HFSC Mark Up of JOBS 2 .0 Bills
AT
NOVEMBER 14TH’S HOUSE FINANCIAL SERVICES COMMITTEE mark up, lawmakers ordered the
following bills to be reported favorably to the House of Representatives.
- H.R.
3329, to enhance the ability of community financial institutions to
foster economic growth and serve their communities, boost small
businesses, increase individual savings, and for other purposes
- H.R.
3468, the Credit Union Share Insurance Fund Parity Act
- H.R.
1800, the Small Business Credit Availability Act
- H.R.
2274, the Small Business Mergers, Acquisitions, Sales, and Brokerage
Simplification Act
- H.R.
3448, the Small Cap Liquidity Reform Act of 2013
Opening
Remarks
In
his opening statement,
Chairman Jeb Hensarling (R-Texas.) stated that the bills before the committee “will
comprise the basis of a JOBS Act 2.0” and will help to encourage a strong,
healthy economy that leads to more jobs for Americans. He added that
small businesses are at the forefront of innovation, but are currently
suffering under the “sheer weight, volume, and complexity of Washington
regulations” and face “regulatory barriers between them and our capital
markets.”
Ranking
Member Maxine Waters (D-Calif.), in her remarks, stated that Congress has the
responsibility to provide small businesses with clarity and “clear direction
for the future.” She noted that most of the bills in front of the
Committee are a “strong step in the right direction” but had concerns that they
are not “part of a larger package.” She also said there were some “outstanding
issues” with the bills related to small business access to the capital markets.
Waters
noted that the Securities and Exchange Commission (SEC) “would prefer to
exempt” mergers and acquisition (M&A) brokers from registration and said
she supports the amendment to H.R. 2274, which provides for this. She concluded
that it is critical for the SEC to receive appropriate funding, as the bills
under consideration require implementation by this regulatory
agency.
H.R.
3468
– the Credit Union Share Insurance Fund Parity Act – Approved by Voice Vote
Rep.
Ed Royce (R-Calif.), sponsor of the bill, explained that his legislation would
create parity in the treatment of trust accounts and prepaid debit master
accounts between create unions covered by the National Credit Union Share
Insurance Fund (NCUSIF) and bank accounts covered by the Federal Deposit
Insurance Corporation (FDIC), saying that there is “no public policy reason” to
distinguish between the two.
Rep.
Ed Perlmutter (D- Colo.), co-sponsor of the bill, stated that the legislation
should not be seen as authorization for credit unions to take deposit over the
current limits or increase the current thresholds, but that it narrowly defines
which accounts will be given insurance coverage.
H.R.
3329
– To enhance the ability of community financial institutions to foster economic
growth and serve their communities, boost small businesses, increase individual
savings, and for other purposes – Approved by Voice Vote
Rep.
Blaine Luetkemeyer (R-Mo.), sponsor of the bill, explained that H.R. 3329 would
require the Federal Reserve Board, within six months of the date of enactment,
to apply the Policy Statement permitting the formation and expansion of small
bank holding companies (BHCs) with debt levels higher than those permitted for
larger banks. He noted the bill would apply this policy to banks with
assets of less than $1 billion, which is an increase in the current threshold
of $500 million. This increase would be allowed “so long as they (1) are
not engaged in any nonbanking activities involving significant leverage; and
(2) do not have a significant amount of outstanding debt that is held by the
general public,” Luetkemeyer added.
Luetkemeyer
added that the bill also amends Section 171 of the Dodd-Frank Act, “to clarify
that exemption granted to small bank holding companies also applies to savings
and loan holding companies”
Rep.
Patrick Murphy (D-Fla.) stated that the bill provides needed relief and will
give smaller BHCs more flexibility with their capital requirements and noted
that the Fed retains the ability to impose capital standards as they deem
necessary.
Waters
noted that this bill is a prime example of bipartisan efforts to make needed
technical corrections to the Dodd-Frank Act.
H.R.
1800
– The Small Business Credit Availability Act – Approved by Vote of 31-26
Rep.
Michael Grimm (R-N.Y.), sponsor of the bill, stated that business development
companies (BDCs) are a much needed source of financing for small firms and that
regulations governing these entities have not been updated for 30 years.
He said that his “common sense legislation” would increase BDC’s ability of
lending by “modestly increasing” their allowable leverage from 1:1 to 2:1,
noting that this level is “still lower than banks and real estate investment
trusts (REITS).”
Grimm
said that while some people have concerns that increased leverage will make
BDCs more risky; “the opposite is true” as allowing additional leverage will promote
BDCs to seek less risky investments.
Rep.
John Delaney (D-DE) expressed concern that changes resulting from the bill will
have unintended consequences by “effectively lowering their cost of capital by
increasing their leverage.” He said this would make BDCs “formidable
competitors” to community banks and could result in “tax erosion” as BDCs are
not taxed.
Maloney
Amendment – Withdrawn
Rep.
Carolyn Maloney offered an amendment, which was ultimately withdrawn, that
sought to allow BDCs to use more leverage but “only if they get approval from
shareholders first,” noting that this approval would only be needed from
shareholders who physically show up to the meeting.
Maloney
said the amendment would also require the SEC to ensure that retail investors
can distinguish between BDCs “that use more leverage and those that do not”
using the model of exchange traded funds which are labeled as
“leveraged.” The amendment would also allow BDCs to issue multiple
classes of stock, she added, and would limit the amount of preferred stock
allowed to be issued. She concluded that her amendment would give BDCs
the flexibility they need but do so in a “safe and sound manner.”
Waters
added that she did not know how this legislation would become law without the
investor protections put forth in Maloney’s amendment.
Grimm
responded to this amendment saying that he would be willing to work with
Maloney and Waters to find a solution, saying he agreed that investors should
be protected. He said, however, that “many good companies” will not want
the “leveraged” label and that labeling these would give a “false sense of
security” to BDCs not described as leveraged.
Rep.
Scott Garrett (R-N.J.) said that Maloney’s amendment was “substantive” as it
seeks to provide more transparency and disclosure to investors but had concerns
that other portions of the amendment may add extra burdens which are different
from other similarly situated investment vehicles.
Hensarling
said “this is an amendment we take seriously” and that “the subject matter is
valid.” He then gave Maloney his “personal assurance [that] we will work
on it in good faith” to address her concerns before the bill is brought to the
House floor. He then explained that the majority side of the committee
has concerns about shareholder burdens and what the amendment would do to
available capital.
After
these assurances, Maloney withdrew her amendment.
Grimm
Amendment – Adopted
Grimm
explained that his amendment would require the SEC to complete their rulemaking
within 180 days of enactment of the legislation and that if they fail to do so,
the provision under Section 4 “will be self-enacting.” He stated that
this amendment would address the problems seen the in past where the SEC missed
its statuary deadlines and the American people we left waiting for rules that
would help the economy.
Waters
stated that the amendment is “asking a lot of this side of the aisle” and it
would “tie the hands of the SEC.”
Perlmutter
then raised concern that the phrase “it’s reasonable interpretation of,”
allowing companies to make an interpretation if the SEC fails to act in time,
would cause problems if the SEC eventually comes to a different conclusion.
After much discussion Grimm agreed to strike the phrase from his amendment and
the amended language was agreed to by unanimous consent.
Mulvaney
Amendment – Adopted
Rep.
Mick Mulvaney (R-S.C.) explained that his amendment would expand the opportunities
for BDCs to invest in financial services companies, thus allowing smaller
financial institutions to raise more capital. He noted that a previous version
of the bill allowed for investment in hedge funds, but that due to concerns
about this, he excluded these entities.
H.R.
2274
– the Small Business Mergers, Acquisitions, Sales, and Brokerage Simplification
Act – Approved by Vote of 57 – 0
Rep.
Bill Huizenga (R-Mich.), sponsor of the bill, said it is estimated that over
$10 trillion of privately owned small and family businesses will be sold as the
baby boomer generation retires. He then explained that M&A brokers
are subject to costly requirements that increase the costs that business owners
incur when they sell their businesses.
Huizenga
said his bill “simplifies the system of transfer of ownership” for privately
held concerns and reduces the cost of M&A broker services.
Huizenga
then explained his amendment in nature of a substitute for the bill, saying
that it would further simplify the system by exempting brokers from SEC
registration as long as they meet certain criteria. He stated that his
bill “has teeth,” is “substantive” and addresses current “one size fits all”
regulations that treat the sales of small companies in the same way as the
sales of large ones. Huizenga said the current structure is “impractical
and unnecessary” and that he is in favor of a “belt and suspenders” approach.
Waters
then asked to enter into a colloquy with Huizenga to address the phrase “any
person associated with an M&A broker” saying that the language could be
interpreted to “extend to a broader class of persons” then they may be
comfortable with. She requested that the language be changed to apply
only to M&A brokers and employees. Huizenga said he would be happy to
address this issue as he wants to make sure the legislation is “hitting the
intended people.”
Waters
also asked for confirmation that it was not his intention to preempt state
government and state regulators, to which Huizenga confirmed the bill is not
intended to do.
H.R.
3448
– the Small Cap Liquidity Reform Act of 2013 – Approved by Vote of 57 -0
Rep.
Sean Duffy (R-Mich.), sponsor of the bill, thanked Reps. John Carney (D-Del.)
and Ranking Member Waters for their input in making his bill a bipartisan
proposal and stressed the importance of emerging growth companies (EGCs) as
“engines of job growth in America.” He stated that “some companies are
stalling on the on-ramp” that was created by the Jumpstart Our Business
Startups (JOBS) Act due to a lack of liquidity and that his bill would improve
liquidity for certain small cap issuers.
Duffy
explained that the bill would allow for a five year pilot program for EGCs,
with revenue of up to $750 million, to increase their quoting increments to
five and 10 cent increments from the one cent increments used currently.
He added that the bill would provide liability protection for companies that
chose to participate and would also ask the SEC to report back to Congress on
the progress of the program and its effects on job creation and liquidity.
Carney,
co-sponsor, stated that the bill seeks to encourage investors and brokers to
look more closely at EGCs and increase levels of investment in them.
Duffy
Amendment 29 – Adopted
Duffy
offered his first amendment stating that it is a technical fix to specify that
if an EGC elects out of the program or changes its trading increment, the SEC
must notify all platforms of this change, not just the exchanges. Carney
expressed his support and noted that this amendment was added due to input from
stakeholders.
Dufy
Amendment 30 – Adopted
Duffy
stated his second amendment clarifies that the SEC has the discretion to
determine at what increment between the five and 10 cent intervals that stocks
can be traded.
Carney
Amendment – Adopted
Carney
said his amendment clarified the intent of the bill to apply the safe harbor
provision solely to a firm’s decision to expand the tick size for their
company. He said that the language already in the bill arguably achieves
this but when working with corporate governance experts he was told it may not
be as clear as intended if brought in front of a judge. He further stated
that he does not want to “punish business leaders who want to participate” but
does not want to give too broad of protection from shareholder suits related to
participation.
Sinema
Amendment – Adopted
Rep.
Kyrsten Sinema (D-Ariz.) stated that her amendment authorizes the SEC to
“determine what works and what doesn’t” and gives them the description to “get
it right” by allowing them to expand the number of participants eligible and
change the duration of the program for one or more participants. She
added that the “more scientific evidence there is” the better the SEC will be
able to increase interest in these companies.
For
more information on this mark-up and to view a webcast, please click here.
,Blog Tags:,Blog Categories:,Blog TrackBack:,Blog Pingback:No,Hearing Summaries Issues:General,Hearing Summaries Agency:House Financial Services Committee,Publish Year:2013
AT
NOVEMBER 14TH’S HOUSE FINANCIAL SERVICES COMMITTEE mark up, lawmakers ordered the
following bills to be reported favorably to the House of Representatives.
- H.R.
3329, to enhance the ability of community financial institutions to
foster economic growth and serve their communities, boost small
businesses, increase individual savings, and for other purposes - H.R.
3468, the Credit Union Share Insurance Fund Parity Act - H.R.
1800, the Small Business Credit Availability Act - H.R.
2274, the Small Business Mergers, Acquisitions, Sales, and Brokerage
Simplification Act - H.R.
3448, the Small Cap Liquidity Reform Act of 2013
Opening
Remarks
In
his opening statement,
Chairman Jeb Hensarling (R-Texas.) stated that the bills before the committee “will
comprise the basis of a JOBS Act 2.0” and will help to encourage a strong,
healthy economy that leads to more jobs for Americans. He added that
small businesses are at the forefront of innovation, but are currently
suffering under the “sheer weight, volume, and complexity of Washington
regulations” and face “regulatory barriers between them and our capital
markets.”
Ranking
Member Maxine Waters (D-Calif.), in her remarks, stated that Congress has the
responsibility to provide small businesses with clarity and “clear direction
for the future.” She noted that most of the bills in front of the
Committee are a “strong step in the right direction” but had concerns that they
are not “part of a larger package.” She also said there were some “outstanding
issues” with the bills related to small business access to the capital markets.
Waters
noted that the Securities and Exchange Commission (SEC) “would prefer to
exempt” mergers and acquisition (M&A) brokers from registration and said
she supports the amendment to H.R. 2274, which provides for this. She concluded
that it is critical for the SEC to receive appropriate funding, as the bills
under consideration require implementation by this regulatory
agency.
H.R.
3468
– the Credit Union Share Insurance Fund Parity Act – Approved by Voice Vote
Rep.
Ed Royce (R-Calif.), sponsor of the bill, explained that his legislation would
create parity in the treatment of trust accounts and prepaid debit master
accounts between create unions covered by the National Credit Union Share
Insurance Fund (NCUSIF) and bank accounts covered by the Federal Deposit
Insurance Corporation (FDIC), saying that there is “no public policy reason” to
distinguish between the two.
Rep.
Ed Perlmutter (D- Colo.), co-sponsor of the bill, stated that the legislation
should not be seen as authorization for credit unions to take deposit over the
current limits or increase the current thresholds, but that it narrowly defines
which accounts will be given insurance coverage.
H.R.
3329
– To enhance the ability of community financial institutions to foster economic
growth and serve their communities, boost small businesses, increase individual
savings, and for other purposes – Approved by Voice Vote
Rep.
Blaine Luetkemeyer (R-Mo.), sponsor of the bill, explained that H.R. 3329 would
require the Federal Reserve Board, within six months of the date of enactment,
to apply the Policy Statement permitting the formation and expansion of small
bank holding companies (BHCs) with debt levels higher than those permitted for
larger banks. He noted the bill would apply this policy to banks with
assets of less than $1 billion, which is an increase in the current threshold
of $500 million. This increase would be allowed “so long as they (1) are
not engaged in any nonbanking activities involving significant leverage; and
(2) do not have a significant amount of outstanding debt that is held by the
general public,” Luetkemeyer added.
Luetkemeyer
added that the bill also amends Section 171 of the Dodd-Frank Act, “to clarify
that exemption granted to small bank holding companies also applies to savings
and loan holding companies”
Rep.
Patrick Murphy (D-Fla.) stated that the bill provides needed relief and will
give smaller BHCs more flexibility with their capital requirements and noted
that the Fed retains the ability to impose capital standards as they deem
necessary.
Waters
noted that this bill is a prime example of bipartisan efforts to make needed
technical corrections to the Dodd-Frank Act.
H.R.
1800
– The Small Business Credit Availability Act – Approved by Vote of 31-26
Rep.
Michael Grimm (R-N.Y.), sponsor of the bill, stated that business development
companies (BDCs) are a much needed source of financing for small firms and that
regulations governing these entities have not been updated for 30 years.
He said that his “common sense legislation” would increase BDC’s ability of
lending by “modestly increasing” their allowable leverage from 1:1 to 2:1,
noting that this level is “still lower than banks and real estate investment
trusts (REITS).”
Grimm
said that while some people have concerns that increased leverage will make
BDCs more risky; “the opposite is true” as allowing additional leverage will promote
BDCs to seek less risky investments.
Rep.
John Delaney (D-DE) expressed concern that changes resulting from the bill will
have unintended consequences by “effectively lowering their cost of capital by
increasing their leverage.” He said this would make BDCs “formidable
competitors” to community banks and could result in “tax erosion” as BDCs are
not taxed.
Maloney
Amendment – Withdrawn
Rep.
Carolyn Maloney offered an amendment, which was ultimately withdrawn, that
sought to allow BDCs to use more leverage but “only if they get approval from
shareholders first,” noting that this approval would only be needed from
shareholders who physically show up to the meeting.
Maloney
said the amendment would also require the SEC to ensure that retail investors
can distinguish between BDCs “that use more leverage and those that do not”
using the model of exchange traded funds which are labeled as
“leveraged.” The amendment would also allow BDCs to issue multiple
classes of stock, she added, and would limit the amount of preferred stock
allowed to be issued. She concluded that her amendment would give BDCs
the flexibility they need but do so in a “safe and sound manner.”
Waters
added that she did not know how this legislation would become law without the
investor protections put forth in Maloney’s amendment.
Grimm
responded to this amendment saying that he would be willing to work with
Maloney and Waters to find a solution, saying he agreed that investors should
be protected. He said, however, that “many good companies” will not want
the “leveraged” label and that labeling these would give a “false sense of
security” to BDCs not described as leveraged.
Rep.
Scott Garrett (R-N.J.) said that Maloney’s amendment was “substantive” as it
seeks to provide more transparency and disclosure to investors but had concerns
that other portions of the amendment may add extra burdens which are different
from other similarly situated investment vehicles.
Hensarling
said “this is an amendment we take seriously” and that “the subject matter is
valid.” He then gave Maloney his “personal assurance [that] we will work
on it in good faith” to address her concerns before the bill is brought to the
House floor. He then explained that the majority side of the committee
has concerns about shareholder burdens and what the amendment would do to
available capital.
After
these assurances, Maloney withdrew her amendment.
Grimm
Amendment – Adopted
Grimm
explained that his amendment would require the SEC to complete their rulemaking
within 180 days of enactment of the legislation and that if they fail to do so,
the provision under Section 4 “will be self-enacting.” He stated that
this amendment would address the problems seen the in past where the SEC missed
its statuary deadlines and the American people we left waiting for rules that
would help the economy.
Waters
stated that the amendment is “asking a lot of this side of the aisle” and it
would “tie the hands of the SEC.”
Perlmutter
then raised concern that the phrase “it’s reasonable interpretation of,”
allowing companies to make an interpretation if the SEC fails to act in time,
would cause problems if the SEC eventually comes to a different conclusion.
After much discussion Grimm agreed to strike the phrase from his amendment and
the amended language was agreed to by unanimous consent.
Mulvaney
Amendment – Adopted
Rep.
Mick Mulvaney (R-S.C.) explained that his amendment would expand the opportunities
for BDCs to invest in financial services companies, thus allowing smaller
financial institutions to raise more capital. He noted that a previous version
of the bill allowed for investment in hedge funds, but that due to concerns
about this, he excluded these entities.
H.R.
2274
– the Small Business Mergers, Acquisitions, Sales, and Brokerage Simplification
Act – Approved by Vote of 57 – 0
Rep.
Bill Huizenga (R-Mich.), sponsor of the bill, said it is estimated that over
$10 trillion of privately owned small and family businesses will be sold as the
baby boomer generation retires. He then explained that M&A brokers
are subject to costly requirements that increase the costs that business owners
incur when they sell their businesses.
Huizenga
said his bill “simplifies the system of transfer of ownership” for privately
held concerns and reduces the cost of M&A broker services.
Huizenga
then explained his amendment in nature of a substitute for the bill, saying
that it would further simplify the system by exempting brokers from SEC
registration as long as they meet certain criteria. He stated that his
bill “has teeth,” is “substantive” and addresses current “one size fits all”
regulations that treat the sales of small companies in the same way as the
sales of large ones. Huizenga said the current structure is “impractical
and unnecessary” and that he is in favor of a “belt and suspenders” approach.
Waters
then asked to enter into a colloquy with Huizenga to address the phrase “any
person associated with an M&A broker” saying that the language could be
interpreted to “extend to a broader class of persons” then they may be
comfortable with. She requested that the language be changed to apply
only to M&A brokers and employees. Huizenga said he would be happy to
address this issue as he wants to make sure the legislation is “hitting the
intended people.”
Waters
also asked for confirmation that it was not his intention to preempt state
government and state regulators, to which Huizenga confirmed the bill is not
intended to do.
H.R.
3448
– the Small Cap Liquidity Reform Act of 2013 – Approved by Vote of 57 -0
Rep.
Sean Duffy (R-Mich.), sponsor of the bill, thanked Reps. John Carney (D-Del.)
and Ranking Member Waters for their input in making his bill a bipartisan
proposal and stressed the importance of emerging growth companies (EGCs) as
“engines of job growth in America.” He stated that “some companies are
stalling on the on-ramp” that was created by the Jumpstart Our Business
Startups (JOBS) Act due to a lack of liquidity and that his bill would improve
liquidity for certain small cap issuers.
Duffy
explained that the bill would allow for a five year pilot program for EGCs,
with revenue of up to $750 million, to increase their quoting increments to
five and 10 cent increments from the one cent increments used currently.
He added that the bill would provide liability protection for companies that
chose to participate and would also ask the SEC to report back to Congress on
the progress of the program and its effects on job creation and liquidity.
Carney,
co-sponsor, stated that the bill seeks to encourage investors and brokers to
look more closely at EGCs and increase levels of investment in them.
Duffy
Amendment 29 – Adopted
Duffy
offered his first amendment stating that it is a technical fix to specify that
if an EGC elects out of the program or changes its trading increment, the SEC
must notify all platforms of this change, not just the exchanges. Carney
expressed his support and noted that this amendment was added due to input from
stakeholders.
Dufy
Amendment 30 – Adopted
Duffy
stated his second amendment clarifies that the SEC has the discretion to
determine at what increment between the five and 10 cent intervals that stocks
can be traded.
Carney
Amendment – Adopted
Carney
said his amendment clarified the intent of the bill to apply the safe harbor
provision solely to a firm’s decision to expand the tick size for their
company. He said that the language already in the bill arguably achieves
this but when working with corporate governance experts he was told it may not
be as clear as intended if brought in front of a judge. He further stated
that he does not want to “punish business leaders who want to participate” but
does not want to give too broad of protection from shareholder suits related to
participation.
Sinema
Amendment – Adopted
Rep.
Kyrsten Sinema (D-Ariz.) stated that her amendment authorizes the SEC to
“determine what works and what doesn’t” and gives them the description to “get
it right” by allowing them to expand the number of participants eligible and
change the duration of the program for one or more participants. She
added that the “more scientific evidence there is” the better the SEC will be
able to increase interest in these companies.
For
more information on this mark-up and to view a webcast, please click here.