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H.R. 1070 (112th): Small Company Capital Formation Act of 2011

The text of the bill below is as of Sep 14, 2011 (Reported by House Committee).


IB

Union Calendar No. 135

112th CONGRESS

1st Session

H. R. 1070

[Report No. 112–206]

IN THE HOUSE OF REPRESENTATIVES

March 14, 2011

(for himself, Mr. Garrett, Mr. Westmoreland, Mr. Jones, and Mrs. Biggert) introduced the following bill; which was referred to the Committee on Financial Services

September 14, 2011

Additional sponsors: Mr. Canseco, Mr. Manzullo, Mr. Duncan of Tennessee, Ms. Eshoo, Mrs. Bachmann, Mr. Stivers, Mr. David Scott of Georgia, Mr. Neugebauer, Mr. Walsh of Illinois, Mr. Paulsen, Mr. Marchant, Mr. Quayle, Mr. Culberson, Mr. Price of Georgia, Mr. Roe of Tennessee, and Ms. Hayworth

September 14, 2011

Reported with an amendment, committed to the Committee of the Whole House on the State of the Union, and ordered to be printed

Strike out all after the enacting clause and insert the part printed in italic

For text of introduced bill, see copy of bill as introduced on March 14, 2011


A BILL

To amend the Securities Act of 1933 to authorize the Securities and Exchange Commission to exempt a certain class of securities from such Act.


1.

Short title

This Act may be cited as the Small Company Capital Formation Act of 2011.

2.

Authority to exempt certain securities

(a)

In general

Section 3(b) of the Securities Act of 1933 (15 U.S.C. 77c(b)) is amended—

(1)

by striking (b) The Commission and inserting the following:

(b)

Additional exemptions

(1)

Small issues exemptive authority

The Commission

; and

(2)

by adding at the end the following:

(2)

Additional issues

The Commission shall by rule or regulation add a class of securities to the securities exempted pursuant to this section in accordance with the following terms and conditions:

(A)

The aggregate offering amount of all securities sold within the prior 12-month period in reliance on the exemption added in accordance with this paragraph shall not exceed $50,000,000.

(B)

The securities may be offered and sold publicly.

(C)

The securities shall not be restricted securities within the meaning of the Federal securities laws and the regulations promulgated thereunder.

(D)

The civil liability provision in section 12(a)(2) shall apply to any person offering or selling such securities.

(E)

The issuer may solicit interest in the offering prior to filing any offering statement, on such terms and conditions as the Commission may prescribe in the public interest or for the protection of investors.

(F)

The Commission shall require the issuer to file audited financial statements with the Commission annually.

(G)

Such other terms, conditions, or requirements as the Commission may determine necessary in the public interest and for the protection of investors, which may include—

(i)

a requirement that the issuer prepare and electronically file with the Commission and distribute to prospective investors an offering statement, and any related documents, in such form and with such content as prescribed by the Commission, which shall include a description of the issuer’s business operations, its financial condition, its corporate governance principles, its use of investor funds, and other appropriate matters; and

(ii)

disqualification provisions under which the exemption shall not be available based upon the disciplinary history of the issuer or its predecessors, affiliates, officers, directors, underwriters, or other related persons, which shall be substantially similar to the disqualification provisions contained in the regulations adopted in accordance with section 926 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (15 U.S.C. 77d note).

(3)

Limitation

Only the following types of securities may be exempted under a rule or regulation adopted pursuant to paragraph (2): equity securities, debt securities, and debt securities convertible or exchangeable to equity interests, including any guarantees of such securities.

(4)

Periodic disclosures

Upon such terms and conditions as the Commission determines necessary in the public interest and for the protection of investors, the Commission by rule or regulation may require an issuer of a class of securities exempted under paragraph (2) to make available to investors periodic disclosures regarding the issuer, its business operations, its financial condition, its corporate governance principles, its use of investor funds, and other appropriate matters, and also may provide for the suspension and termination of such a requirement with respect to that issuer.

(5)

Adjustment

Not later than 2 years after the date of enactment of the Small Company Capital Formation Act of 2011 and every 2 years thereafter, the Commission shall review the offering amount limitation described in paragraph (2)(A) and shall increase such amount as the Commission determines appropriate. If the Commission determines not to increase such amount, it shall report to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate on its reasons for not increasing the amount.

.

(b)

Treatment as covered securities for purposes of NSMIA

Section 18(b)(4) of the Securities Act of 1933 (15 U.S.C. 77r(b)(4)) is amended—

(1)

in subparagraph (C), by striking ; or at the end and inserting a semicolon; and

(2)

by redesignating subparagraph (D) as subparagraph (E), and inserting after subparagraph (C) the following:

(D)

a rule or regulation adopted pursuant to section 3(b)(2) and such security is—

(i)

offered or sold through a broker or dealer;

(ii)

offered or sold on a national securities exchange; or

(iii)

sold to a qualified purchaser as defined by the Commission pursuant to paragraph (3).

.

(c)

Conforming amendment

Section 4(5) of the Securities Act of 1933 is amended by striking section 3(b) and inserting section 3(b)(1).

September 14, 2011

Reported with an amendment, committed to the Committee of the Whole House on the State of the Union, and ordered to be printed