79–006 

115TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 115–576 

ACCELERATING ACCESS TO CAPITAL ACT OF 2017 

FEBRUARY 23, 2018.—Committed to the Committee of the Whole House on the State 

of the Union and ordered to be printed 

Mr. HENSARLING, from the Committee on Financial Services, 

submitted the following 

R E P O R T 

together with 

MINORITY VIEWS 

[To accompany H.R. 4529] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Financial Services, to whom was referred the 

bill (H.R. 4529) to direct the Securities and Exchange Commission 

to revise Form S–3 so as to add listing and registration of a class 

of common equity securities on a national securities exchange as an 

additional basis for satisfying the requirements of General Instruction I.B.1. of such form and to remove such listing and registration 

as a requirement of General Instruction I.B.6. of such form, having 

considered the same, report favorably thereon without amendment 

and recommend that the bill do pass. 

PURPOSE AND SUMMARY

On December 1, 2017, Representative Ann Wagner introduced 

H.R. 4529, the ‘‘Accelerating Access to Capital Act of 2017’’, to 

amend the Securities and Exchange Commission’s (SEC) Form S– 

3 registration statement for smaller reporting companies that have 

a class of common equity securities listed and registered on a national securities exchange. The bill allows these companies to register primary securities offerings exceeding one-third of the aggregate market value of voting and non-voting common equity held by 

non-affiliates of the registrant. It also allows smaller reporting 

companies without a class of common equity securities listed and 

registered on a national securities exchange to register primary securities offerings up to one-third of their public float. 

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BACKGROUND AND NEED FOR LEGISLATION

Allowing a greater number of smaller reporting companies to use 

the SEC’s Form S–3 for securities offerings will reduce overly burdensome compliance costs associated with filing redundant paperwork and allow eligible companies to focus more resources on growing their businesses. 

The Form S–3 is currently available to companies with a public 

float—e.g., the amount of shares not held by private shareholders 

or employees—of at least $75 million and a reporting history with 

the SEC of at least 12 months. Additionally, smaller reporting companies with a security traded on a national securities exchange 

may use Form S–3 but are limited to offerings that do not exceed 

one-third of their public float in a given year. 

Filing a Form S–3 is more efficient than the more burdensome 

Form S–1. The Form S–3 is a short-form registration statement 

that allows forward incorporation by reference, as well as ‘‘off-theshelf’’ offerings. Allowing forward incorporation by reference enables the company to simply, after the Form’s effective date, reference any further documentation on the original Form S–3 document. Otherwise, companies must refile the registration form or 

file a post-effective amendment, which often results in the company 

having to delay any further security issuances and incur additional, unnecessary legal costs. In other words, using Form S–3 not 

only allows companies to avoid unnecessary compliance costs, but 

forward market incorporation and shelf registration lends to an efficiency that helps companies maximize market opportunities, and 

make it more likely that they will conduct more registered securities offerings. 

Expanding the use of Form S–3 as provided in H.R. 4529 is long 

overdue. The original public float requirement for companies eligible to use Form S–3 to register primary offerings was $150 million. 

In 1992, the SEC reduced the minimum float threshold to the current $75 million based on an analysis of trading markets. In 2006, 

the SEC’s Advisory Committee on Smaller Public Companies recommended that all reporting companies, regardless of public float 

or exchange-traded status, should be allowed to use Form S–3. The 

next year, the SEC proposed to expand the use of Form S–3 to all 

reporting companies, regardless of public float or exchange-traded 

status, and would have also imposed a 20% cap of public float on 

the amount of securities to be offered. The SEC determined that 

expanding Form S–3 eligibility was appropriate because most public filings now being filed on the SEC’s Electronic Data Gathering, 

Analysis, and Retrieval (EDGAR) database, allows widespread and 

direct accessibility to company disclosure. Ultimately, the SEC’s 

final rule limited the Form S–3 to only companies traded on a national securities exchange but raised the cap to one-third of public 

float. In adopting the 2007 rule, the SEC stated that ‘‘extending 

Form S–3 short-form registration to additional issuers should enhance their ability to access the public securities markets.’’ After 

all, the ‘‘inability of these companies to utilize [Form S–3] limited 

their capacity to access the public securities markets and, because 

of the cost and lack of flexibility associated with [Form S–1], they 

either did not file registration statements . . . or were limited in 

the number that they filed.’’ Furthermore, the SEC estimated that 

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the offering reforms made in its 2007 release, including expanded 

Form S–3 eligibility, would decrease the compliance burden for 

companies by approximately 10,375 hours of in-house company personnel time (valued at $1,816,000) and approximately $12,450,000 

for the services of outside professionals. 

More recently, expanding the use of Form S–3 for all smaller reporting companies was a recommendation included in the SEC’s 

Government-Business Forum on Small Business Capital Formation 

Final Report for 2012. At a Financial Services Subcommittee on 

Capital Markets hearing in 2014, Brian Hahn, Chief Financial Officer of GlycoMimetics, Inc., testifying on behalf of Biotechnology Industry Organization, confirmed the SEC’s observations in 2007, 

when he noted that a reform like this ‘‘would increase the pool of 

companies eligible to use Form S–3 to register for an offering. 

Form S–3 is the most simplified SEC registration form, and utilizing it to conduct an offering contributes to the cost-savings goals 

of emerging companies.’’ He continued that expanding access to 

Form S–3 ‘‘would increase small companies’ access to public funds 

in an efficient and cost-effective manner that will stimulate capital 

formation.’’ 

Further, during a 2015 Capital Markets Subcommittee hearing, 

David Weild, CEO of Weild & Co., testified that, ‘‘the flexibility, 

speed and costs savings afforded by Form S–3 ‘Shelf Registrations’ 

helps corporate issuers to improve their cost of equity capital.’’ 

One of the SEC’s most important missions is to facilitate capital 

formation, though the Obama Administration largely neglected this 

mission in favor of extraneous and highly politicized regulatory undertakings. The current SEC Chairman, Jay Clayton, has stressed 

that a key part of his agenda is facilitating capital formation for 

all companies, which will provide expanded opportunities for investors, help grow the economy, facilitate innovation, and further job 

creation. 

While the SEC has the statutory authority to enact many of 

these provisions unilaterally, earlier this year, the SEC did act to 

help facilitate capital formation by extending confidential filings to 

all companies, a provision that was included in H.R. 10, the Financial CHOICE Act. In addition to implementing CHOICE Act provisions, the Committee encourages the SEC to review the recommendations it has collected, including those from the Government Business Forum on Small Business Capital Formation, and 

act on those most likely to help small businesses access the capital 

markets so they can innovate, grow, and provide economic opportunities for their communities. Additionally, the Committee urges the 

Commission to act quickly to hire a Small Business Advocate to 

run the Office of the Advocate for Small Business Capital Formation pursuant to the SEC Small Business Advocate Act signed into 

law by President Obama in December 2016. 

The SEC’s near-term agenda may not accommodate the expansion of the Form S–3 to a larger group of companies that meet the 

conditions of the Form. If the SEC cannot act, it is incumbent upon 

Congress to Act to assist the SEC meet the entirety of its statutory 

mission. H.R. 4529 is a measured legislative response to address 

the inequities between large and small issuers. It is important to 

note that H.R. 4529 does not relieve any issuer of its obligations 

to file periodic and annual reports with the SEC. H.R. 4529 does 

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not exempt these issuers from registration under the Securities Exchange Act of 1934. Also, in order to be eligible to use Form S–3, 

a company must have timely filed 12 months of reports beforehand. 

Finally, H.R. 4529 does not eliminate or inhibit the SEC’s ability 

to pursue securities fraud actions against a company, who takes 

advantages of the Form S–3 expansion, when H.R. 4529 becomes 

law. 

HEARINGS

The Committee on Financial Services held hearings examining 

matters relating to H.R. 4529 on April 26, 2017, and April 28, 

2017. 

COMMITTEE CONSIDERATION

The Committee on Financial Services met in open session on December 12, 2017, and December 13, 2017, and ordered H.R. 4529 

to be reported favorably to the House without amendment by a recorded vote of 34 yeas to 26 nays (Record vote no. FC–124), a 

quorum being present. 

COMMITTEE VOTES

Clause 3(b) of rule XIII of the Rules of the House of Representatives requires the Committee to list the record votes on the motion 

to report legislation and amendments thereto. The sole recorded 

vote was on a motion by Chairman Hensarling to report the bill favorably to the House without amendment. The motion was agreed 

to by a recorded vote of 34 yeas to 26 nays (Record vote no. FC– 

124), a quorum being present. 

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Insert graphic folio 6 HR576.001
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COMMITTEE OVERSIGHT FINDINGS

Pursuant to clause 3(c)(1) of rule XIII of the Rules of the House 

of Representatives, the findings and recommendations of the Committee based on oversight activities under clause 2(b)(1) of rule X 

of the Rules of the House of Representatives, are incorporated in 

the descriptive portions of this report. 

PERFORMANCE GOALS AND OBJECTIVES

Pursuant to clause 3(c)(4) of rule XIII of the Rules of the House 

of Representatives, the Committee states that H.R. 4529 will help 

facilitate capital raising efforts by small businesses by extending 

shelf registration statements to small reporting companies. 

NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX

EXPENDITURES

In compliance with clause 3(c)(2) of rule XIII of the Rules of the 

House of Representatives, the Committee adopts as its own the estimate of new budget authority, entitlement authority, or tax expenditures or revenues contained in the cost estimate prepared by 

the Director of the Congressional Budget Office pursuant to section 

402 of the Congressional Budget Act of 1974. 

CONGRESSIONAL BUDGET OFFICE ESTIMATES

Pursuant to clause 3(c)(3) of rule XIII of the Rules of the House 

of Representatives, the following is the cost estimate provided by 

the Congressional Budget Office pursuant to section 402 of the 

Congressional Budget Act of 1974: 

U.S. CONGRESS, CONGRESSIONAL BUDGET OFFICE, Washington, DC, February 16, 2018. 

Hon. JEB HENSARLING, 

Chairman, Committee on Financial Services, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 4529, the Accelerating 

Access to Capital Act of 2017. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Stephen Rabent. 

Sincerely, 

KEITH HALL, 

Director. 

Enclosure. 

H.R. 4529—Accelerating Access to Capital Act of 2017 

Under current law, companies that sell securities must register 

their offerings with the Securities and Exchange Commission 

(SEC). Certain companies that meet various requirements may use 

a simplified registration form. H.R. 4529 would expand eligibility 

to use the simplified registration form. 

Using information from the SEC, CBO estimates that implementing H.R. 4529 would cost less than $500,000 over the 2018– 

2022 period for the agency to update its registration rules. HowVerDate Sep 11 2014 04:06 Feb 24, 2018 Jkt 079006 PO 00000 Frm 00006 Fmt 6659 Sfmt 6602 E:\HR\OC\HR576.XXX HR576
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ever, the SEC is authorized to collect fees sufficient to offset its annual appropriation; therefore, CBO estimates that the net effect on 

discretionary spending would be negligible, assuming appropriation 

actions consistent with that authority. 

Enacting H.R. 4529 would not affect direct spending or revenues; 

therefore, pay-as-you-go procedures do not apply. 

CBO estimates that enacting H.R. 4529 would not increase net 

direct spending or on-budget deficits in any of the four consecutive 

10-year periods beginning in 2028. 

H.R. 4529 contains no intergovernmental mandates as defined in 

the Unfunded Mandates Reform Act (UMRA). 

If the SEC increases fees to offset the costs associated with implementing the bill, H.R. 4529 would increase the cost of an existing mandate on private entities required to pay those fees. Using 

information from the SEC, CBO estimates that the incremental 

cost of the mandate would fall well below the annual threshold for 

private-sector mandates established in UMRA ($156 million in 

2017, adjusted annually for inflation). 

The CBO staff contact for this estimate is Stephen Rabent. The 

estimate was approved by H. Samuel Papenfuss, Deputy Assistant 

Director for Budget Analysis. 

FEDERAL MANDATES STATEMENT

This information is provided in accordance with section 423 of 

the Unfunded Mandates Reform Act of 1995. 

The Committee has determined that the bill does not contain 

Federal mandates on the private sector. The Committee has determined that the bill does not impose a Federal intergovernmental 

mandate on State, local, or tribal governments. 

ADVISORY COMMITTEE STATEMENT

No advisory committees within the meaning of section 5(b) of the 

Federal Advisory Committee Act were created by this legislation. 

APPLICABILITY TO LEGISLATIVE BRANCH

The Committee finds that the legislation does not relate to the 

terms and conditions of employment or access to public services or 

accommodations within the meaning of the section 102(b)(3) of the 

Congressional Accountability Act. 

EARMARK IDENTIFICATION

With respect to clause 9 of rule XXI of the Rules of the House 

of Representatives, the Committee has carefully reviewed the provisions of the bill and states that the provisions of the bill do not 

contain any congressional earmarks, limited tax benefits, or limited 

tariff benefits within the meaning of the rule. 

DUPLICATION OF FEDERAL PROGRAMS

In compliance with clause 3(c)(5) of rule XIII of the Rules of the 

House of Representatives, the Committee states that no provision 

of the bill establishes or reauthorizes: (1) a program of the Federal 

Government known to be duplicative of another Federal program; 

(2) a program included in any report from the Government Accountability Office to Congress pursuant to section 21 of Public 

8 

Law 111–139; or (3) a program related to a program identified in 

the most recent Catalog of Federal Domestic Assistance, published 

pursuant to the Federal Program Information Act (Pub. L. No. 95– 

220, as amended by Pub. L. No. 98–169). 

DISCLOSURE OF DIRECTED RULEMAKING

Pursuant to section 3(i) of H. Res. 5, (115th Congress), the following statement is made concerning directed rulemakings: The 

Committee estimates that the bill requires one directed rulemaking 

to direct the SEC to revise Form S–3. 

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title 

This section cites H.R. 4529 as the ‘‘Accelerating Access to Capital Act of 2017.’’ 

Section 2. Expanded eligibility for use of Form S–3 

This section directs the SEC to revise Form S–3 to permit securities to be registered if the primary securities offerings exceed onethird of the aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant and to permit 

smaller reporting companies without a class of common equity securities listed and registered on a national securities exchange to 

register primary securities offerings up to one-third of their public 

float. 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

H.R. 4529 does not repeal or amend any section of a statute. 

Therefore, the Office of Legislative Counsel did not prepare the report contemplated by clause 3(e)(1)(B) of rule XIII of the Rules of 

the House of Representatives. 

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MINORITY VIEWS 

H.R. 4529 would dangerously expand the type of companies that 

are eligible to use the Securities and Exchange Commission’s shortform registration statement (Form S–3) to register their securities 

before selling them to the general public. Current restrictions for 

companies using Form S–3, which are based on size and whether 

they are traded on an exchange, ensure that they have timely information available to the public, ample liquidity, and strong corporate governance standards. By removing these restrictions, H.R. 

4529 would allow small, little-known companies to avoid SEC staff 

review and invite accounting fraud, market manipulation, insider 

trading, and sales of artificially inflated stock 

Unlike Form S–1, the SEC’s general registration statement, 

Form S–3 is a streamlined form that allows eligible companies to 

sell their securities as they wish over the course of three years, 

without having to file and seek SEC approval for separate registration statements. These ‘‘shelf offerings’’ provide companies with 

considerable flexibility in how they sell their shares, allowing them 

to take advantage of changes in the markets and other factors. 

In exchange for this flexibility, companies must meet certain restrictions designed to protect investors. In particular, companies 

must have consistently filed their public reporting forms for one 

year and either (1) have at least $75 million in common equity or 

(2) be listed on an exchange and sell no more than one-third of the 

value of their common equity in a year. 

According to the SEC, these restrictions ensure that the investing public has sufficient and timely information about these companies, making multiple registration statements unnecessary. For example, companies with more than $75 million in common equity 

are more widely followed by research analysts, while exchangetraded companies with less than $75 million must meet exchange 

listing standards that ensure liquidity and strong corporate governance standards. 

H.R. 4529 ignores these common-sense restrictions and would 

allow non-exchange traded companies, regardless of size, to sell up 

to 1/3 of the value of their common equity using Form S–3. If a 

company is traded on an exchange, the bill would allow it to sell 

an unlimited number of shares using Form S–3, again regardless 

of size. 

Democratic witnesses have testified before the Committee that 

such an expansion of Form S–3 would allow companies to avoid 

SEC staff review and risk increased fraud and market manipulation, particularly for non-exchange traded companies. According to 

Professor Mercer Bullard of the University of Mississippi School of 

Law, previous studies have found that 80% of manipulation cases 

involved non-exchange traded stocks, and a positive correlation between lower disclosure requirements and the likelihood of manipuVerDate Sep 11 2014 04:06 Feb 24, 2018 Jkt 079006 PO 00000 Frm 00009 Fmt 6604 Sfmt 6604 E:\HR\OC\HR576.XXX HR576
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lation. Professor John Coffee from the Columbia Law School also 

testified that such a change to Form S–3 ‘‘invites potential disaster 

and investor confusion.’’ 

According to the Consumer Federation of America (CFA), ‘‘the 

most likely, and perhaps the best outcome, if this legislation is 

adopted, is that the market simply will not accept such offerings, 

and thus it will do nothing to promote capital formation.’’ The CFA 

has also noted that ‘‘this bill increases the risk of fraud and misconduct without offering any benefits to justify that added risk.’’ 

For all of these reasons, we oppose H.R. 4529. 

MAXINE WATERS. 

DANIEL T. KILDEE. 

MICHAEL E. CAPUANO. 

NYDIA VELA ́ ZQUEZ. 

EMANUEL CLEAVER. 

STEPHEN F. LYNCH. 

JOYCE BEATTY. 

JUAN VARGAS. 

CAROLYN B. MALONEY. 

AL GREEN. 

GWEN MOORE. 

BRAD SHERMAN. 

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