69–006 

115TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 1st Session 115–292 

TO DIRECT THE SECURITIES AND EXCHANGE COMMISSION TO ALLOW 

CERTAIN ISSUERS TO BE EXEMPT FROM REGISTRATION REQUIREMENTS, AND FOR OTHER PURPOSES 

SEPTEMBER 5, 2017.—Committed to the Committee of the Whole House on the State 

of the Union and ordered to be printed 

Mr. HENSARLING, from the Committee on Financial Services, 

submitted the following 

R E P O R T 

[To accompany H.R. 2864] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Financial Services, to whom was referred the 

bill (H.R. 2864) to direct the Securities and Exchange Commission 

to allow certain issuers to be exempt from registration requirements, and for other purposes, 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. APPLICATION OF EXEMPTION. 

The Securities and Exchange Commission shall amend— 

(1) section 230.251 of title 17, Code of Federal Regulations, to remove the requirement that the issuer not be subject to section 13 or 15(d) of the Securities 

Exchange Act of 1934 (15 U.S.C. 78a et seq.) immediately before the offering; 

and 

(2) section 230.257 of title 17, Code of Federal Regulations, with respect to 

an offering described in section 230.251(a)(2) of title 17, Code of Federal Regulations, to deem any issuer that is subject to section 13 or 15(d) of the Securities 

Exchange Act of 1934 as having met the periodic and current reporting requirements of section 230.257 of title 17, Code of Federal Regulations, if such issuer 

meets the reporting requirements of section 13 of the Securities Exchange Act 

of 1934. 

PURPOSE AND SUMMARY

H.R. 2864 was introduced by Representatives Kyrsten Sinema 

and Trey Hollingsworth on June 8, 2017. H.R. 2864 would amend 

the federal securities laws to direct the Securities and Exchange 

Commission (SEC) to expand its Regulation A+ rules to include 

companies that are ‘‘fully reporting’’ companies under the Securities Exchange Act of 1934. In doing so, the legislation will facilitate 

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capital formation for small reporting companies and provide smalldollar investors with enhanced investment opportunities and facilitate liquidity in the capital markets for these smaller companies. 

BACKGROUND AND NEED FOR LEGISLATION

H.R. 2864 will allow smaller, fully reporting SEC companies to 

raise capital publicly through Regulation A+ (Reg A+) offerings. 

Title IV of the Jumpstart Our Business Startups or ‘‘JOBS’’ Act directed the SEC to issue rules to update Regulation A (Reg A), 

which exempts small offerings of up to $5 million within a 12- 

month period from federal registration. Even though these small offerings are exempted under Reg A from federal registration, they 

remain subject to state securities law registration and qualification 

requirements. Historically, a limited number of issuers used the 

Reg A exemption. From 2009 through 2012, there were 19 qualified 

Reg A offerings for a total offering amount of approximately $73 

million. During the same period, there were approximately 27,870 

offerings for a total offering amount of approximately $26 billion 

that were eligible to take advantage of the Reg A exemption but 

did not. 

The JOBS Act exemption, now known as Reg A+, increased the amount companies could offer from $5 million to $50 million within 

a 12-month period. Reg A+ also pre-empted state registration and 

qualification requirements. On March 25, 2015, the SEC approved 

its final rule to implement Title IV of the JOBS Act. The final rule 

provides for two tiers of offerings: Tier 1, for offerings of securities 

of up to $20 million in a 12-month period, with not more than $6 

million in offers by selling security-holders that are affiliates of the 

issuer; and Tier 2, for offerings of securities of up to $50 million 

in a 12-month period, with not more than $15 million in offers by 

selling security-holders that are affiliates of the issuer. Both Tiers 

are subject to certain basic requirements while Tier 2 offerings are 

also subject to additional disclosure and ongoing reporting requirements. The final rule also provides for the preemption of state securities law registration and qualification requirements for securities offered or sold to ‘‘qualified purchasers’’ in Tier 2 offerings. 

Since the amendments to Reg A became effective in June 2015, 

the rate of Reg A+ securities offerings has increased. As of October 

2016, prospective issuers have publicly filed offering statements for 

147 Reg A+ offerings, seeking up to $2.6 billion in financing. Of 

these filed, approximately 81 offerings, seeking up to $1.5 billion 

have been qualified by the SEC and $190 million has been reported 

raised, though this understates the true amount raised due to reporting time frames. As a comparison, in the 12 months leading up 

to June 18, 2015, there were approximately 51 filings seeking to 

raise $159 million, including 12 qualified filings seeking to raise up 

to $34 million. Average issuers were seeking $18 million in a given, 

qualified offering, the average for Tier 2 was $26 million and the 

average for Tier 1 was $10 million, still well below the thresholds 

for each Tier. 

A 2016 SEC study showed that, consistent with the intent of Reg 

A+, the typical issuer based on offering data was relatively small. 

The typical issuer had median assets of approximately $0.1 million 

across all filings and approximately $0.2 million across qualified filings. Two-thirds of all filings and of qualified offerings were by 

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issuers with assets up to $1 million. 92% of all filings and 87% of 

qualified filings were by issuers with total assets not exceeding 

$100 million. Average assets were $51 million across all issuers 

and $79 million across issuers in qualified offerings. Median issuer 

had no cash, property, plants and equipment, long-term debt, revenue, or net income. These characteristics are consistent with the 

present pool of filers being primarily comprised of small, earlystage companies with limited collateral, which may restrict their 

ability to obtain a bank loan or other debt financing on favorable 

terms. 

Despite the data that demonstrates the importance of Reg A+ to 

provide investment capital to small issuers, not all issuers are permitted to make an offering using Reg A+. When the SEC issued its 

final rule to implement Title IV of the JOBS Act, it excluded fully 

SEC reporting companies (those reporting under 13(a) or 15(d) of 

the Securities Exchange Act of 1934) as ineligible issuers who could 

use Reg A+. This exclusion was contrary to the intent of Title IV, 

which was meant to improve access to capital for all small companies, to include fully SEC reporting companies. H.R. 2864 corrects 

the SEC’s action and will provides the benefits of Reg A+ to full 

reporting companies, which will enhance the liquidity and vibrancy 

of these issuers for initial and secondary offerings. 

HEARINGS

The Committee on Financial Services’ Subcommittee on Capital 

Markets, Securities, and Investment held hearings examining matters related to H.R. 2864 on March 22, 2017, and July 18, 2017. 

COMMITTEE CONSIDERATION

The Committee on Financial Services met in open session on 

July 25, 2017 and ordered H.R. 2864 to be reported favorably to the 

House as amended by a recorded vote of 59 yeas to 0 nays (Record 

vote no. FC–68), a quorum being present. Before the motion to report was offered, the Committee adopted an amendment in the nature of a substitute offered by Ms. Sinema by voice vote. 

COMMITTEE VOTES

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

to report legislation and amendments thereto. 

The sole recorded vote was on a motion by Chairman Hensarling 

to report the bill favorably to the House as amended. The motion 

was agreed to by a recorded vote of 59 yeas to 0 nays (Record vote 

no. FC–68), a quorum being present. 

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COMMITTEE OVERSIGHT FINDINGS

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

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

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

the descriptive portions of this report. 

PERFORMANCE GOALS AND OBJECTIVES

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

of Representatives, the Committee states that H.R. 2864 will enhance access to capital for small issuers, create greater investor 

choice and provide liquidity to the capital markets by allowing for 

‘‘fully reporting’’ companies to raise capital publicly using Regulation A+. 

NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX

EXPENDITURES

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

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

the Director of the Congressional Budget Office pursuant to section 

402 of the Congressional Budget Act of 1974. 

CONGRESSIONAL BUDGET OFFICE ESTIMATES

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

of Representatives, the following is the cost estimate provided by 

the Congressional Budget Office pursuant to section 402 of the 

Congressional Budget Act of 1974: 

U.S. CONGRESS, 

CONGRESSIONAL BUDGET OFFICE, 

Washington, DC, September 5, 2017. 

Hon. JEB HENSARLING, 

Chairman, Committee on Financial Services, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 2864, the Improving Access to Capital Act. 

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

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

Sincerely, 

KEITH HALL, Director. 

Enclosure. 

H.R. 2864—Improving Access to Capital Act 

Under current law, some securities offerings are exempt from 

registration with the Securities and Exchange Commission (SEC) if 

the offering meets certain criteria and if an issuer is exempt from 

other SEC reporting requirements. H.R. 2864 would expand the exemption to allow issuers that are subject to SEC reporting requirements to qualify for the registration exemption. The bill also would 

require the SEC to deem certain offerings as having met the exVerDate Sep 11 2014 02:53 Sep 07, 2017 Jkt 069006 PO 00000 Frm 00005 Fmt 6659 Sfmt 6602 E:\HR\OC\HR292.XXX HR292
6 

emption’s reporting requirements if the issuer is subject to and 

meets reporting requirements under a different securities law. 

Based on an analysis of information from the SEC, CBO estimates that implementing H.R. 2864 would increase the agency’s 

costs by less than $500,000, to update its regulations. Under current law, the SEC is authorized to collect fees sufficient to offset 

its annual appropriation; therefore, CBO estimates that the net effect on discretionary spending would be negligible, assuming appropriation actions consistent with that authority. 

Enacting H.R. 2864 would not affect direct spending or revenues; 

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

that enacting H.R. 2864 would not increase net direct spending or 

on-budget deficits in any of the four consecutive 10-year periods beginning in 2028. 

H.R. 2864 contains no intergovernmental mandates as defined in 

the Unfunded Mandates Reform Act and would not affect the budgets of state, local, or tribal governments. 

If the SEC increases fees or premiums to offset the costs associated with implementing the bill, H.R. 2864 would increase the cost 

of an existing mandate on private entities required to pay those assessments. CBO estimates that incremental cost of the mandate 

would be small and would fall well below the annual threshold for 

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

2017, adjusted annually for inflation). 

The CBO staff contacts for this estimate are Stephen Rabent (for 

federal costs) and Logan Smith (for private-sector mandates). The 

estimate was approved by H. Samuel Papenfuss, Deputy Assistant 

Director for Budget Analysis. 

FEDERAL MANDATES STATEMENT

This information is provided in accordance with section 423 of 

the Unfunded Mandates Reform Act of 1995. 

The Committee has determined that the bill does not contain 

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

mandate on State, local, or tribal governments. 

ADVISORY COMMITTEE STATEMENT

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

Federal Advisory Committee Act were created by this legislation. 

APPLICABILITY TO LEGISLATIVE BRANCH

The Committee finds that the legislation does not relate to the 

terms and conditions of employment or access to public services or 

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

Congressional Accountability Act. 

EARMARK IDENTIFICATION

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

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

contain any congressional earmarks, limited tax benefits, or limited 

tariff benefits within the meaning of the rule. 

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DUPLICATION OF FEDERAL PROGRAMS

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

House of Representatives, the Committee states that no provision 

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

Government known to be duplicative of another Federal program; 

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

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

the most recent Catalog of Federal Domestic Assistance, published 

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

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

DISCLOSURE OF DIRECTED RULEMAKING

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

Committee estimates that the bill requires no directed rulemakings 

within the meaning of such section. 

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short Title. 

This section cites H.R. 2864 as the ‘‘Improving Access to Capital 

Act’’. 

Section 2. Application of Exemption 

This section requires the Securities and Exchange Commission to 

remove the requirement that the issuer not be subject to section 13 

or 15(d) of the Securities Exchange Act of 1934. 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

H.R. 2864 does not repeal or amend any section of a statute. 

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

Representatives. 

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