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[House Report 112-406]
[From the U.S. Government Printing Office]


112th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     112-406

======================================================================



 
REOPENING AMERICAN CAPITAL MARKETS TO EMERGING GROWTH COMPANIES ACT OF 
                                  2011

                                _______
                                

 March 1, 2012.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

  Mr. Bachus, from the Committee on Financial Services, submitted the 
                               following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 3606]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 3606) to increase American job creation and 
economic growth by improving access to the public capital 
markets for emerging growth companies, having considered the 
same, report favorably thereon with an amendment and recommend 
that the bill as amended do pass.
    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Reopening American Capital Markets to 
Emerging Growth Companies Act of 2012''.

SEC. 2. DEFINITIONS.

  (a) Securities Act of 1933.--Section 2(a) of the Securities Act of 
1933 (15 U.S.C. 77b(a)) is amended by adding at the end the following:
          ``(19) The term `emerging growth company' means an issuer 
        that had total annual gross revenues of less than 
        $1,000,000,000 during its most recently completed fiscal year. 
        An issuer that is an emerging growth company as of the first 
        day of that fiscal year shall continue to be deemed an emerging 
        growth company until the earliest of--
                  ``(A) the last day of the fiscal year of the issuer 
                during which it had total annual gross revenues of 
                $1,000,000,000 or more;
                  ``(B) the last day of the fiscal year of the issuer 
                following the fifth anniversary of the date of the 
                first sale of common equity securities of the issuer 
                pursuant to an effective registration statement under 
                this title; or
                  ``(C) the date on which such issuer is deemed to be a 
                `large accelerated filer', as defined in section 
                240.12b-2 of title 17, Code of Federal Regulations, or 
                any successor thereto.''.
  (b) Securities Exchange Act of 1934.--Section 3(a) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78c(a)) is amended--
          (1) by redesignating paragraph (77), as added by section 
        941(a) of the Investor Protection and Securities Reform Act of 
        2010 (Public Law 111-203, 124 Stat. 1890), as paragraph (79); 
        and
          (2) by adding at the end the following:
          ``(80) Emerging growth company.--The term `emerging growth 
        company' means an issuer that had total annual gross revenues 
        of less than $1,000,000,000 during its most recently completed 
        fiscal year. An issuer that is an emerging growth company as of 
        the first day of that fiscal year shall continue to be deemed 
        an emerging growth company until the earliest of--
                  ``(A) the last day of the fiscal year of the issuer 
                during which it had total annual gross revenues of 
                $1,000,000,000 or more;
                  ``(B) the last day of the fiscal year of the issuer 
                following the fifth anniversary of the date of the 
                first sale of common equity securities of the issuer 
                pursuant to an effective registration statement under 
                the Securities Act of 1933; or
                  ``(C) the date on which such issuer is deemed to be a 
                `large accelerated filer', as defined in section 
                240.12b-2 of title 17, Code of Federal Regulations, or 
                any successor thereto.''.
  (c) Other Definitions.--As used in this Act, the following 
definitions shall apply:
          (1) Commission.--The term ``Commission'' means the Securities 
        and Exchange Commission.
          (2) Initial public offering date.--The term ``initial public 
        offering date'' means the date of the first sale of common 
        equity securities of an issuer pursuant to an effective 
        registration statement under the Securities Act of 1933.
  (d) Effective Date.--Notwithstanding section 2(a)(19) of the 
Securities Act of 1933 and section 3(a)(80) of the Securities Exchange 
Act of 1934, an issuer shall not be an emerging growth company for 
purposes of such Acts if the first sale of common equity securities of 
such issuer pursuant to an effective registration statement under the 
Securities Act of 1933 occurred on or before December 8, 2011.

SEC. 3. DISCLOSURE OBLIGATIONS.

  (a) Executive Compensation.--
          (1) Exemption.--Section 14A(e) of the Securities Exchange Act 
        of 1934 (15 U.S.C. 78n-1(e)) is amended--
                  (A) by striking ``The Commission may'' and inserting 
                the following:
          ``(1) In general.-- The Commission may'';
                  (B) by striking ``an issuer'' and inserting ``any 
                other issuer''; and
                  (C) by adding at the end the following:
          ``(2) Treatment of emerging growth companies.--
                  ``(A) In general.--An emerging growth company shall 
                be exempt from the requirements of subsections (a) and 
                (b).
                  ``(B) Compliance after termination of emerging growth 
                company treatment.--An issuer that was an emerging 
                growth company but is no longer an emerging growth 
                company shall include the first separate resolution 
                described under subsection (a)(1) not later than the 
                end of--
                          ``(i) in the case of an issuer that was an 
                        emerging growth company for less than 2 years 
                        after the date of first sale of common equity 
                        securities of the issuer pursuant to an 
                        effective registration statement under the 
                        Securities Act of 1933, the 3-year period 
                        beginning on such date; and
                          ``(ii) in the case of any other issuer, the 
                        1-year period beginning on the date the issuer 
                        is no longer an emerging growth company.''.
          (2) Proxies.--Section 14(i) of the Securities Exchange Act of 
        1934 (15 U.S.C. 78n(i)) is amended by inserting ``, for any 
        issuer other than an emerging growth company,'' after 
        ``including''.
          (3) Compensation disclosures.--Section 953(b)(1) of the 
        Investor Protection and Securities Reform Act of 2010 (Public 
        Law 111-203; 124 Stat. 1904) is amended by inserting ``, other 
        than an emerging growth company, as that term is defined in 
        section 3(a) of the Securities Exchange Act of 1934,'' after 
        ``require each issuer''.
  (b) Financial Disclosures and Accounting Pronouncements.--
          (1) Securities act of 1933.--Section 7(a) of the Securities 
        Act of 1933 (15 U.S.C. 77g(a)) is amended--
                  (A) by striking ``(a) The registration'' and 
                inserting the following:
  ``(a) Information Required in Registration Statement.--
          ``(1) In general.--The registration''; and
                  (B) by adding at the end the following:
          ``(2) Treatment of emerging growth companies.--An emerging 
        growth company--
                  ``(A) need not present more than 2 years of audited 
                financial statements in order for the registration 
                statement of such emerging growth company with respect 
                to an initial public offering of its common equity 
                securities to be effective, and in any other 
                registration statement to be filed with the Commission, 
                an emerging growth company need not present selected 
                financial data in accordance with section 229.301 of 
                title 17, Code of Federal Regulations, for any period 
                prior to the earliest audited period presented in 
                connection with its initial public offering; and
                  ``(B) may not be required to comply with any new or 
                revised financial accounting standard until such date 
                that a company that is not an issuer (as defined under 
                section 2(a) of the Sarbanes-Oxley Act of 2002 (15 
                U.S.C. 7201(a)) is required to comply with such new or 
                revised accounting standard, if such standard applies 
                to companies that are not issuers.''.
          (2) Securities exchange act of 1934.--Section 13(a) of the 
        Securities Exchange Act of 1934 (15 U.S.C. 78m(a)) is amended 
        by adding at the end the following: ``In any registration 
        statement, periodic report, or other reports to be filed with 
        the Commission, an emerging growth company need not present 
        selected financial data in accordance with section 229.301 of 
        title 17, Code of Federal Regulations, for any period prior to 
        the earliest audited period presented in connection with its 
        first registration statement that became effective under this 
        Act or the Securities Act of 1933 and, with respect to any such 
        statement or reports, an emerging growth company may not be 
        required to comply with any new or revised financial accounting 
        standard until such date that a company that is not an issuer 
        (as defined under section 2(a) of the Sarbanes-Oxley Act of 
        2002 (15 U.S.C. 7201(a))) is required to comply with such new 
        or revised accounting standard, if such standard applies to 
        companies that are not issuers.''.
  (c) Other Disclosures.--An emerging growth company may comply with 
section 229.303(a) of title 17, Code of Federal Regulations, or any 
successor thereto, by providing information required by such section 
with respect to the financial statements of the emerging growth company 
for each period presented pursuant to section 7(a) of the Securities 
Act of 1933 (15 U.S.C. 77g(a)). An emerging growth company may comply 
with section 229.402 of title 17, Code of Federal Regulations, or any 
successor thereto, by disclosing the same information as any issuer 
with a market value of outstanding voting and nonvoting common equity 
held by non-affiliates of less than $75,000,000.

SEC. 4. INTERNAL CONTROLS AUDIT.

  Section 404(b) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7262(b)) 
is amended by inserting ``, other than an issuer that is an emerging 
growth company (as defined in section 3 of the Securities Exchange Act 
of 1934),'' before ``shall attest to''.

SEC. 5. AUDITING STANDARDS.

  Section 103(a)(3) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 
7213(a)(3)) is amended by adding at the end the following:
                  ``(C) Transition period for emerging growth 
                companies.--Any rules of the Board requiring mandatory 
                audit firm rotation or a supplement to the auditor's 
                report in which the auditor would be required to 
                provide additional information about the audit and the 
                financial statements of the issuer (auditor discussion 
                and analysis) shall not apply to an audit of an 
                emerging growth company, as defined in section 3 of the 
                Securities Exchange Act of 1934. Any additional rules 
                adopted by the Board after the date of enactment of 
                this subparagraph shall not apply to an audit of any 
                emerging growth company, unless the Commission 
                determines that the application of such additional 
                requirements is necessary or appropriate in the public 
                interest, after considering the protection of investors 
                and whether the action will promote efficiency, 
                competition, and capital formation.''.

SEC. 6. AVAILABILITY OF INFORMATION ABOUT EMERGING GROWTH COMPANIES.

  (a) Provision of Research.--Section 2(a)(3) of the Securities Act of 
1933 (15 U.S.C. 77b(a)(3)) is amended by adding at the end the 
following: ``The publication or distribution by a broker or dealer of a 
research report about an emerging growth company that is the subject of 
a proposed public offering of the common equity securities of such 
emerging growth company pursuant to a registration statement that the 
issuer proposes to file, or has filed, or that is effective shall be 
deemed for purposes of paragraph (10) of this subsection and section 
5(c) not to constitute an offer for sale or offer to sell a security, 
even if the broker or dealer is participating or will participate in 
the registered offering of the securities of the issuer. As used in 
this paragraph, the term ``research report'' means a written, 
electronic, or oral communication that includes information, opinions, 
or recommendations with respect to securities of an issuer or an 
analysis of a security or an issuer, whether or not it provides 
information reasonably sufficient upon which to base an investment 
decision.''.
  (b) Securities Analyst Communications.--Section 15D of the Securities 
Exchange Act of 1934 (15 U.S.C. 78o-6) is amended--
          (1) by redesignating subsection (c) as subsection (d); and
          (2) by inserting after subsection (b) the following:
  ``(c) Limitation.--Notwithstanding subsection (a) or any other 
provision of law, neither the Commission nor any national securities 
association registered under section 15A may adopt or maintain any rule 
or regulation in connection with an initial public offering of the 
common equity of an emerging growth company--
          ``(1) restricting, based on functional role, which associated 
        persons of a broker, dealer, or member of a national securities 
        association, may arrange for communications between a 
        securities analyst and a potential investor; or
          ``(2) restricting a securities analyst from participating in 
        any communications with the management of an emerging growth 
        company that is also attended by any other associated person of 
        a broker, dealer, or member of a national securities 
        association whose functional role is other than as a securities 
        analyst.''.
  (c) Expanding Permissible Communications.--Section 5 of the 
Securities Act of 1933 (15 U.S.C. 77e) is amended--
          (1) by redesignating subsection (d) as subsection (e); and
          (2) by inserting after subsection (c) the following:
  ``(d) Limitation.--Notwithstanding any other provision of this 
section, an emerging growth company or any person authorized to act on 
behalf of an emerging growth company may engage in oral or written 
communications with potential investors that are qualified 
institutional buyers or institutions that are accredited investors, as 
such terms are respectively defined in section 230.144A and section 
230.501(a) of title 17, Code of Federal Regulations, or any successor 
thereto, to determine whether such investors might have an interest in 
a contemplated securities offering, either prior to or following the 
date of filing of a registration statement with respect to such 
securities with the Commission, subject to the requirement of 
subsection (b)(2).''.
  (d) Post Offering Communications.--Neither the Commission nor any 
national securities association registered under section 15A of the 
Securities Exchange Act of 1934 may adopt or maintain any rule or 
regulation prohibiting any broker, dealer, or member of a national 
securities association from publishing or distributing any research 
report or making a public appearance, with respect to the securities of 
an emerging growth company, either--
          (1) within any prescribed period of time following the 
        initial public offering date of the emerging growth company; or
          (2) within any prescribed period of time prior to the 
        expiration date of any agreement between the broker, dealer, or 
        member of a national securities association and the emerging 
        growth company or its shareholders that restricts or prohibits 
        the sale of securities held by the emerging growth company or 
        its shareholders after the initial public offering date.

SEC. 7. OTHER MATTERS.

  (a) Draft Registration Statements.--Section 6 of the Securities Act 
of 1933 (15 U.S.C. 77f) is amended by adding at the end the following:
  ``(e) Emerging Growth Companies.--
          ``(1) In general.--Any emerging growth company, prior to its 
        initial public offering date, may confidentially submit to the 
        Commission a draft registration statement, for confidential 
        nonpublic review by the staff of the Commission prior to public 
        filing, provided that the initial confidential submission and 
        all amendments thereto shall be publicly filed with the 
        Commission not later than 21 days before the date on which the 
        issuer conducts a road show, as such term is defined in section 
        230.433(h)(4) of title 17, Code of Federal Regulations, or any 
        successor thereto.
          ``(2) Confidentiality.--Notwithstanding any other provision 
        of this title, the Commission shall not be compelled to 
        disclose any information provided to or obtained by the 
        Commission pursuant to this subsection. For purposes of section 
        552 of title 5, United States Code, this subsection shall be 
        considered a statute described in subsection (b)(3)(B) of such 
        section 552. Information described in or obtained pursuant to 
        this subsection shall be deemed to constitute confidential 
        information for purposes of section 24(b)(2) of the Securities 
        Exchange Act of 1934.''.
  (b) Tick Size.--Section 11A(c) of the Securities Exchange Act of 1934 
(15 U.S.C. 78k-1(c)) is amended by adding at the end the following new 
paragraph:
          ``(6) Tick size.--
                  ``(A) Study and report.--The Commission shall conduct 
                a study examining the transition to trading and quoting 
                securities in one penny increments, also known as 
                decimalization. The study shall examine the impact that 
                decimalization has had on the number of initial public 
                offerings since its implementation relative to the 
                period before its implementation. The study shall also 
                examine the impact that this change has had on 
                liquidity for small and middle capitalization company 
                securities and whether there is sufficient economic 
                incentive to support trading operations in these 
                securities in penny increments. Not later than 90 days 
                after the date of enactment of this paragraph, the 
                Commission shall submit to Congress a report on the 
                findings of the study.
                  ``(B) Designation.--If the Commission determines that 
                the securities of emerging growth companies should be 
                quoted and traded using a minimum increment of greater 
                than $0.01, the Commission may, by rule not later than 
                180 days after the date of enactment of this paragraph, 
                designate a minimum increment for the securities of 
                emerging growth companies that is greater than $0.01 
                but less than $0.10 for use in all quoting and trading 
                of securities in any exchange or other execution 
                venue.''.

SEC. 8. OPT-IN RIGHT FOR EMERGING GROWTH COMPANIES.

  (a) In General.--With respect to an exemption provided to emerging 
growth companies under this Act, or an amendment made by this Act, an 
emerging growth company may choose to forgo such exemption and instead 
comply with the requirements that apply to an issuer that is not an 
emerging growth company.
  (b) Special Rule.--Notwithstanding subsection (a), with respect to 
the extension of time to comply with new or revised financial 
accounting standards provided under section 7(a)(2)(B) of the 
Securities Act of 1933 and section 13(a) of the Securities Exchange Act 
of 1934, as added by section 3(b), if an emerging growth company 
chooses to comply with such standards to the same extent that a non-
emerging growth company is required to comply with such standards, the 
emerging growth company--
          (1) must make such choice at the time the company is first 
        required to file a registration statement, periodic report, or 
        other report with the Commission under section 13 of the 
        Securities Exchange Act of 1934 and notify the Securities and 
        Exchange Commission of such choice;
          (2) may not select some standards to comply with in such 
        manner and not others, but must comply with all such standards 
        to the same extent that a non-emerging growth company is 
        required to comply with such standards; and
          (3) must continue to comply with such standards to the same 
        extent that a non-emerging growth company is required to comply 
        with such standards for as long as the company remains an 
        emerging growth company.

SEC. 9. REVIEW OF REGULATION S-K.

  (a) Review.--The Securities and Exchange Commission shall conduct a 
review of its Regulation S-K (17 C.F.R. 229.10 et seq.) to--
          (1) comprehensively analyze the current registration 
        requirements of such regulation; and
          (2) determine how such requirements can be updated to 
        modernize and simplify the registration process and reduce the 
        costs and other burdens associated with these requirements for 
        issuers who are emerging growth companies.
  (b) Report.--Not later than 180 days after the date of enactment of 
this Act, the Commission shall transmit to Congress a report of the 
review conducted under subsection (a). The report shall include the 
specific recommendations of the Commission on how to streamline the 
registration process in order to make it more efficient and less 
burdensome for the Commission and for prospective issuers who are 
emerging growth companies.

                          Purpose and Summary

    H.R. 3606, the ``Reopening American Capital Markets to 
Emerging Growth Companies Act of 2012,'' amends the Securities 
Act of 1933 to establish a new category of issuers known as 
``Emerging Growth Companies'' (EGCs), which are issuers that 
have total annual gross revenues of less than $1 billion. H.R. 
3606 exempts EGCs from certain regulatory requirements until 
the earliest of three dates: (1) five years from the date of 
the EGC's initial public offering; (2) the date an EGC has $1 
billion in annual gross revenue; or (3) the date an EGC becomes 
a ``large accelerated filer,'' which is defined by the 
Securities and Exchange Commission (SEC) as a company that has 
a worldwide public float of $700 million or more. H.R. 3606 
thus provides temporary regulatory relief to small companies, 
which encourages them to go public, yet ensures their eventual 
compliance with regulatory requirements as they grow larger.
    H.R. 3606 adapts the SEC's scaled regulations for smaller 
companies by more slowly phasing in regulations that impose 
high costs on issuers, without compromising core investor 
protections or disclosures. EGCs would still be required to 
comply with SEC-mandated quarterly and annual disclosures, but 
they would be exempted from Section 404(b) of the Sarbanes-
Oxley Act (P.L. 107-204) of 2002 for a longer transition 
period--up to five years--instead of the current transition 
period of two years. To ensure that investors are adequately 
protected, an EGC's management would still be required to 
establish and maintain internal controls over financial 
reporting, as mandated by Section 404(a) of the Sarbanes-Oxley 
Act, and its chief executive officer and chief financial 
officer would still have to certify the company's financial 
statements.
    H.R. 3606 requires EGCs to provide audited financial 
statements for the two years prior to registration, rather than 
three years as is now required. This two-year period already 
applies to companies with a public float under $75 million, 
which are known as ``non-accelerated filers.'' Within a year of 
its initial public offering (IPO), the EGC would report three 
years' worth of financial statements, as larger companies are 
required to do.
    H.R. 3606 exempts EGCs from any rules promulgated by the 
Public Company Accounting Oversight Board (PCAOB) that would 
require mandatory audit firm rotation, thereby allowing them to 
avoid the unnecessary costs of changing from an auditor 
familiar with the company to one that is not. H.R. 3606 gives 
EGCs the opportunity to ``opt in'' to certain regulations by 
complying with them before they lose their EGC status. However, 
if the Financial Accounting Standards Board adopts new 
accounting standards while a company is an EGC, the EGC must 
comply with either all or none of the new standards while it 
remains an EGC.
    H.R. 3606 exempts EGCs from two new corporate governance 
requirements that were established by the Dodd-Frank Wall 
Street Reform and Consumer Protection Act (P.L. 111-203). 
First, the bill exempts EGCs from Section 951's requirement 
that public companies hold a non-binding stockholder vote on 
executive compensation arrangements. Second, the bill exempts 
EGCs from Section 953(b)'s requirement that public companies 
calculate and disclose the median compensation of all employees 
compared to the CEO. EGCs would still comply with all stock 
exchange corporate governance and listing requirements, 
including board member independence rules.
    H.R. 3606 also improves the flow of information about EGCs 
to investors by removing burdensome and outdated restrictions 
on communications between companies, research analysts, and 
investors. Existing SEC rules prohibit investment banks that 
underwrite a company's IPO from publishing research on 
companies that would be classified as EGCs under the bill. The 
bill allows investors to obtain research reports about an EGC 
before or at the same time as its IPO. The bill, however, 
maintains other investor protections, such as those set forth 
in Section 501 of the Sarbanes-Oxley Act, which address 
potential conflicts of interest that can arise when analysts 
recommend equity securities.
    H.R. 3606 also permits EGCs to gauge the interest in 
potential IPOs by permitting greater pre-filing communications 
to institutional and qualified investors to determine whether 
an IPO is likely to be successful. All of the antifraud 
provisions of the securities laws still apply, however, and the 
delivery of a statutory prospectus before securities are sold 
in an IPO would still be required.
    Finally, H.R. 3606 permits EGCs to pre-file confidential 
registration statements, thereby allowing them to begin the SEC 
review process without publicly revealing sensitive commercial 
and financial information to their competitors. Currently, only 
foreign companies are permitted to file confidential 
registration statements with the SEC. The bill requires an EGC 
to publicly file its initial confidential submission at least 
21 days before it begins a pre-IPO ``road show'' for potential 
investors.

                  Background and Need for Legislation

    Over the last decade, the number of companies entering the 
U.S. capital markets through IPOs has sharply declined, 
irrespective of economic conditions during the same period. In 
October 2011, the IPO Task Force issued a report which found 
that 791 companies went public in 1996, and that the U.S. 
averaged 530 IPOs per year from 1991 to 2000. By contrast, the 
U.S. averaged fewer than 157 IPOs per year from 2001 to 2008. 
In 2009, the U.S. had only 61 IPOs; in 2010, it had 153 IPOs. 
The IPO Task Force found that the number of IPOs in the last 
two years remains well below historic levels and is far below 
the number needed to replace the number of listed companies 
lost to mergers, acquisitions, de-listings, and bankruptcy 
during that period.
    The falling number of IPOs has contributed to the decline 
of the U.S. as a global financial market. U.S. capital markets 
raised only 15% of global IPO proceeds in 2010, down from an 
average 28% over the preceding ten years. Nearly 10% of the 
U.S. companies that went public in 2010 did so outside the 
U.S., turning to capital markets in the United Kingdom, Taiwan, 
South Korea, and Canada. Since 2010, capital markets in China, 
Hong Kong, and Singapore have seen more than 700 companies 
pursue IPOs, compared to fewer than 300 in the U.S. during the 
same period.
    The President's Council on Jobs and Competiveness found 
that if the U.S. had maintained its 2007 level of start-up 
activity, nearly two million more Americans would be working 
today. Research indicates that 90% of the jobs that companies 
create are created after their IPO. Since 2009, the number of 
new businesses launched in the U.S. has fallen by 23%, and 
there were fewer venture-backed IPOs in 2008 and 2009 than in 
any year since 1985.
    As the number of U.S. IPOs fell precipitously, fewer small 
companies have gone public. Small companies are critical to 
economic growth in the United States. In order to grow and 
create jobs, small companies must have access to capital. 
Unfortunately, the IPO Task Force found that fewer and fewer 
small companies have gone public: the share of IPOs smaller 
than $50 million fell from 80% in the 1990s to 20% in the 
2000s. To encourage small companies to go public in the U.S., 
to spur economic growth, and to create jobs, Representatives 
Fincher and Carney introduced H.R. 3606 on December 8, 2011.

                                Hearing

    On December 15, 2011, the Subcommittee on Capital Markets 
and Government Sponsored Enterprises held a hearing on 
``Legislative Proposals to Bring Certainty to the Over-the-
Counter Derivatives Market.'' At that hearing, the Subcommittee 
considered H.R. 3606, the ``Reopening American Capital Markets 
to Emerging Growth Companies Act of 2011.'' The following 
witnesses testified:
           Mr. Joseph Brantuck, Head, U.S. New Listings 
        and IPOs & Vice President, NASDAQ OMX
           Mr. Steven R. LeBlanc, Senior Managing 
        Director of Private Markets, Teacher Retirement System 
        of Texas
           Ms. Kate Mitchell, Chair, Initial Public 
        Offering (IPO) Task Force, Former President of the 
        National Venture Capital Association (NVCA); and 
        Managing Director & Co-Founder, Scale Venture Partners
           Mr. Mike Selfridge, Head of Regional 
        Banking, Silicon Valley Bank
    The Subcommittee received testimony from participants in 
the financial markets, all of whom spoke favorably on H.R. 
3606. Ms. Kate Mitchell, Managing Director & Co-Founder, Scale 
Venture Partners, and Chair of the IPO Task Force, testified 
that H.R. 3606 would ``help restore effective access to the 
public markets for EGCs without compromising investor 
protection,'' which would ``spur U.S. job creation and economic 
growth at a time when we desperately need both.'' Mike 
Selfridge, Head of Regional Banking, Silicon Valley Bank, 
testified that ``[b]y providing an `on-ramp' to public markets, 
H.R. 3606 will meaningfully improve growing companies' ability 
to obtain the capital necessary to fund continued growth.'' 
Joseph Brantuk, Head of U.S. Listings and IPOs & Vice 
President, NASDAQ OMX, testified that H.R. 3606 ``would begin 
the process of reducing the barriers to strong and effective 
capital markets for companies across the United States.'' 
Finally, Steven LeBlanc, Senior Managing Director of Private 
Markets, Teachers Retirement System of Texas, testified that 
``H.R. 3606's scaling of regulations for newly public companies 
presents a workable approach to facilitating small and emerging 
growth companies' access to capital.''

                        Committee Consideration

    The Committee on Financial Services met in open session on 
February 16, 2012, and ordered H.R. 3606, as amended, favorably 
reported to the House by a record vote of 54 yeas and 1 nay 
(Record vote no. FC-57).

                            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. On 
February 16, 2012, the Committee on Financial Services met in 
open session and ordered H.R. 3606, as amended, favorably 
reported to the House by a record vote of 54 yeas and 1 nay 
(Record vote no. FC-57). The names of Members voting for and 
against follow:

                                              RECORD VOTE NO. FC-57
----------------------------------------------------------------------------------------------------------------
         Representative             Aye       Nay     Present     Representative      Aye       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Bachus.....................        X   ........  .........  Mr. Frank (MA)...        X   ........  .........
Mr. Hensarling.................        X   ........  .........  Ms. Waters.......        X   ........  .........
Mr. King (NY)..................  ........  ........  .........  Mrs. Maloney.....  ........  ........  .........
Mr. Royce......................        X   ........  .........  Mr. Gutierrez....        X   ........  .........
Mr. Lucas......................        X   ........  .........  Ms. Velazquez....        X   ........  .........
Mr. Paul.......................  ........  ........  .........  Mr. Watt.........        X   ........  .........
Mr. Manzullo...................        X   ........  .........  Mr. Ackerman.....        X   ........  .........
Mr. Jones......................        X   ........  .........  Mr. Sherman......        X   ........  .........
Mrs. Biggert...................        X   ........  .........  Mr. Meeks........        X   ........  .........
Mr. Gary G. Miller (CA)........  ........  ........  .........  Mr. Capuano......  ........        X   .........
Mrs. Capito....................        X   ........  .........  Mr. Hinojosa.....        X   ........  .........
Mr. Garrett....................        X   ........  .........  Mr. Clay.........        X   ........  .........
Mr. Neugebauer.................        X   ........  .........  Mrs. McCarthy            X   ........  .........
                                                                 (NY).
Mr. McHenry....................        X   ........  .........  Mr. Baca.........        X   ........  .........
Mr. Campbell...................  ........  ........  .........  Mr. Lynch........        X   ........  .........
Mrs. Bachmann..................        X   ........  .........  Mr. Miller (NC)..        X   ........  .........
Mr. McCotter...................        X   ........  .........  Mr. David Scott          X   ........  .........
                                                                 (GA).
Mr. McCarthy (CA)..............        X   ........  .........  Mr. Al Green (TX)        X   ........  .........
Mr. Pearce.....................        X   ........  .........  Mr. Cleaver......  ........  ........  .........
Mr. Posey......................        X   ........  .........  Ms. Moore........        X   ........  .........
Mr. Fitzpatrick................        X   ........  .........  Mr. Ellison......        X   ........  .........
Mr. Westmoreland...............        X   ........  .........  Mr. Perlmutter...        X   ........  .........
Mr. Luetkemeyer................        X   ........  .........  Mr. Donnelly.....        X   ........  .........
Mr. Huizenga...................        X   ........  .........  Mr. Carson.......        X   ........  .........
Mr. Duffy......................        X   ........  .........  Mr. Himes........        X   ........  .........
Ms. Hayworth...................        X   ........  .........  Mr. Peters.......        X   ........  .........
Mr. Renacci....................        X   ........  .........  Mr. Carney.......        X   ........  .........
Mr. Hurt.......................        X   ........  .........
Mr. Dold.......................        X   ........  .........
Mr. Schweikert.................        X   ........  .........
Mr. Grimm......................        X   ........  .........
Mr. Canseco....................        X   ........  .........
Mr. Stivers....................        X   ........  .........
Mr. Fincher....................        X   ........  .........
----------------------------------------------------------------------------------------------------------------

    During consideration of H.R. 3606 by the Committee, the 
following amendments were considered:
    1. An amendment offered by Mr. Himes, no. 7, to reduce the 
total annual gross revenue test to qualify as an EGC from $1 
billion to $750 million and eliminate the large accelerated 
filer test, was not agreed to by a record vote of 23 yeas and 
31 nays (Record vote no. FC-55).

                                              RECORD VOTE NO. FC-55
----------------------------------------------------------------------------------------------------------------
         Representative             Aye       Nay     Present     Representative      Aye       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Bachus.....................  ........        X   .........  Mr. Frank (MA)...        X   ........  .........
Mr. Hensarling.................  ........        X   .........  Ms. Waters.......        X   ........  .........
Mr. King (NY)..................  ........  ........  .........  Mrs. Maloney.....  ........  ........  .........
Mr. Royce......................  ........        X   .........  Mr. Gutierrez....        X   ........  .........
Mr. Lucas......................  ........        X   .........  Ms. Velazquez....        X   ........  .........
Mr. Paul.......................  ........  ........  .........  Mr. Watt.........        X   ........  .........
Mr. Manzullo...................  ........        X   .........  Mr. Ackerman.....        X   ........  .........
Mr. Jones......................  ........        X   .........  Mr. Sherman......        X   ........  .........
Mrs. Biggert...................  ........        X   .........  Mr. Meeks........        X   ........  .........
Mr. Gary G. Miller (CA)........  ........        X   .........  Mr. Capuano......        X   ........  .........
Mrs. Capito....................  ........        X   .........  Mr. Hinojosa.....        X   ........  .........
Mr. Garrett....................  ........        X   .........  Mr. Clay.........        X   ........  .........
Mr. Neugebauer.................  ........        X   .........  Mrs. McCarthy            X   ........  .........
                                                                 (NY).
Mr. McHenry....................  ........        X   .........  Mr. Baca.........        X   ........  .........
Mr. Campbell...................  ........  ........  .........  Mr. Lynch........        X   ........  .........
Mrs. Bachmann..................  ........        X   .........  Mr. Miller (NC)..        X   ........  .........
Mr. McCotter...................  ........        X   .........  Mr. David Scott          X   ........  .........
                                                                 (GA).
Mr. McCarthy (CA)..............  ........        X   .........  Mr. Al Green (TX)        X   ........  .........
Mr. Pearce.....................  ........        X   .........  Mr. Cleaver......  ........  ........  .........
Mr. Posey......................  ........        X   .........  Ms. Moore........        X   ........  .........
Mr. Fitzpatrick................  ........        X   .........  Mr. Ellison......        X   ........  .........
Mr. Westmoreland...............  ........        X   .........  Mr. Perlmutter...        X   ........  .........
Mr. Luetkemeyer................  ........        X   .........  Mr. Donnelly.....        X   ........  .........
Mr. Huizenga...................  ........        X   .........  Mr. Carson.......        X   ........  .........
Mr. Duffy......................  ........  ........  .........  Mr. Himes........        X   ........  .........
Ms. Hayworth...................  ........        X   .........  Mr. Peters.......  ........  ........  .........
Mr. Renacci....................  ........        X   .........  Mr. Carney.......  ........        X   .........
Mr. Hurt.......................  ........        X   .........
Mr. Dold.......................  ........        X   .........
Mr. Schweikert.................  ........        X   .........
Mr. Grimm......................  ........        X   .........
Mr. Canseco....................  ........        X   .........
Mr. Stivers....................  ........        X   .........
Mr. Fincher....................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    2. An amendment offered by Mr. Ellison, no. 9, to strike 
the EGC exemption from the ``say-on-pay'' shareholder vote 
requirement, was not agreed to by a record vote of 24 yeas and 
31 nays (Record vote no. FC-56).

                                              RECORD VOTE NO. FC-56
----------------------------------------------------------------------------------------------------------------
         Representative             Aye       Nay     Present     Representative      Aye       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Bachus.....................  ........        X   .........  Mr. Frank (MA)...        X   ........  .........
Mr. Hensarling.................  ........        X   .........  Ms. Waters.......        X   ........  .........
Mr. King (NY)..................  ........  ........  .........  Mrs. Maloney.....  ........  ........  .........
Mr. Royce......................  ........        X   .........  Mr. Gutierrez....        X   ........  .........
Mr. Lucas......................  ........        X   .........  Ms. Velazquez....        X   ........  .........
Mr. Paul.......................  ........  ........  .........  Mr. Watt.........        X   ........  .........
Mr. Manzullo...................  ........        X   .........  Mr. Ackerman.....        X   ........  .........
Mr. Jones......................        X   ........  .........  Mr. Sherman......        X   ........  .........
Mrs. Biggert...................  ........        X   .........  Mr. Meeks........        X   ........  .........
Mr. Gary G. Miller (CA)........  ........  ........  .........  Mr. Capuano......        X   ........  .........
Mrs. Capito....................  ........        X   .........  Mr. Hinojosa.....        X   ........  .........
Mr. Garrett....................  ........        X   .........  Mr. Clay.........        X   ........  .........
Mr. Neugebauer.................  ........        X   .........  Mrs. McCarthy            X   ........  .........
                                                                 (NY).
Mr. McHenry....................  ........        X   .........  Mr. Baca.........        X   ........  .........
Mr. Campbell...................  ........  ........  .........  Mr. Lynch........        X   ........  .........
Mrs. Bachmann..................  ........        X   .........  Mr. Miller (NC)..        X   ........  .........
Mr. McCotter...................  ........        X   .........  Mr. David Scott          X   ........  .........
                                                                 (GA).
Mr. McCarthy (CA)..............  ........        X   .........  Mr. Al Green (TX)        X   ........  .........
Mr. Pearce.....................  ........        X   .........  Mr. Cleaver......  ........  ........  .........
Mr. Posey......................  ........        X   .........  Ms. Moore........        X   ........  .........
Mr. Fitzpatrick................  ........        X   .........  Mr. Ellison......        X   ........  .........
Mr. Westmoreland...............  ........        X   .........  Mr. Perlmutter...        X   ........  .........
Mr. Luetkemeyer................  ........        X   .........  Mr. Donnelly.....        X   ........  .........
Mr. Huizenga...................  ........        X   .........  Mr. Carson.......        X   ........  .........
Mr. Duffy......................  ........        X   .........  Mr. Himes........  ........        X   .........
Ms. Hayworth...................  ........        X   .........  Mr. Peters.......        X   ........  .........
Mr. Renacci....................  ........        X   .........  Mr. Carney.......  ........        X   .........
Mr. Hurt.......................  ........        X   .........
Mr. Dold.......................  ........        X   .........
Mr. Schweikert.................  ........        X   .........
Mr. Grimm......................  ........        X   .........
Mr. Canseco....................  ........        X   .........
Mr. Stivers....................  ........        X   .........
Mr. Fincher....................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    The following amendments and motion were also considered by 
the Committee:
    1. An amendment offered by Messrs. Fincher and Carney, no. 
1, to make technical corrections to the bill; to add an 
effective date to the bill; to strike Section 3(c) of the bill 
and replace it with language amending Section 7(a) of the 
Securities Act of 1933 and Section 13(a) of the Securities 
Exchange Act of 1934 to clarify that EGCs can take advantage of 
the timing provided by the Financial Accounting Standards Board 
to private companies for new accounting standards, if such new 
standards apply to private companies; to incorporate technical 
comments from the SEC on financial reporting in Section 3 and 
auditing standards in Section 5; and to add a new Section 8 to 
the bill that clarifies that EGCs can ``opt-in'' to regulations 
that they are exempted from by the bill, other than for 
accounting standards, where they must either choose to use the 
EGC treatment for accounting standards, or not at all, was 
agreed to by voice vote.
    2. An amendment offered by Mr. Schweikert, no. 2, to 
require the SEC to study the transitional impact to fraction 
trading from penny trading, and provide the SEC authority to 
increase the trading increment for the class of securities 
created by the bill, was agreed to by voice vote.
    3. An amendment offered by Mr. Renacci, no. 3, to allow an 
EGC to determine a period of time, following its initial public 
offering, when its stock can only be traded on the exchange 
where it chooses to list; to allow EGCs to designate a period 
of time during which trading on non-exchange venues would be 
limited; and to require that quotation and transaction 
information for EGCs must be made available by an entity that 
operates a national market system, was withdrawn.
    4. An amendment offered by Mr. McHenry, no. 4, to promote 
development of ``market quality incentive programs'' on 
registered national securities exchanges, was withdrawn.
    5. An amendment offered by Ms. Waters, no. 5, to require 
that the distribution of a research report by a broker or 
dealer or any oral or written communications to institutional 
or accredited investors be filed with the SEC and be deemed a 
prospectus, was not agreed to by voice vote.
    6. An amendment offered by Mr. Royce, no. 6, to increase 
the exemption from compliance with Section 404(b) of the 
Sarbanes-Oxley Act of 2002 from $75 million in public float to 
$1 billion, was withdrawn.
    7. An amendment offered by Mr. Himes, no. 8, to require the 
SEC, in consultation with the national securities exchanges, to 
establish a uniform system to easily identify EGCs for 
investors, was not agreed to by voice vote.
    8. An amendment offered by Mr. Ellison, no. 10, to clarify 
that issuers who no longer qualify for EGC status before the 
five year exemption ends, must comply with ``say-on-pay'' 
shareholder votes in the following fiscal year, was withdrawn.
    9. An amendment offered by Mr. Ellison, no. 11, to strike 
the Dodd-Frank Act Section 953(b) pay ratio disclosure 
exemption for EGCs, was not agreed to by voice vote.
    10. An amendment offered by Mr. Garrett, no. 12, to require 
the SEC to study the impact of regulation S-K and report to 
Congress within 180 days of enactment, was agreed to by voice 
vote.
    11. An amendment offered by Mr. Ellison, no. 13, to clarify 
that issuers who no longer qualify for EGC status before the 
five year exemption ends, must comply with ``say-on-pay'' 
shareholder votes in the following fiscal year, was agreed to 
by voice vote.
    12. A motion offered by Mr. Garrett to move the previous 
question on H.R. 3606 was agreed to by voice vote.

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee has held hearings and 
made findings that are reflected in 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 establishes the 
following performance related goals and objectives for this 
legislation:
    The objective of H.R. 3606 is to make it easier for small 
companies to raise capital in U.S. financial markets, thereby 
facilitating their growth and creating jobs. Because small 
companies are critical to the economic growth of the United 
States, H.R. 3606 establishes a new category of issuers, EGCs, 
and exempts them from certain regulatory requirements in order 
to encourage them to go public in the United States.

   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 finds that this 
legislation would result in no new budget authority, 
entitlement authority, or tax expenditures or revenues.

                        Committee Cost Estimate

    A cost estimate prepared by the Director of the 
Congressional Budget Office pursuant to section 402 of the 
Congressional Budget Act of 1974 was not made available in time 
for the filing of this report. The Chairman of the Committee 
shall cause such estimate to be printed in the Congressional 
Record upon its receipt by the Committee.

                  Congressional Budget Office Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, a cost estimate provided by the 
Congressional Budget Office pursuant to section 402 of the 
Congressional Budget Act of 1974 was not made available to the 
Committee in time for the filing of this report. The Chairman 
of the Committee shall cause such estimate to be printed in the 
Congressional Record upon its receipt by the Committee.

                       Federal Mandates Statement

    An estimate of Federal mandates prepared by the Director of 
the Congressional Budget Office pursuant to section 423 of the 
Unfunded Mandates Reform Act was not made available to the 
Committee in time for the filing of this report. The Chairman 
of the Committee shall cause such estimate to be printed in the 
Congressional Record upon its receipt by the Committee.

                      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

    H.R. 3606 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

             Section-by-Section Analysis of the Legislation


Section 1. Short title

    This short title of this bill is the ``Reopening American 
Capital Markets to Emerging Growth Companies Act of 2012.''

Section 2. Definitions

    This section would amend the Securities Act of 1933 and the 
Securities Exchange Act of 1934 to establish a new category of 
issuers known as ``Emerging Growth Companies'' (EGCs) which are 
issuers that have total annual gross revenues of less than $1 
billion. An issuer that is an EGC as of the first day of a 
fiscal year shall continue to be deemed an EGC until: (1) the 
last day of the fiscal year during which the issuer had $1 
billion in annual gross revenues or more; (2) the last day of 
the fiscal year following the fifth anniversary of the issuer's 
initial public offering date; or (3) the date in which the 
issuer is deemed to be a ``large accelerated filer,'' defined 
by the U.S. Securities and Exchange Commission (SEC) as an 
issuer with more than $700 million in public float.
    This section also would define the ``initial public 
offering date'' as the date of the first sale of common equity 
securities of an issuer pursuant to an effective registration 
statement under the Securities Act of 1933. This section would 
establish the effective date for the bill as December 8, 2011, 
which is the date the bill was introduced.

Section 3. Disclosure obligations

    This section would exempt EGCs from Section 951 of the 
Dodd-Frank Wall Street Reform and Consumer Protection Act (P.L. 
111-203), which requires publicly-traded companies to hold a 
non-binding shareholder vote at least once every three years on 
executive compensation and a shareholder vote on executive 
severance payments known as ``golden parachutes.'' This section 
also would exempt EGCs from Section 953(b) of the Dodd-Frank 
Act, which requires publicly-traded companies to disclose in 
every SEC filing the ratio of the CEO's compensation to the 
median compensation of all other employees. This section also 
would require an issuer that loses its EGC status before its 
second anniversary as a public company to comply with the Dodd-
Frank Act's executive compensation disclosure requirements 
described above starting in its third year of being a public 
company. Further, this section would require an issuer that 
loses its EGC status after its second anniversary as a public 
company to comply with the Dodd-Frank Act's executive 
compensation disclosure requirements beginning in the fiscal 
year after losing its status.
    This section also would require that EGCs provide no more 
than two years of audited financial statements along with their 
SEC-filed registration statement. Additionally, this section 
would phase in the requirement to provide financial data to the 
SEC so that an EGC is not required to provide audited financial 
statements for periods prior to those provided with the 
registration statement.
    This section also would provide EGCs with the same extended 
compliance period for new or revised accounting standards 
issued by the Financial Accounting Standards Board that are 
currently available to private companies, if such new or 
revised standards apply to companies that are not issuers.
    This section would also require an EGC to present selected 
financial data in its periodic reports only for the earliest 
audited period presented in connection with its first 
registration statement. This section would also permit EGCs to 
follow the same executive compensation disclosure requirements 
followed by companies with less than $75 million in public 
float.

Section 4. Internal controls audit

    This section would allow EGCs to defer compliance with 
Section 404(b) of the Sarbanes-Oxley Act of 2002 until the 
company is no longer considered an EGC.

Section 5. Auditing standards

    This section would provide that any rules promulgated by 
the Public Company Accounting Oversight Board (PCAOB) that 
would require mandatory audit firm rotation or a supplement to 
the auditor's report shall not apply to an EGC. In addition, 
this section would provide that any auditing standards adopted 
by the PCAOB after enactment would not apply to EGCs unless the 
SEC finds that the application of such rules to EGCs is 
necessary or appropriate after it considers investor 
protection, efficiency, competition, and capital formation.

Section 6. Availability of information about EGCs

    This section would amend the Securities Act of 1933 to 
permit the publication or distribution by a broker or dealer of 
a research report about an EGC that is the subject of a 
proposed public offering, even if the broker or dealer is 
participating or will participate in the offering. This section 
also would amend the Securities Act of 1933 to expand the range 
of permissible pre-filing communications to sophisticated 
institutional investors to allow EGCs to determine whether 
qualified institutional or accredited investors might have an 
interest in a contemplated securities offering.
    This section would amend the Securities Exchange Act of 
1934 to permit members of the investment banking team for a 
broker or dealer participating in an offering to arrange for 
communications between securities analysts and potential 
investors in EGCs, and to permit research analysts to 
participate in communications with management of the issuer 
that are also attended by other members of the broker or 
dealer.
    This section would also permit the publication and 
distribution of research reports about EGCs during post-IPO 
quiet periods and lock-up periods established by the SEC or 
national securities associations under the Securities Exchange 
Act of 1934.

Section 7. Other matters

    This section would permit U.S. companies to submit draft 
registration statements to the SEC on a confidential basis, as 
is currently permitted for non-U.S. companies. Final 
registration materials, including all amendments resulting from 
the SEC review process, will still be required to be made 
publicly available to investors with adequate time for review 
prior to an EGC's initial public offering.
    This section also would require the SEC to study the 
effects of the transition from fraction trading to penny 
trading for securities, including the effect of the transition 
on initial public offerings and liquidity for small and mid-cap 
companies. The section would require the SEC to report to 
Congress about the impact of penny trading 90 days after 
enactment of the bill. The section also would authorize the SEC 
to increase the trading increment for EGCs to greater than $.01 
but less than $.10 within 180 days of enactment.

Section 8. Opt-in right for emerging growth companies

    This section would allow EGCs to forgo the regulatory 
exemptions afforded to EGCs and instead ``opt-in'' to certain 
regulatory requirements as they see fit. However, EGCs cannot 
selectively ``opt-in'' to comply with new or revised accounting 
standards. Instead, an EGC must declare in its SEC-filed 
registration statement whether it will or will not use the 
extension of time for all new or revised accounting standards 
applicable to EGCs.

Section 9. Review of regulation S-K.

    This section would require the SEC to review Regulation S-K 
and determine how the registration process can be simplified 
for EGCs. This section requires the SEC to report to Congress 
on streamlining the registration process for prospective EGCs 
within 180 days of enactment of the bill.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

                         SECURITIES ACT OF 1933


TITLE I--SHORT TITLE

           *       *       *       *       *       *       *



                              DEFINITIONS

  Sec. 2. (a) Definitions.--When used in this title, unless the 
context otherwise requires--
          (1) * * *

           *       *       *       *       *       *       *

          (3) The term ``sale'' or ``sell'' shall include every 
        contract of sale or disposition of a security or 
        interest in a security, for value. The term ``offer to 
        sell'', ``offer for sale'', or ``offer'' shall include 
        every attempt or offer to dispose of, or solicitation 
        of an offer to buy, a security or interest in a 
        security, for value. The terms defined in this 
        paragraph and the term ``offer to buy'' as used in 
        subsection (c) of section 5 shall not include 
        preliminary negotiations or agreements between an 
        issuer (or any person directly or indirectly 
        controlling or controlled by an issuer, or under direct 
        or indirect common control with an issuer) and any 
        underwriter or among underwriters who are or are to be 
        in privity of contract with an issuer (or any person 
        directly or indirectly controlling or controlled by an 
        issuer, or under direct or indirect common control with 
        an issuer). Any security given or delivered with, or as 
        a bonus on account of, any purchase of securities or 
        any other thing, shall be conclusively presumed to 
        constitute a part of the subject of such purchase and 
        to have been offered and sold for value. The issue or 
        transfer of a right or privilege, when originally 
        issued or transferred with a security, giving the 
        holder of such security the right to convert such 
        security into another security of the same issuer or of 
        another person, or giving a right to subscribe to 
        another security of the same issuer or of another 
        person, which right cannot be exercised until some 
        future date, shall not be deemed to be an offer or sale 
        of such other security; but the issue or transfer of 
        such other security upon the exercise of such right of 
        conversion or subscription shall be deemed a sale of 
        such other security. Any offer or sale of a security 
        futures product by or on behalf of the issuer of the 
        securities underlying the security futures product, an 
        affiliate of the issuer, or an underwriter, shall 
        constitute a contract for sale of, sale of, offer for 
        sale, or offer to sell the underlying securities. Any 
        offer or sale of a security-based swap by or on behalf 
        of the issuer of the securities upon which such 
        security-based swap is based or is referenced, an 
        affiliate of the issuer, or an underwriter, shall 
        constitute a contract for sale of, sale of, offer for 
        sale, or offer to sell such securities. The publication 
        or distribution by a broker or dealer of a research 
        report about an emerging growth company that is the 
        subject of a proposed public offering of the common 
        equity securities of such emerging growth company 
        pursuant to a registration statement that the issuer 
        proposes to file, or has filed, or that is effective 
        shall be deemed for purposes of paragraph (10) of this 
        subsection and section 5(c) not to constitute an offer 
        for sale or offer to sell a security, even if the 
        broker or dealer is participating or will participate 
        in the registered offering of the securities of the 
        issuer. As used in this paragraph, the term ``research 
        report'' means a written, electronic, or oral 
        communication that includes information, opinions, or 
        recommendations with respect to securities of an issuer 
        or an analysis of a security or an issuer, whether or 
        not it provides information reasonably sufficient upon 
        which to base an investment decision.

           *       *       *       *       *       *       *

          (19) The term ``emerging growth company'' means an 
        issuer that had total annual gross revenues of less 
        than $1,000,000,000 during its most recently completed 
        fiscal year. An issuer that is an emerging growth 
        company as of the first day of that fiscal year shall 
        continue to be deemed an emerging growth company until 
        the earliest of--
                  (A) the last day of the fiscal year of the 
                issuer during which it had total annual gross 
                revenues of $1,000,000,000 or more;
                  (B) the last day of the fiscal year of the 
                issuer following the fifth anniversary of the 
                date of the first sale of common equity 
                securities of the issuer pursuant to an 
                effective registration statement under this 
                title; or
                  (C) the date on which such issuer is deemed 
                to be a ``large accelerated filer'', as defined 
                in section 240.12b-2 of title 17, Code of 
                Federal Regulations, or any successor thereto.

           *       *       *       *       *       *       *


       PROHIBITIONS RELATING TO INTERSTATE COMMERCE AND THE MAILS

  Sec. 5. (a) * * *

           *       *       *       *       *       *       *

  (d) Limitation.--Notwithstanding any other provision of this 
section, an emerging growth company or any person authorized to 
act on behalf of an emerging growth company may engage in oral 
or written communications with potential investors that are 
qualified institutional buyers or institutions that are 
accredited investors, as such terms are respectively defined in 
section 230.144A and section 230.501(a) of title 17, Code of 
Federal Regulations, or any successor thereto, to determine 
whether such investors might have an interest in a contemplated 
securities offering, either prior to or following the date of 
filing of a registration statement with respect to such 
securities with the Commission, subject to the requirement of 
subsection (b)(2).
  [(d)] (e) Notwithstanding the provisions of section 3 or 4, 
unless a registration statement meeting the requirements of 
section 10(a) is in effect as to a security-based swap, it 
shall be unlawful for any person, directly or indirectly, to 
make use of any means or instruments of transportation or 
communication in interstate commerce or of the mails to offer 
to sell, offer to buy or purchase or sell a security-based swap 
to any person who is not an eligible contract participant as 
defined in section 1a(18) of the Commodity Exchange Act (7 
U.S.C. 1a(18)).

    REGISTRATION OF SECURITIES AND SIGNING OF REGISTRATION STATEMENT

  Sec. 6. (a) * * *

           *       *       *       *       *       *       *

  (e) Emerging Growth Companies.--
          (1) In general.--Any emerging growth company, prior 
        to its initial public offering date, may confidentially 
        submit to the Commission a draft registration 
        statement, for confidential nonpublic review by the 
        staff of the Commission prior to public filing, 
        provided that the initial confidential submission and 
        all amendments thereto shall be publicly filed with the 
        Commission not later than 21 days before the date on 
        which the issuer conducts a road show, as such term is 
        defined in section 230.433(h)(4) of title 17, Code of 
        Federal Regulations, or any successor thereto.
          (2) Confidentiality.--Notwithstanding any other 
        provision of this title, the Commission shall not be 
        compelled to disclose any information provided to or 
        obtained by the Commission pursuant to this subsection. 
        For purposes of section 552 of title 5, United States 
        Code, this subsection shall be considered a statute 
        described in subsection (b)(3)(B) of such section 552. 
        Information described in or obtained pursuant to this 
        subsection shall be deemed to constitute confidential 
        information for purposes of section 24(b)(2) of the 
        Securities Exchange Act of 1934.

           *       *       *       *       *       *       *

  Sec. 7. [(a) The registration] (a) Information Required in 
Registration Statement.--
          (1) In general.--The registration statement, when 
        relating to a security other than a security issued by 
        a foreign government, or political subdivision thereof, 
        shall contain the information, and be accompanied by 
        the documents, specified in Schedule A, and when 
        relating to a security issued by a foreign government, 
        or political subdivision thereof, shall contain the 
        information, and be accompanied by the documents, 
        specified in Schedule B; except that the Commission may 
        by rules or regulations provide that any such 
        information or document need not be included in respect 
        of any class of issuers or securities if it finds that 
        the requirement of such information or document is 
        inapplicable to such class and that disclosure fully 
        adequate for the protection of investors is otherwise 
        required to be included within the registration 
        statement. If any accountant, engineer, or appraiser, 
        or any person whose profession gives authority to a 
        statement made by him, is named as having prepared or 
        certified any part of the registration statement, or is 
        named as having prepared or certified a report or 
        valuation for use in connection with the registration 
        statement, the written consent of such person shall be 
        filed with the registration statement. If any such 
        person is named as having prepared or certified a 
        report or valuation (other than a public official 
        document or statement) which is used in connection with 
        the registration statement, but is not named as having 
        prepared or certified such report or valuation for use 
        in connection with the registration statement, the 
        written consent of such person shall be filed with the 
        registration statement unless the Commission dispenses 
        with such filing as impracticable or as involving undue 
        hardship on the person filing the registration 
        statement. Any such registration statement shall 
        contain such other information, and be accompanied by 
        such other documents, as the Commission may by rules or 
        regulations require as being necessary or appropriate 
        in the public interest or for the protection of 
        investors.
          (2) Treatment of emerging growth companies.--An 
        emerging growth company--
                  (A) need not present more than 2 years of 
                audited financial statements in order for the 
                registration statement of such emerging growth 
                company with respect to an initial public 
                offering of its common equity securities to be 
                effective, and in any other registration 
                statement to be filed with the Commission, an 
                emerging growth company need not present 
                selected financial data in accordance with 
                section 229.301 of title 17, Code of Federal 
                Regulations, for any period prior to the 
                earliest audited period presented in connection 
                with its initial public offering; and
                  (B) may not be required to comply with any 
                new or revised financial accounting standard 
                until such date that a company that is not an 
                issuer (as defined under section 2(a) of the 
                Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201(a)) 
                is required to comply with such new or revised 
                accounting standard, if such standard applies 
                to companies that are not issuers.

           *       *       *       *       *       *       *

                              ----------                              


                    SECURITIES EXCHANGE ACT OF 1934

TITLE I--REGULATION OF SECURITIES EXCHANGES

           *       *       *       *       *       *       *


                  DEFINITIONS AND APPLICATION OF TITLE

  Sec. 3. (a) When used in this title, unless the context 
otherwise requires--
          (1) * * *

           *       *       *       *       *       *       *

          [(77)] (79) Asset-backed security.--The term ``asset-
        backed security''--
                  (A) * * *

           *       *       *       *       *       *       *

          (80) Economic growth company.--The term ``emerging 
        growth company'' means an issuer that had total annual 
        gross revenues of less than $1,000,000,000 during its 
        most recently completed fiscal year. An issuer that is 
        an emerging growth company as of the first day of that 
        fiscal year shall continue to be deemed an emerging 
        growth company until the earliest of--
                  (A) the last day of the fiscal year of the 
                issuer during which it had total annual gross 
                revenues of $1,000,000,000 or more;
                  (B) the last day of the fiscal year of the 
                issuer following the fifth anniversary of the 
                date of the first sale of common equity 
                securities of the issuer pursuant to an 
                effective registration statement under the 
                Securities Act of 1933; or
                  (C) the date on which such issuer is deemed 
                to be a ``large accelerated filer'', as defined 
                in section 240.12b-2 of title 17, Code of 
                Federal Regulations, or any successor thereto.

           *       *       *       *       *       *       *


     NATIONAL MARKET SYSTEM FOR SECURITIES; SECURITIES INFORMATION 
                               PROCESSORS

  Sec. 11A. (a) * * *

           *       *       *       *       *       *       *

  (c)(1) * * *

           *       *       *       *       *       *       *

  (6) Tick size.--
          (A) Study and report.--The Commission shall conduct a 
        study examining the transition to trading and quoting 
        securities in one penny increments, also known as 
        decimalization. The study shall examine the impact that 
        decimalization has had on the number of initial public 
        offerings since its implementation relative to the 
        period before its implementation. The study shall also 
        examine the impact that this change has had on 
        liquidity for small and middle capitalization company 
        securities and whether there is sufficient economic 
        incentive to support trading operations in these 
        securities in penny increments. Not later than 90 days 
        after the date of enactment of this paragraph, the 
        Commission shall submit to Congress a report on the 
        findings of the study.
          (B) Designation.--If the Commission determines that 
        the securities of emerging growth companies should be 
        quoted and traded using a minimum increment of greater 
        than $0.01, the Commission may, by rule not later than 
        180 days after the date of enactment of this paragraph, 
        designate a minimum increment for the securities of 
        emerging growth companies that is greater than $0.01 
        but less than $0.10 for use in all quoting and trading 
        of securities in any exchange or other execution venue.

           *       *       *       *       *       *       *


                      PERIODICAL AND OTHER REPORTS

  Sec. 13. (a) Every issuer of a security registered pursuant 
to section 12 of this title shall file with the Commission, in 
accordance with such rules and regulations as the Commission 
may prescribe as necessary or appropriate for the proper 
protection of investors and to insure fair dealing in the 
security--
          (1) * * *

           *       *       *       *       *       *       *

Every issuer of a security registered on a national securities 
exchange shall also file a duplicate original of such 
information, documents, and reports with the exchange. In any 
registration statement, periodic report, or other reports to be 
filed with the Commission, an emerging growth company need not 
present selected financial data in accordance with section 
229.301 of title 17, Code of Federal Regulations, for any 
period prior to the earliest audited period presented in 
connection with its first registration statement that became 
effective under this Act or the Securities Act of 1933 and, 
with respect to any such statement or reports, an emerging 
growth company may not be required to comply with any new or 
revised financial accounting standard until such date that a 
company that is not an issuer (as defined under section 2(a) of 
the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201(a))) is required 
to comply with such new or revised accounting standard, if such 
standard applies to companies that are not issuers.

           *       *       *       *       *       *       *


                                PROXIES

  Sec. 14. (a) * * *

           *       *       *       *       *       *       *

  (i) Disclosure of Pay Versus Performance.--The Commission 
shall, by rule, require each issuer to disclose in any proxy or 
consent solicitation material for an annual meeting of the 
shareholders of the issuer a clear description of any 
compensation required to be disclosed by the issuer under 
section 229.402 of title 17, Code of Federal Regulations (or 
any successor thereto), including, for any issuer other than an 
emerging growth company, information that shows the 
relationship between executive compensation actually paid and 
the financial performance of the issuer, taking into account 
any change in the value of the shares of stock and dividends of 
the issuer and any distributions. The disclosure under this 
subsection may include a graphic representation of the 
information required to be disclosed.

           *       *       *       *       *       *       *


SEC. 14A. SHAREHOLDER APPROVAL OF EXECUTIVE COMPENSATION.

  (a) * * *

           *       *       *       *       *       *       *

  (e) Exemption.--[The Commission may]
          (1) In general.--The Commission may, by rule or 
        order, exempt [an issuer] any other issuer or class of 
        issuers from the requirement under subsection (a) or 
        (b). In determining whether to make an exemption under 
        this subsection, the Commission shall take into 
        account, among other considerations, whether the 
        requirements under subsections (a) and (b) 
        disproportionately burdens small issuers.
          (2) Treatment of emerging growth companies.--
                  (A) In general.--An emerging growth company 
                shall be exempt from the requirements of 
                subsections (a) and (b).
                  (B) Compliance after termination of emerging 
                growth company treatment.--An issuer that was 
                an emerging growth company but is no longer an 
                emerging growth company shall include the first 
                separate resolution described under subsection 
                (a)(1) not later than the end of--
                          (i) in the case of an issuer that was 
                        an emerging growth company for less 
                        than 2 years after the date of first 
                        sale of common equity securities of the 
                        issuer pursuant to an effective 
                        registration statement under the 
                        Securities Act of 1933, the 3-year 
                        period beginning on such date; and
                          (ii) in the case of any other issuer, 
                        the 1-year period beginning on the date 
                        the issuer is no longer an emerging 
                        growth company.

           *       *       *       *       *       *       *


SEC. 15D. SECURITIES ANALYSTS AND RESEARCH REPORTS.

  (a) * * *

           *       *       *       *       *       *       *

  (c) Limitation.--Notwithstanding subsection (a) or any other 
provision of law, neither the Commission nor any national 
securities association registered under section 15A may adopt 
or maintain any rule or regulation in connection with an 
initial public offering of the common equity of an emerging 
growth company--
          (1) restricting, based on functional role, which 
        associated persons of a broker, dealer, or member of a 
        national securities association, may arrange for 
        communications between a securities analyst and a 
        potential investor; or
          (2) restricting a securities analyst from 
        participating in any communications with the management 
        of an emerging growth company that is also attended by 
        any other associated person of a broker, dealer, or 
        member of a national securities association whose 
        functional role is other than as a securities analyst.
  [(c)] (d) Definitions.--In this section--
          (1) * * *

           *       *       *       *       *       *       *

                              ----------                              


INVESTOR PROTECTION AND SECURITIES REFORM ACT OF 2010

           *       *       *       *       *       *       *


 TITLE IX--INVESTOR PROTECTIONS AND IMPROVEMENTS TO THE REGULATION OF 
                               SECURITIES

SEC. 901. SHORT TITLE.

  This title may be cited as the ``Investor Protection and 
Securities Reform Act of 2010''.

           *       *       *       *       *       *       *


Subtitle E--Accountability and Executive Compensation

           *       *       *       *       *       *       *


SEC. 953. EXECUTIVE COMPENSATION DISCLOSURES.

  (a) * * *
  (b) Additional Disclosure Requirements.--
          (1) In general.--The Commission shall amend section 
        229.402 of title 17, Code of Federal Regulations, to 
        require each issuer, other than an emerging growth 
        company, as that term is defined in section 3(a) of the 
        Securities Exchange Act of 1934, to disclose in any 
        filing of the issuer described in section 229.10(a) of 
        title 17, Code of Federal Regulations (or any successor 
        thereto)--
                  (A) * * *

           *       *       *       *       *       *       *

                              ----------                              


SARBANES-OXLEY ACT OF 2002

           *       *       *       *       *       *       *


TITLE I--PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD

           *       *       *       *       *       *       *


SEC. 103. AUDITING, QUALITY CONTROL, AND INDEPENDENCE STANDARDS AND 
                    RULES.

  (a) Auditing, Quality Control, and Ethics Standards.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Authority to adopt other standards.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) Transition period for emerging growth 
                companies.--Any rules of the Board requiring 
                mandatory audit firm rotation or a supplement 
                to the auditor's report in which the auditor 
                would be required to provide additional 
                information about the audit and the financial 
                statements of the issuer (auditor discussion 
                and analysis) shall not apply to an audit of an 
                emerging growth company, as defined in section 
                3 of the Securities Exchange Act of 1934. Any 
                additional rules adopted by the Board after the 
                date of enactment of this subparagraph shall 
                not apply to an audit of any emerging growth 
                company, unless the Commission determines that 
                the application of such additional requirements 
                is necessary or appropriate in the public 
                interest, after considering the protection of 
                investors and whether the action will promote 
                efficiency, competition, and capital formation.

           *       *       *       *       *       *       *


TITLE IV--ENHANCED FINANCIAL DISCLOSURES

           *       *       *       *       *       *       *


SEC. 404. MANAGEMENT ASSESSMENT OF INTERNAL CONTROLS.

  (a) * * *
  (b) Internal Control Evaluation and Reporting.--With respect 
to the internal control assessment required by subsection (a), 
each registered public accounting firm that prepares or issues 
the audit report for the issuer, other than an issuer that is 
an emerging growth company (as defined in section 3 of the 
Securities Exchange Act of 1934), shall attest to, and report 
on, the assessment made by the management of the issuer. An 
attestation made under this subsection shall be made in 
accordance with standards for attestation engagements issued or 
adopted by the Board. Any such attestation shall not be the 
subject of a separate engagement.

           *       *       *       *       *       *       *


                             MINORITY VIEWS

    H.R. 3606 encourages emerging growth companies (EGCs) to 
access the public capital markets by temporarily exempting EGCs 
from some registration procedures, prohibitions on initial 
public offering (IPO) communications, and independent audits of 
internal controls over financial reporting, among other 
exemptions. Democrats agree in principle that it is important 
to modernize and improve the ability of a company to raise 
capital in today's environment, but are concerned H.R. 3606 
goes beyond what is necessary at the expense of protecting the 
investor.
    During consideration of H.R. 3606, Democrats offered 
several amendments to strike the right balance between 
promoting capital formation of smaller businesses and guarding 
against bad actors, but each of these was rejected. Ms. Waters 
offered an amendment to ameliorate the conflicts between 
investors and the underwriters and their analysts, requiring 
that the research be subject to potential liability, to better 
prevent the kinds of fraudulent practices that were prevalent 
during the ``dot.com'' bubble. Mr. Ellison's amendment 
recognizes the importance of early compensation practices by 
empowering EGC shareholders to cast a nonbinding vote on 
executive compensation levels as well as golden parachutes. Mr. 
Himes proposed to better target H.R. 3606's exemptions for EGCs 
to truly small companies that may not be able to afford some 
public company requirements by reducing the exemption limit 
from $1 billion to $750 million, and to better identify those 
companies.
    While we believe that additional changes must be made in 
H.R. 3606, Democrats worked with the Majority to improve the 
bill during the markup. One amendment was adopted that, among 
other things, prevents the politicization of the accounting 
standards setting process of the Federal Accounting Standards 
Board. Another amendment expedited the ability for shareholders 
to cast a vote on the executive compensation levels within one 
year instead of up to 3 years after the EGC's exemption 
expires. These improvements represent a first step in the right 
direction.
    Democrats and Republicans share the desire to create an 
accessible, robust and efficient capital market for the benefit 
of small businesses and investors, alike. We expect that as 
H.R. 3606 moves forward, further refinements will be adopted to 
ensure that investor protections are not sacrificed.

                                   Barney Frank.
                                   Wm. Lacy Clay.
                                   Gwen Moore.
                                   James A. Himes.
                                   Ruben Hinojosa.
                                   Keith Ellison.
                                   Ed Perlmutter.
                                   Michael E. Capuano.
                                   Al Green.
                                   Stephen F. Lynch.
                                   David Scott.
                                   Maxine Waters.
                                   Carolyn B. Maloney.
                                   Melvin L. Watt.
                                   Luis V. Gutierrez.
                                   Gary C. Peters.
                                   Andre Carson.
                                   Gary L. Ackerman.
                                   Gregory W. Meeks.

                                  
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