In early June, the US House of Representatives passed two sets of bills focused on promoting capital formation. The bipartisan effort included bills that amend the accredited investor definition in order to increase the diversity of investors participating in the private markets. In addition, as the IPO market continues to suffer, the packages include bills that would enact legislation formalizing measures that already are permitted by SEC staff, such as, for example, expanding “testing-the-waters” accommodations to all issuers. Also, the package includes a bill directing the SEC to investigate the costs associated with going public for middle market companies.
House bills passed on June 1, 2023, include:
- H.R. 2792, the Small Entity Update Act, directs the SEC to revisit the definition of “small entity” and assess regulatory costs of compliance for these small and growing businesses. The bill was agreed to by roll call vote, 367-8.
- H.R. 2795, the Enhancing Multi-Class Share Disclosures Act, requires issuers with a multi-class stock structure to make certain disclosures in any proxy or consent solicitation material. The bill was agreed to by roll call vote, 347-30.
- H.R. 2796, the Promoting Opportunities for Non-Traditional Capital Formation Act, requires the Advocate for Small Business Capital Formation to provide educational resources and host events to promote capital raising options for traditionally underrepresented small businesses. The bill was agreed to by roll call vote, 309-67.
- H.R. 2797, the Equal Opportunity for All Investors Act, institutes a FINRA-administered examination that would allow an individual to qualify as an accredited investor. The bill was agreed to by roll call vote, 383-18.
House bills passed on June 5, 2023, include:
- H.R. 835, the Fair Investment Opportunities for Professional Experts Act, codifies the current definition of accredited investor, which includes individuals with a net worth of over $1 million or an annual income of over $200,000. In addition, the bill expands the definition to include individuals with education or experience related to a particular investment. The bill was agreed to by voice vote.
- H.R. 1579, the Accredited Investor Definition Review Act, updates the list of certifications an investor must satisfy in order to qualify as an accredited investor. The bill was agreed to by voice vote.
- H.R. 2608, a bill to amend the Federal securities laws to specify the periods for which financial statements are required to be provided by an emerging growth company, and for other purposes, clarifies that the EGC accommodations remain available both when an EGC acquires another company and in follow-on offerings for an issuer that lost its EGC status during IPO registration. The bill was agreed to by voice vote.
- H.R. 2610, a bill to amend the Securities Exchange Act of 1934 to specify certain registration statement contents for emerging growth companies, to permit issuers to file draft registration statements with the SEC for confidential review, and for other purposes, clarifies that the EGC financial statement accommodations remain available whether an EGC is conducting an IPO or spinning off a portion of its business. The bill was agreed to by voice vote.
- H.R. 2593, the Senior Security Act of 2023, creates a task force to protect seniors from falling victim to fraud and abuse in our capital markets. The bill was agreed to by voice vote.
- H.R. 2793, the Encouraging Public Offerings Act of 2023, allows all issuers to submit a confidential draft registration statement for review prior to going public and permits any issuer to “test-the-waters” and gauge investor interest prior to filing. The bill was agreed to by roll call vote, 384-13.
- H.R. 2812, the Middle Market IPO Cost Act, directs the SEC to conduct a study of the costs associated with small- and medium-sized companies electing to undertake IPOs. The bill was agreed to by roll call vote, 390-10.
All bills have been received in the Senate and referred to its Committee on Banking, Housing, and Urban Affairs.