July 11, 2018

House Financial Services Committee “Markup of Legislation”

Key Takeaways

  • All bills considered were favorably reported out of committee. 

Bills Considered

  • H.R. 3555, the “Exchange Regulatory Improvement Act”
    • An Amendment in the Nature of a Substitute offered by Mr. Loudermilk
  • H.R. 6177, the “Developing and Empowering our Aspiring Leaders Act”
    • An Amendment in the Nature of a Substitute offered by Mr. Hollingsworth
  • H.R. 6319, the “Expanding Investment in Small Businesses Act”
  • H.R. 6322, the “Enhancing Multi-Class Stock Disclosures Act”
    • An Amendment in the Nature of a Substitute offered by Mr. Meeks
  • H.R. 6324, the “Middle-Market IPO Underwriting Fee Act”
  • H.R. 6320, the “Promoting Transparent Standards for Corporate Insiders Act”
  • H.R. 6321, the “Investment Adviser Regulatory Flexibility Improvement Act”
  • H.R. 6323, the “National Senior Investor Initiative Act of 2018”
    • An Amendment in the Nature of a Substitute offered by Mr. Gottheimer 

Opening Statements

Chairman Jeb Hensarling (R-Texas), House Financial Services Committee

Hensarling stated that many of the bills being considered today are bipartisan and that they will all help small businesses access capital and allow companies to go public more easily. He noted that while entrepreneurship was at a generational low in 2016, initial public offerings (IPOs) are making a comeback and that it is imperative to make the process easier.

Ranking Member Maxine Waters (D-Calif.), House Financial Services Committee

Waters applauded the bipartisan bills being considered and then discussed her bill, H.R. 6320, the “Promoting Transparent Standards for Corporate Insiders Act” which would limit the ability of corporate insiders to make trades based on non-public information. She continued that her bill would require the Securities and Exchange Commission (SEC) to study whether anti-fraud provisions that combat insider trading should be amended and then report to Congress and amend rules as necessary based on the findings.

Rep. Carolyn Maloney (D-N.Y.)

Maloney discussed her bill, H.R. 1611, the “Gender Diversity in Corporate Leadership Act of 2017” which would disclose the gender makeup of company boards, noting studies that have shown that diversified boards have better company outcomes than those without diversity. 

H.R. 6321, the “Investment Adviser Regulatory Flexibility Improvement Act”

Rep. Gwen Moore (D-Wis.) introduced her bill which would amend the Regulatory Flexibility Act, explaining that in the 1980s the SEC wrote the rules so narrowly for investment advisors that no one qualifies for regulatory relief, and that her bill will fix this problem. Rep. Bill Huizenga (R-Mich.), a cosponsor of the bill, explained that the bill will provide regulatory relief for those investment advisor firms with 10 or fewer employees, as well as call on the SEC to within one year of enactment amend the definition of small business/organization to assess the rulemaking impact. Hensarling and Waters also voiced their support for the bill.

The bill was favorably reported to the House by voice vote.

H.R. 6319, the “Expanding Investment in Small Businesses Act”

Rep. Randy Hultgren (R-Ill.) introduced his bill which would direct the SEC to complete a report within 180 days and report back to Congress its recommendations on increasing the voting shares a diversified company can hold from 10 percent to 15 percent. Hensarling supported the bill, noting that a major problem for companies going public is the ability to stay public, especially for micro and nano companies, adding that the diversified fund rule could be part of this problem and that the SEC’s study would provide insight.

The bill was favorably reported to the House by voice vote.

H.R. 6320, the “Promoting Transparent Standards for Corporate Insiders Act”

Waters introduced her bill which would ensure corporate executives are not able to illegally trade based on non-public information they learn about their companies. She continued that SEC anti-fraud rules prohibit insider trading but that there are loopholes that this bill will fix. Waters explained that the SEC will be required to study whether to amend the current rule to limit the ability of corporate insiders to adopt multiple, overlapping plans or change plans based on inside information, and that the SEC will then have to report back to Congress with their findings and amend existing rules as necessary. Hultgren voiced his support, noting the importance of the SEC clarifying where changes in the rules are needed. Hensarling and Maloney also voiced their support for the bill.

The bill was favorably reported to the House by voice vote.

H.R. 3555, the “Exchange Regulatory Improvement Act”

An Amendment in the Nature of a Substitute was offered by Rep. Barry Loudermilk (R-Ga.), which would amend the definition of “facility” and prevent regulatory overreach by the SEC. He explained that currently exchanges and parent companies offer products and services that are separate from the normal functions of exchanges (such as a coffee shop) but that the SEC tries to regulate them. He explained that this bill will specify that the Commission does not have oversight over these products and services. Hensarling, Waters, Hultgren and Rep. David Scott (D-Ga.) stressed the need for clarification on what a facility is, voicing their support for the bill.

The bill was favorably reported to the House by voice vote.

H.R. 6177, the “Developing and Empowering our Aspiring Leaders Act”

An Amendment in the Nature of a Substitute was offered by Rep. Trey Hollingsworth (R-Ind.) which would allow venture capital firms to focus on transactions and growing their portfolios rather than focus on “complicated” regulatory issues. He continued that venture capital funds should be exempt from the definition of registered investment advisors, as it currently restricts the activities venture capital firms can take. Hensarling, Hultgren and Maloney also voiced their support for the bill.

The bill was favorably reported to the House by voice vote.

H.R. 6322, the “Enhancing Multi-Class Stock Disclosures Act”

An Amendment in the Nature of a Substitute was offered by Rep. Gregory Meeks (D-N.Y.). Meeks explained that his bill would amend the ‘34 Act to require issuers with multiple classes of stock to make disclosures about their different kinds of shares. Meeks argued the bill was important given the increasing number of companies with dual- or multi-class stock. Reps. Hensarling, Hultgren, and Waters all spoke in support of the measure.

The bill was favorably reported to the House by voice vote.

H.R. 6323, the “National Senior Investor Initiative Act of 2018”

An Amendment in the Nature of a Substitute was offered by Rep. Josh Gottheimer (D-N.J.). Gottheimer explained that the bipartisan bill is aimed at stopping financial predators from scamming seniors in retirement, citing at True Link Financial survey that seniors are criminally defrauded of $13 million annually. Noting that ten thousand Americans are turning 65 every day, Gottheimer said that the root causes of elder fraud must be addressed. Gottheimer continued that his bill establishes an interdivisional task force at the SEC to identify problems senior investors face, analyze exam and enforcement data, and report to Congress with its findings. Reps. Hultgren, Hensarling, Hollingsworth, and Waters also spoke in support of the bill. Hensarling noted that Congress has made strides in addressing this issue by including the Senior Safe Act in S. 2155, and said that this is an area that the SEC should continue to focus on.

The bill was favorably reported to the House by voice vote.

H.R. 6324, the “Middle-Market IPO Underwriting Fee Act”

Rep Jim Himes (D-Conn.) introduced his bill, and his updated Amendment in the Nature of a Substitute, that calls for the SEC to conduct a study on the gross spread and “other costs associated” with initial public offerings (IPOs). Himes said such a study would help policymakers determine possible steps to make IPO markets more competitive, helping issuers and investors. Himes praised members of the majority, including Rep. French Hill (R-Ark.) for working with him on language that was acceptable to both sides. Hultgren and Huizenga both praised the Amendment, and Hill thanked Himes for working with him on it. Waters also said she supported the bill and urged all Members of the committee to vote in favor of it.

The bill was favorably reported to the House by voice vote.

For more information on this markup, please click here.