Micro Offering Safe Harbor Act
Mr. Speaker, I thank the gentlewoman for yielding. I want to begin, Mr. Speaker, by responding to the gentleman from Texas, who began this debate by saying how this was a continuation of an ongoing effort by Republicans to promote…
Mr. Speaker, I thank the gentlewoman for yielding.
I want to begin, Mr. Speaker, by responding to the gentleman from Texas, who began this debate by saying how this was a continuation of an ongoing effort by Republicans to promote progrowth tax reform in particular.
I want to be very clear, Mr. Speaker. The proposal that is currently before this House with respect to the tax changes is a tax scam. It is not a tax plan. It is a scam. It gives $1.5 trillion in tax cuts to the wealthiest Americans, the biggest corporations, and the millionaires and billionaires. It increases taxes on tens of millions of middle class families. It pays for this big gift back to corporations and billionaires and millionaires by deep cuts in Medicare, Medicaid, infrastructure spending, education--the things that actually create jobs.
It creates additional incentives to ship American jobs overseas, creates incentives for American companies to take jobs here and ship them overseas, not to keep them here in our own country. It is another maybe more robust example of trickle-down economics. It has failed before. It will fail again.
The American people might have the benefit of understanding this more completely if there were actually a process where this was debated, witnesses testified, and experts came in to talk about the implications of this. But this is being done in the dark of night, at the speed of light so the American people won't find out what is about to happen to them. So the idea of describing this as progrowth in this context, both with the provisions and the process, seems, to me, laughable.
Let me just give the American people a couple of examples:
It denies individuals the right to deduct State and local taxes but preserves that right for corporations;
It denies the worker who is forced to leave his home and move because his employer is moving--either do that or he loses his job--from deducting the cost of moving, but it preserves the right of a company who is offshoring jobs overseas to take a deduction for the cost of moving those American jobs overseas.
Those are just two examples. So this isn't a progrowth tax policy. This is trickle-down economics designed to let the people at the very top hold onto more of their money and corporations to keep more of their profits in the hope that it will trickle down to the rest of the American people.
It doesn't work. It doesn't represent a progrowth tax policy. It is a tax scam, and so I want to just correct the record, Mr. Speaker, with all due respect to the gentleman from Texas.
Mr. Speaker, I rise, in addition to that, to express my strong opposition to H.R. 2201, the Micro Offering Safe Harbor Act.
In light of the devastating 2008 financial crisis and the regulatory weaknesses revealed by the Wells Fargo and Equifax scandals, we should be considering legislation that will bolster consumer and investor protections; but today, instead, we are considering H.R. 2201, which will enable abusive financial practices.
Generally, a company that seeks to make public offerings must register them with the Securities and Exchange Commission or must fit into one of several exceptions that are designed to balance investor protections with regulatory burdens on smaller companies. This legislation would allow so-called microcap offerings, offerings valued at $500,000 or less in a single year to be sold to 35 or fewer investors, subject only to the requirement that each investor have a substantive preexisting relationship with the company.
Despite the similarity of these provisions to some restrictions currently imposed on unregistered security offerings, H.R. 2201 omits several critical investor protections that are characteristic of existing exemptions. In particular, microcap offerings would be exempt from important regulatory protections set up in the 1933 Securities Act, including registration, disclosure, and fraud protections.
Oversight in the smaller offering space such as the one proposed in H.R. 2201 is important because the SEC has found fraud in the microcap stock markets is of increasing concern to regulators, as such markets have proven to be fertile grounds for fraud and abuse.
Without core protections, H.R. 2201 would leave investors vulnerable to an array of investment scams and abuses, with unsophisticated investors particularly at risk. For example, the bill has no restriction on resale. In the past, failure to restrict the resale of unregistered securities has exposed secondary investors to fraudulent pump-and-dump schemes, as the gentlewoman from California mentioned.
Additionally, groups like Americans for Financial Reform, Center for American Progress, and Public Citizen oppose H.R. 2201 because it would enable a type of investment scam known as affinity fraud. In these schemes, scam artists prey upon members of identifiable groups, such as ethnic or religious communities or the elderly, often by enlisting respected community or religious members to help convince victims that a dubious investment is legitimate. The proliferation of affinity fraud in low-income communities demonstrates that H.R. 2201's preexisting relationship requirement would not provide safeguards against such abuse.
Given existing exemptions for smaller companies would provide ample opportunity for companies to raise capital while also protecting investors, H.R. 2201 is, at best, unnecessary. This bill would simply create a loophole that undermines protections against the kind of financial abuses and recklessness that we have already seen damage our financial system and hurt people.
Mr. Speaker, I urge my colleagues to oppose H.R. 2201.
I thank the gentlewoman again for yielding.