC rule that is opposed by many investor advocates.

The amendment allows high-risk startups to tout their businesses in front of retail investors. This is currently prohibited in part because roughly 75 percent of VC-backed startups fail.

The amendment would specifically allow angel investors and issuers to market their startup ventures to prospective investors at colleges and nonprofits, including churches.

Broadly marketing your securities to the public in this fashion-- known as a general solicitation--is usually prohibited for private offerings like these because the public nature of the market effectively makes the offering itself public, and therefore, requires registration with the SEC.

At universities and churches, students and congregants gather to learn, and they generally trust the information they receive. I don't believe these are spaces where it is appropriate to market highly risky investment opportunities.

In my own district, a church was the victim of an investment scheme in which an issuer conned the church out of nearly $6 million. I previously offered an amendment during our committee's markup last year that would prevent future frauds like this from happening again--frauds that would be further enabled by this amendment.

As such, I urge my colleagues to oppose Mr. Lawler's amendment, and I reserve the balance of my time.

Mr. Chair, what Mr. Lawler doesn't recognize is that the underlying bill makes the accredited investor definition meaningless. All you have to do is check a box, and poof, able to invest.

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

Mr. Chair, I yield myself the balance of my time to close.

Simply put, this amendment allows failure-prone startups to market their private offerings to unaccredited investors who do not fully understand the risks involved.

Colleges and churches are not the place startups should be raising money, and in general, we should not make it easier for them to push their risky private securities on unsuspecting retail investors, as this provision does.

Mr. Chair, I urge my colleagues to vote ``no,'' and I yield back the balance of my time.

Mr. Chair, I demand a recorded vote.

Madam Chair, I claim the time in opposition to the amendment.

Madam Chair, I yield myself such time as I may consume.

This amendment ignores the reality that many investors, particularly seniors, do not have access to or the ability to review electronic documents or simply do not prefer electronic delivery of financial documents. It would require investors to opt in to receive paper documents, which would effectively prevent individuals who do not have easy access to the internet from viewing important financial documents about the securities they invest in.

Several major investor advocate groups strongly oppose this bill, including the AARP, the North American Securities Administrators Association, the Consumer Federation of America, Americans for Financial Reform, and Public Citizen, to name a few.

I strongly urge my colleagues to vote ``no'' on this terrible amendment.

Madam Chair, I reserve the balance of my time.

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

The name of this amendment, Improving Disclosure for Investors, is an oxymoron. It does absolutely nothing to improve disclosure for investors. Rather, by forcing them to opt in to paper filings, it would make it more difficult, if not impossible, for many investors to see what fees they pay for their funds, brokerage accounts, and retirement savings. Instead of having easy, instant access via paper copies, they would need to go online to search for that information.

This amendment is more appropriately called the improving Wall Street profits at the expense of retail investors act.

I strongly urge my colleagues to protect elderly investors and to vote ``no'' on this amendment.

Madam Chair, I yield back the balance of my time.

Madam Chair, I yield myself such time as I may consume.

This amendment, sponsored by Mr. Lucas, would be better titled the retirement hazard for charities and educational institutions amendment because it puts the retirement savings of public interest professionals at risk.

403(b) retirement plans cater to teachers, school administrators, professors, nonprofit employees, and healthcare workers. These individuals dedicate their lives to the public interest. They invest in the future of our children. They ensure we get the healthcare we need, even during a global pandemic, and too often, they aren't paid nearly enough to do the work that they do.

There are current restrictions on how 403(b) plans can invest their assets, and this is to ensure that these retirement accounts are generally safe investments. However, this amendment would allow 403(b) plans to invest in two types of risky, unregistered securities: collective investment trusts, or CITs, which is a type of pooled investment vehicle, and insurance products called variable annuities, both of which are considered fairly risky products for unsophisticated investors.

Madam Chair, under this amendment, neither of these products would be subject to regulation or oversight by the SEC.

More than half of all 403(b) plans are not covered by ERISA protections, meaning that this newly allowed risky investment activity would also escape the oversight of the Department of Labor.

While Republicans claim they are creating parity with 401(k) plans, this is simply untrue because all 401(k) plans are, in fact, covered by ERISA. To create true parity, we would need to restrict the sale of CITs and variable annuities to only 403(b) plans covered by ERISA.

All in all, this amendment would carve out over $1.4 trillion of retirement funds from Federal oversight. This would constitute the single largest deregulation of our capital markets in years.

Ultimately, this amendment would put the hard-earned retirement savings of public interest professionals at risk. That is why I strongly oppose it.

Madam Chair, I reserve the balance of my time.

Madam Chair, I continue to reserve the balance of my time.

Madam Chair, I yield myself the balance of my time.

Madam Chair, by allowing unregistered financial professionals to sell unregistered products to 403(b) plans, this amendment would leave America's teachers, healthcare workers, and other public interest professionals vulnerable to losing their retirement funds.

Neither of the two unregistered products contemplated nor the sales of these products would be subject to regulation or oversight by the SEC, which allows them to skirt investor protections and exposes plan participants to greater risk of loss. Congress must do everything in its power to ensure our teachers and dedicated public servants have a comfortable retirement, but this amendment would do anything but that.

Madam Chair, I strongly urge my colleagues to vote ``no,'' and I yield back the balance of my time.

Madam Chair, I demand a recorded vote.

Madam Chair, I claim the time in opposition.

Madam Chair, I yield myself such time as I may consume.

Madam Chair, this amendment would be better titled increasing investor risks.

Currently, closed-end funds, which are a type of mutual fund, are only allowed to invest up to 15 percent of their assets into private funds. This current limit of 15 percent gives closed-end funds some flexibility to invest in private funds but establishes a reasonable restriction, considering private funds are subject to less regulation and disclosure. This restriction also accounts for the fact that private funds invest in fledgling startups and distressed companies, which are significantly more risky than public securities, and most of their investments fail.

Mrs. Wagner's amendment would eliminate the restriction on closed-end fund investments into private funds, allowing them to invest up to 100 percent of their assets into private funds. Moreover, the amendment provides zero safeguards to mitigate the new risks created by this blunt deregulation.

Like all the rest of the capital markets-related amendments before us today, this one is opposed by investor groups, consumer and investor advocates, and State regulators.

For these reasons, Madam Chair, I oppose this amendment. I urge my colleagues to do the same, and I reserve the balance of my time.

Madam Chair, I yield myself the balance of my time.

Madam Chair, as I stated, the assets that private funds purchase are significantly more risky than public securities. In fact, 9 out of every 10 of their investments fail.

Allowing closed-end funds to invest all of their assets into private funds can be risky for America's retirement savers, who should be able to trust that these funds are safe investments for them to save for retirement.

As such, Madam Chair, I strongly urge my colleagues to vote ``no,'' and I yield back the balance of my time.

Mr. Chair, I yield myself such time as I may consume. Mr. Chair, I rise in support of H.R. 2799, the Expanding Access to Capital Act.

As chair of the Capital Markets Subcommittee, I am so proud of the hard work of our members in crafting this landmark piece of legislation that supports America's Main Street businesses and retail investors. I am also grateful to leadership for affirming that this bill is a crucial priority and taking action to pass this legislation in the House today.

This legislation is the culmination of four hearings that the Capital Markets Subcommittee has held this Congress, where we heard powerful testimony from 19 witnesses, including founders of both private and public companies, investors of all sizes, former SEC Commissioners, securities law practitioners, and even one of the authors of the IPO- related provisions of the JOBS Act.

As the witnesses at each of these hearings made clear, all the bills included in H.R. 2799 play a vital role in strengthening our public markets, improving access to capital for small businesses and entrepreneurs, and expanding investment opportunities for all Americans.

For example, Representative Steil's Helping Startups Continue to Grow Act strengthens our public markets, making them more attractive by allowing more companies to benefit from emerging growth company status. Representative Steil's bill also extends the maximum amount of time an issuer can remain an emerging growth company, helping to rightsize the regulatory burdens on newly public companies that are working to achieve their potential. This commonsense provision builds on one of the most successful and impactful reforms from the JOBS Act of 2012.

Representative Houchin's Regulation A+ Improvement Act improves access to capital for small businesses by increasing the amount that small companies can raise under Regulation A from $50 million to $150 million without being subject to burdensome IPO compliance requirements. In making this adjustment, Regulation A will become a more attractive pathway for small businesses to raise capital.

Our committee's legislation also expands investment opportunities for all Americans by revising the accredited investor definition to include individuals receiving investment advice on a private offering from a qualified accredited investor.

Amendments to H.R. 2799 include Representative Huizenga's Improving Disclosure for Investors Act, Representative Lawler's Helping Angels Lead Our Startups Act, Representative Lucas' Retirement Fairness for Charities and Educational Institutions Act, and my Increasing Investor Opportunities Act, which gives investors greater choice and access to an asset class typically reserved for the wealthy. They are all welcome and thoughtful additions.

Together, these policies ensure that our markets are working efficiently and effectively to provide companies access to the capital that they need to innovate, grow, and create jobs, not just on the coasts but in America's heartland as well.

H.R. 2799 offers targeted, commonsense solutions that level the playing field for Main Street investors looking to save for a new home, their child's future, or retirement.

Moreover, America's IPO market has been on the decline for years due to increased regulatory and compliance costs. This package builds on the success of the JOBS Act and reins in those onerous barriers that are keeping America's innovators from seeking to enter and stay in our public markets.

The thoughtfully crafted bills in H.R. 2799 would address a multitude of inefficiencies within our public and private markets and deliver sustainable and enduring growth to our economy.

I thank Chairman McHenry for his leadership and tireless efforts in getting these bills to the floor, and I also thank the Members who have bills in H.R. 2799 for their incredible work.

Mr. Chair, I urge my colleagues to support this legislation, and I reserve the balance of my time.

Mr. Chair, I yield 1 minute to the gentleman from Texas (Mr. Williams), my classmate and good friend and colleague.

Mr. Chair, I yield 1\1/2\ minutes to the gentleman from South Carolina (Mr. Timmons), my friend and colleague.

Mr. Chair, I yield 1 minute to the gentleman from Wisconsin (Mr. Fitzgerald), my friend and colleague.

Mr. Chair, I yield an additional 30 seconds to the gentleman from Wisconsin.

Mr. Chair, I yield 2 minutes to the gentleman from Wisconsin (Mr. Steil), my friend and colleague.

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

I want to quickly and swiftly say that H.R. 2799 has been a wonderful collaborative effort. There are many bipartisan pieces of legislation in this bill and amendments that also received bipartisan support out of the committee.

Mr. Chair, I urge all of my colleagues to join Republicans in supporting savers, entrepreneurs, and job creators and to give them the chance to achieve their American Dream by voting ``yes'' on H.R. 2799, and I yield back the balance of my time.

Mr. Chair, I rise in support of my friend and colleague from New York's amendment, which would add his Helping Angels Lead Our Startups, or HALOS, Act to H.R. 2799.

Mr. Lawler's legislation is a commonsense step to promote capital formation by permanently reducing certain burdens on U.S. small businesses and entrepreneurs.

Unfortunately, when implementing the JOBS Act of 2012, the SEC complicated these events for many startups by classifying demo day discussions as general solicitations, blocking companies from being able to use common fundraising practices.

In 2021, then-SEC Chairman Clayton reformed these rules to provide relief for entrepreneurs throughout our country, and my colleague's amendment builds on this progress by adding much-needed certainty that will ensure startups can continue to access demo days without sacrificing their ability to raise capital through popular and practical regulatory pathways.

Members of Congress from both sides of the aisle have recognized the need for this amendment with the current language receiving strong bipartisan support, once again, from the committee.

Therefore, I urge my colleagues to adopt this commonsense amendment and help U.S. startups grow their ideas into thriving and successful businesses.

Madam Chair, I rise in support of the gentleman from Oklahoma's amendment.

Under current law, Americans participating in 401(k) plans through their employer may invest their retirement accounts in collective investment trusts, CITs, and insurance company separate accounts that are exempt from the SEC's registration requirements. This exemption from SEC registration allows these products to be offered at lower costs.

However, teachers, nurses, janitors, and charity workers who participate in 403(b) plans are currently denied access to the cost- effective investments available to private workers in 401(k) plans. Importantly, investment options in a 403(b) plan are always selected by the private or public employer. As such, this amendment does not allow direct retail sales to individuals.

Moreover, unregistered does not mean unregulated. It simply means

that investment products available to 403(b) plans will not have to register with the SEC and, thus, will not have to provide a lengthy prospectus document to accompany the filing, thus keeping costs appropriately low.

The amendment preserves important protections for investors in 403(b) plans.

Mr. Lucas' amendment is a thoughtful and balanced bill to allow employees of nonprofit charities and public educational institutions in 403(b) plans to have access to the same low-cost investments available to employees of for-profit companies and other employees in 401(k) plans.

This amendment is co-led in a bipartisan fashion with support from my colleagues across the aisle, Mr. Gottheimer and Mr. Foster. On top of that, the bill this amendment is based on, the Retirement Fairness for Charities and Educational Institutions Act, passed out of the Financial Services Committee last year with very strong bipartisan support.

Madam Chair, I urge my colleagues to support this amendment.

Madam Chair, I have an amendment at the desk.

Madam Chair, I yield myself such time as I may consume.

Madam Chair, closed-end funds are a popular tool for everyday investors who gain exposure to private markets in a safe, appropriately regulated way. Approximately 3 million Americans rely on these products to build wealth and save for retirement.

Like other investment options available to Americans looking to save for retirement, send their kids to college, or plan for the future, closed-end funds must comply with the requirements of the Securities Act of 1933, the Securities Exchange Act of 1934, and the Investment Company Act of 1940.

To satisfy their regulatory obligations, closed-end funds must, among other things, register with the SEC, file annual and semiannual reports, and comply with stringent valuation and disclosure requirements. They are also subject to the broad antifraud provisions of the Federal securities laws, which provide additional protections to investors.

Unfortunately, an SEC staff position prevents registered closed-end funds from investing more than 15 percent of their total assets in private funds. This arbitrary restriction is especially harmful to low- income and middle-

class Americans who rely on appropriately regulated products like closed-end funds to access high-growth investment opportunities.

In substituting their own judgments for those of financial professionals, SEC bureaucrats have taken another step toward reserving safe access to investment opportunities for wealthy, accredited investors.

My amendment, which mirrors my bipartisan Increasing Investor Opportunities Act, would remove this arbitrary SEC staff position and allow investment professionals to determine which investments a closed- end fund should make. This would increase investment opportunities for millions of Americans and eliminate unnecessary barriers restricting investor access.

Madam Chair, I thank my Democratic friends across the aisle, including Mr. Meeks, Mr. Scott, and Mr. Nickel, for their bipartisan support of my bill on which this amendment is based.

Last year, the Financial Services Committee passed the same text that is in this amendment with strong bipartisan support. I am proud of this legislation and our committee's unwavering commitment to expanding investment opportunities for all Americans.

Madam Chair, I encourage my colleagues to support this amendment, and I reserve the balance of my time.

Madam Chair, I yield 1 minute to the gentleman from New York (Mr. Meeks).

Madam Chair, the closed-end funds are a very popular tool for everyday investors who gain exposure to private markets in a safe, appropriately regulated way.

As I said, approximately 3 million Americans rely on these products to build wealth and save for retirement.

Madam Chair, I urge all of my colleagues to support this amendment, and I yield back the balance of my time.

Madam Chair, I rise in opposition to the amendment.

Madam Chair, a key tenet of H.R. 2799 is to increase access to investment opportunities for everyday investors.

Under the guise of investor protection, this amendment would arbitrarily limit the amount nonaccredited investors can invest in a private offering to 5 percent of an individual's net worth.

In the Expanding Access to Capital Act, the investment cap for a single private offering is set at 10 percent of the investor's net assets or annual income, whichever is greater. Instead of using a number just pulled out of thin air, the 10 percent cap in the bill is rooted in precedent.

There is a 10 percent cap for nonaccredited investors through offerings such as Regulation Crowdfunding and Reg A+. Why would we not go with the percentage cap that is already proven effective?

Additionally, this amendment would arbitrarily cap aggregate investments across private offerings for nonaccredited investors to no more than 25 percent of their net worth. This essentially says to everyday investors that the government knows better than you how to invest your hard-earned dollars.

As I previously said, and we heard from several witnesses at committee, wealth and income should not be a proxy for sophistication. Similarly, if we want to provide more Americans the opportunity to build wealth, we cannot keep them on the sidelines.

Private offerings are often the most high-growth investment opportunities, yet they are largely reserved for high-net-worth investors. This enshrines inequity and blatantly picks winners and losers.

If my colleagues on the other side of the aisle are serious about equity and ownership in the American economy, they will join Republicans in providing more opportunities to everyday investors, not less.

Madam Chair, I urge my colleagues to oppose this amendment, and I reserve the balance of my time.

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

If my colleagues on the other side of the aisle are serious about equity and ownership in the American economy, they will join Republicans in providing more opportunities to everyday investors, not less.

Mr. Chair, I urge my colleagues to oppose this amendment, and I yield back the balance of my time.

Mr. Chair, I demand a recorded vote.

Mr. Chair, I move that the Committee do now rise.

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, H.R. 2799.

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

Mr. Chair, 40 years ago, my father started a small business in our backyard. Growing up in Gastonia, North Carolina, being the youngest of five kids, my father started a small business with his friend, who also had five kids. It didn't change the world and it was just a lawn mowing business. We mowed other people's grass, and that is what put two families through school, provided for two families, and eventually provided for many others as they scaled up and grew the business.

While my dad's small business didn't change the world, it certainly changed my world and our family's world.

Like other entrepreneurs, though, my dad needed access to affordable capital to scale his business. When other sources of opportunities for lending of capital dried up, he relied on a charge card, which we now call a credit card, to grow his business and to start employing other folks.

This story isn't unique to my family. We see this playing out across the country today. Entrepreneurs with new ideas or who are seeking to grow their businesses are struggling to access affordable credit and affordable capital. That means that they are not given the same opportunity to change their lives, their family's lives, or their community.

This is a loss for all of us. It is a loss for American innovation. That is where investment capital and this bill come in to help more entrepreneurs realize their version of the American Dream.

Currently, the venture capital that funds startups are concentrated in traditional financial hubs, like Silicon Valley, Boston, and New York City. Those three cities of the country account for almost three- quarters of all venture funding.

Now, that is not for every business, but it is a very specific group of startups. This Congress and our committee heard compelling testimony from folks across the ideological spectrum who urged us to make it easier for them to raise money from nontraditional sources.

This would allow them not only to build their funds and deploy more capital, but also share their financial success within their community.

This bill, the Expanding Access to Capital Act, does just that and more by alleviating the unique fundraising challenges faced by entrepreneurs and their investors who don't live in Silicon Valley.

This bill will also make improvements to our public markets and create new opportunities for everyday investors to save and build wealth and enjoy their version of the American Dream.

This form of capital formation is a critical ingredient for creating long-term economic growth that has proven enduring here in the United States. Not to mention, it has traditionally been an area where a divided Washington can find consensus.

A little more than a decade ago, Congress came together to pass the JOBS Act, which President Obama then signed into law. It was a Republican House, a Democrat Senate, and a Democrat in the White House who put that historic piece of legislation through the process and into law.

It addressed several hurdles entering our capital markets by rightsizing onerous regulatory barriers and providing entrepreneurs access to new levels and streams of funding.

Recognizing the need to build on the success of the JOBS Act, the House Financial Services Committee embarked on a yearslong mission to better understand the remaining headwinds hindering capital formation and legislate real and impactful solutions.

Many of those solutions are found in this legislation we are considering today, which consist of commonsense, innovative ideas to accomplish three goals: First, the bill strengthens our public markets and aims to incentivize companies to go public, undoing the troubling decline of initial public offerings here in the United States, or IPOs. IPOs are businesses that average everyday investors can own a piece of.

Why is it important that we attract more companies to the public markets in the United States?

One, everyday American investors, also known as retail investors, are limited to investing in publicly traded companies. Most public companies here in the United States that are of large size and scale should be available in the public markets. More public companies here in the United States means more opportunities for the American retail investor to grow their savings.

Number two, job growth. A 2021 study found that biotech startups expand their workforce by an average of 150 percent in the first 3 years after undertaking an initial public offering using the JOBS Act provisions.

To make our public markets more attractive, H.R. 2799, this bill, includes provisions that rightsize regulatory burdens on public companies, streamline the process of going public, and allow more companies to qualify as an emerging growth company.

This is an extension of more key provisions within the bipartisan JOBS Act that have a proven record of success.

Second, as I said earlier, this legislation supports small businesses and entrepreneurs who are the true engine of our economy and account for 99.9 percent of all U.S. businesses.

Among other policies, this bill allows small businesses to raise more money through offerings. It also addresses limitations on small, emerging venture fund managers attempting to raise and deploy capital to startups and entrepreneurs in their communities.

Third, this bill increases access to private markets and allows more Americans to participate in high-growth investment opportunities that have been traditionally reserved for the wealthy elite.

Currently, these investment opportunities are reserved for those qualifying as ``accredited investors,'' which dictates what a person can invest in based off their wealth or income.

We should all agree that wealth and income should not be a proxy for sophistication, especially if investors have expertise or experience that prepares them to invest in private offerings.

This bill includes provisions to expand the accredited investor definition, allowing everyday Americans to invest where they see opportunities and where they have expertise. That means new wealth- building opportunities for American investors who have been arbitrarily sidelined for too long.

Now, these private markets, that is where we have had the fastest growing businesses. The greatest wealth creation is ownership in these private markets. We want to link that up for all Americans to have that opportunity to invest in those markets where they have expertise.

Let me close with this: Capital formation should not be a partisan issue.

This legislation builds on the success of the bipartisan JOBS Act and will benefit Americans in every single one of our districts, either by growing their retirement savings or through job creation and economic growth in their community.

This bill is a compilation of several standalone bills introduced by numerous members of the Financial Services Committee, under the great leadership of our subcommittee chair on Capital Markets, Ann Wagner of Missouri.

There are many Members that I wish to recognize, but it would take too long at this time to go through all of their great work; however, it is embodied in this bill before us today.

I am grateful for the opportunity to be here on the House floor, and I am grateful to the House Republican leadership that have prioritized this help for small businesses and our legislative work in the Financial Services Committee. I think we can see that we all want to be unified in helping the American people achieve their dreams in the way they see fit. For small business folks that want to start a small business, we need to make things easier for them, not harder. This bill makes it better for them and easier for them.

Mr. Chair, I yield to the gentlewoman from Missouri (Mrs. Wagner) to control the balance of my time.

Mr. Chair, I rise in opposition to the bill. It is not a good bill. We have some amendments that will make it slightly better, but it still won't be a good bill. All the Democrats on the Financial Services Committee voted against this bill in committee.

Let's give a little background here. The gold standard is a public offering of securities. They then become registered securities. They can trade on an exchange. They provide disclosures to investors and audited financial statements.

We do have exceptions to this rule--exceptions for small offerings and exceptions where you are going to have accredited investors who have the capacity to absorb an enormous amount of risk and the capacity to evaluate the investments.

The definition of an accredited investor was criticized by the chair of the full committee when he was here, and I agree that definition should change. Right now, it is focused too much just on wealth and income. We need, instead, to also allow people to be accredited investors if they have the expertise to evaluate the investment and are not putting too much of their own resources into one illiquid investment. We also need to take a look at the expertise that an investor may not have himself or herself but can acquire through truly independent advisers.

The fact is that the definition of accredited investor should be improved, and that is why this House passed and sent to the Senate bills that would improve it, and I hope the Senate will finally take action on those bipartisan pieces of legislation.

This bill doesn't really improve the definition of accredited investor. It says that you are an accredited investor if you sign a piece of paper saying you want to be an accredited investor, self- certification. That shreds investor protection.

This bill not only guts investor protection when it comes to the definition of accredited investor, but it also locks in a system in which a company can say they are a private company even though they have thousands of owners--thousands. You can have 2,000 or more owners because you may have an investment vehicle that has hundreds of investors of its own, and it counts as only one investor toward that 2,000.

That means that a lot of companies will never go public. That means that those investors who want investor protection and want the liquidity of being able to sell their shares on an exchange will never be able to invest. It means that these companies will not provide the audited financial statements and the other disclosures that are required of public companies.

It guts the concept of being a public company. Why is that so important? Because today, the SEC published climate disclosures required of public companies, and today, we are considering a bill that is designed to truncate the number of public companies that we have.

If you care about the economy, vote ``no.'' If you want to protect investors, vote ``no.'' If you want to protect our climate, vote ``no.''

This bill would open the door to investors placing their entire nest eggs in private securities with insufficient transparency, no audited financial statements, and no liquidity. Vote ``no.''

Madam Chair, I have an amendment at the desk.

Madam Chair, in the debate on the bill in chief, the chair of the full committee correctly criticized the definition of accredited investor as it occurs under current law.

Accredited investor is an important concept in securities law because, Madam Chair, when you have a private offering, one that hasn't gone through the SEC process, the amount that can be raised and the number of investors you can have are related to, in large part, how many of your investors are accredited.

The current definition makes you an accredited investor if you earn over $200,000 a year or have a net worth of more than $1 million. Frankly, the fact that you have that level of income or that level of wealth does not show that you have particular expertise or that your adviser team has particular expertise. While it certainly shows that you are in a position to absorb a loss, no one can afford to absorb a loss of 100 percent of their net worth.

We need a different definition of accredited investor, one that does not limit that status just to those who happen to be wealthy or have a high income.

The bill before us here does provide that different definition by saying you are an accredited investor, first, if you acknowledge the risks that you are taking and, second, if you are investing less than 10 percent of your net worth in the securities offering so that you can afford a loss on what, after all, is a higher risk--as many people have pointed out--offering about which you get less information.

The problem with the bill in chief using that 10 percent standard is twofold. First, it includes in your net

worth your primary residence. If you happen to have a $1 million home, you could take out a $100,000 mortgage on it and invest all $100,000 in one relatively risky investment.

You have literally bet your house on an investment that is of a type that is risky and where you get less information and where the investment is illiquid. That is not good investor protection.

What this amendment does is it says, yes, we are going to look at what portion of your net worth you are investing, but we are going to take a look first at your net worth excluding your primary residence because very few people feel they can afford to lose their house; second, that you cannot invest more than 10 percent of your net worth in any single offering or more than 25 percent of your net worth in all these private offerings.

Therefore, we look at wealth, excluding your home so you don't risk losing your home, and we look at not only how much you are investing in the particular investment, but how much you are investing overall.

I want to correct one thing. This amendment limits it to, excluding your primary residence, 5 percent of your net worth on any one private offering, and no more than 25 percent of your net worth, excluding your primary residence, on all such private offerings.

Madam Chair, I urge adoption of this amendment. I think it gives us a better definition of those who can afford the risks and the risk of liquidity that comes with these private investments.

The risk of liquidity is there. You may think, well, I made an investment and it is going to pan out, but if you need the money and you can't liquidate the investment on a fair basis, it is almost as if the investment failed.

Therefore, we are talking higher risk, less liquidity. We limit it under this amendment to 5 percent of your net worth on any one deal, 25 percent of your net worth on all such deals. Also, when we look at your net worth, we exclude your personal residence. These are not situations where you should be betting your home.

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

Madam Chair, let me respond to those comments.

The underlying bill acknowledges the fact that the government puts some restrictions on how much of your net worth you can put into one of these unregulated, risky, low-information, illiquid investments. Therefore, to say that we have clashed with some great principle of personal freedom in my amendment because it says 5 percent, but that it is consistent with the same great overriding principle of personal autonomy when you back a bill that says 10 percent, defies logic.

Mr. Chair, I have an amendment at the desk.

Mr. Chair, I yield myself 2\1/2\ minutes.

Mr. Chair, for 90 years, the Securities and Exchange Commission has been tasked with three things: protect investors; maintain fair, orderly, and efficient markets; and finally, facilitate capital formation.

The amendment before us today does all three.

First, it directs the Securities and Exchange Commission to promulgate rules with respect to electronic delivery of some required disclosures to retail investors.

Second, it provides a transition period, allowing an initial paper communication about the electronic delivery to be sent to existing investors.

Third, during a period not to exceed 2 years, the amendment requires delivery of the annual notice in paper solely to remind investors of the ability to opt out of that and into electronic delivery at any time.

Lastly--and I can't emphasize this enough--this amendment provides a mechanism for investors at any time to opt out of e-delivery, and once again, you will receive paper versions of the documents.

You want paper, Mr. Chair, you get it.

You want e-delivery, you can get that, too.

E-delivery is not a new and radical concept, but frankly, it is long overdue, and the data supports the facts.

In 2018, the Social Security Administration eliminated paper as its primary method of delivering benefit statements to individuals. Now, nearly 45 million Americans who receive benefits from Social Security have created online accounts to access their information--information that is more timely and more secure.

Likewise, the Federal Thrift Savings Plan, TSP, which Members and staff in this Chamber use, began offering statements digitally in 2003, with 5.5 million or 85 percent of participants currently taking advantage of this option.

Finally, in 2020, the Department of Labor moved to e-delivery as a default for all of its workplace plan participants.

I would close by addressing consumer protection. This amendment appropriately preserves the ability for investors who prefer to receive paper notices and disclosures to do just that.

Like many of my colleagues, I, too, represent a district that encompasses rural communities. That is why it was important for today's amendment to ensure that paper will always be an option if internet access is an issue.

American financial markets are some of the most sophisticated in the world with innovation happening at every turn. Yet, for retail investors, we have decided that defaulting to an outdated mode of information sharing is in their best interest.

Today's amendment was guided by a commitment to honor consumer choice while ensuring Americans receive important information.

Madam Chair, I reserve the balance of my time.

Madam Speaker, I yield 2 minutes to the gentleman from North Carolina (Mr. Nickel).

Madam Chair, may I inquire of the time remaining?

Madam Chair, virtually every Federal agency, including the IRS and the Social Security Administration, have moved to electronic delivery. Why? Because older Americans have rapidly adopted internet technology in recent years, including 96 percent of those between the ages of 50 and 65, of which I am, and over three-quarters of those over the age of 65.

In fact, in a recent AARP study about retirement plan account holders' views on electronic versus paper accounts, 91 percent of the people were comfortable using the internet to log in and view financial accounts and 94 percent used the internet daily.

I understand the AARP has some concerns with this legislation. We have attempted to address those through the ranking member. Unfortunately, their solution so radically changes the scope of the bill that it undercuts the entire intent of this.

As I have said before, if you want paper, you will receive paper. If you want an electronic copy, you will receive an electronic copy. It is disingenuous to say anything else. If you don't have internet access, or if you choose to receive paper, you will get it.

Madam Chair, I yield back the balance of my time.

Madam Chair, I demand a recorded vote.