113TH CONGRESS 

2D SESSION H. R. 3448 

AN ACT 

To amend the Securities Exchange Act of 1934 to provide 

for an optional pilot program allowing certain emerging 

growth companies to increase the tick sizes of their 

stocks. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 
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1 SECTION 1. SHORT TITLE. 

2 This Act may be cited as the ‘‘Small Cap Liquidity 

3 Reform Act of 2014’’. 

4 SEC. 2. LIQUIDITY PILOT PROGRAM FOR SECURITIES OF 

5 CERTAIN EMERGING GROWTH COMPANIES. 

6 (a) IN GENERAL.—Section 11A(c)(6) of the Securi7 ties Exchange Act of 1934 (15 U.S.C. 78k–1(c)(6)) is 

8 amended to read as follows: 

9 ‘‘(6) LIQUIDITY PILOT PROGRAM FOR SECURITIES

10 OF CERTAIN EMERGING GROWTH COMPANIES.— 

11 ‘‘(A) QUOTING INCREMENT.—Beginning on the 

12 date that is 90 days after the date of the enactment 

13 of the Small Cap Liquidity Reform Act of 2014, the 

14 securities of a covered emerging growth company 

15 shall be quoted using— 

16 ‘‘(i) a minimum increment of $0.05; or 

17 ‘‘(ii) if, not later than 60 days after such 

18 date of enactment, the company so elects in the 

19 manner described in subparagraph (D)— 

20 ‘‘(I) a minimum increment of $0.10; 

21 or 

22 ‘‘(II) the increment at which such se23 curities would be quoted without regard to 

24 the minimum increments established under 

25 this paragraph. 
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1 ‘‘(B) TRADING INCREMENT.—In the case of a 

2 covered emerging growth company the securities of 

3 which are quoted at a minimum increment of $0.05 

4 or $0.10 under this paragraph, the Commission shall 

5 determine the increment at which the securities of 

6 such company are traded. 

7 ‘‘(C) FUTURE RIGHT TO OPT OUT OR CHANGE

8 MINIMUM INCREMENT.— 

9 ‘‘(i) IN GENERAL.—At any time beginning 

10 on the date that is 90 days after the date of the 

11 enactment of the Small Cap Liquidity Reform 

12 Act of 2014, a covered emerging growth com13 pany the securities of which are quoted at a 

14 minimum increment of $0.05 or $0.10 under 

15 this paragraph may elect in the manner de16 scribed in subparagraph (D)— 

17 ‘‘(I) for the securities of such com18 pany to be quoted at the increment at 

19 which such securities would be quoted 

20 without regard to the minimum increments 

21 established under this paragraph; or 

22 ‘‘(II) to change the minimum incre23 ment at which the securities of such com24 pany are quoted from $0.05 to $0.10 or 

25 from $0.10 to $0.05. 
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1 ‘‘(ii) WHEN ELECTION EFFECTIVE.—An 

2 election under this subparagraph shall take ef3 fect on the date that is 30 days after such elec4 tion is made. 

5 ‘‘(iii) SINGLE ELECTION TO CHANGE MIN6 IMUM INCREMENT.—A covered emerging growth 

7 company may not make more than one election 

8 under clause (i)(II). 

9 ‘‘(D) MANNER OF ELECTION.— 

10 ‘‘(i) IN GENERAL.—An election is made in 

11 the manner described in this subparagraph by 

12 informing the Commission of such election. 

13 ‘‘(ii) NOTIFICATION OF EXCHANGES AND

14 OTHER TRADING VENUES.—Upon being in15 formed of an election under clause (i), the Com16 mission shall notify each exchange or other 

17 trading venue where the securities of the cov18 ered emerging growth company are quoted or 

19 traded. 

20 ‘‘(E) ISSUERS CEASING TO BE COVERED

21 EMERGING GROWTH COMPANIES.— 

22 ‘‘(i) IN GENERAL.—If an issuer the securi23 ties of which are quoted at a minimum incre24 ment of $0.05 or $0.10 under this paragraph 

25 ceases to be a covered emerging growth com-
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1 pany, the securities of such issuer shall be 

2 quoted at the increment at which such securi3 ties would be quoted without regard to the min4 imum increments established under this para5 graph. 

6 ‘‘(ii) EXCEPTIONS.—The Commission may 

7 by regulation, as the Commission considers ap8 propriate, specify any circumstances under 

9 which an issuer shall continue to be considered 

10 a covered emerging growth company for pur11 poses of this paragraph after the issuer ceases 

12 to meet the requirements of subparagraph 

13 (L)(i). 

14 ‘‘(F) SECURITIES TRADING BELOW $1.— 

15 ‘‘(i) INITIAL PRICE.— 

16 ‘‘(I) AT EFFECTIVE DATE.—If the 

17 trading price of the securities of a covered 

18 emerging growth company is below $1 at 

19 the close of the last trading day before the 

20 date that is 90 days after the date of the 

21 enactment of the Small Cap Liquidity Re22 form Act of 2014, the securities of such 

23 company shall be quoted using the incre24 ment at which such securities would be 
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1 quoted without regard to the minimum in2 crements established under this paragraph. 

3 ‘‘(II) AT IPO.—If a covered emerging 

4 growth company makes an initial public of5 fering after the day described in subclause 

6 (I) and the first share of the securities of 

7 such company is offered to the public at a 

8 price below $1, the securities of such com9 pany shall be quoted using the increment 

10 at which such securities would be quoted 

11 without regard to the minimum increments 

12 established under this paragraph. 

13 ‘‘(ii) AVERAGE TRADING PRICE.—If the av14 erage trading price of the securities of a cov15 ered emerging growth company falls below $1 

16 for any 90-day period beginning on or after the 

17 day before the date of the enactment of the 

18 Small Cap Liquidity Reform Act of 2014, the 

19 securities of such company shall, after the end 

20 of such period, be quoted using the increment 

21 at which such securities would be quoted with22 out regard to the minimum increments estab23 lished under this paragraph. 

24 ‘‘(G) FRAUD OR MANIPULATION.—If the Com25 mission determines that a covered emerging growth 
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1 company has violated any provision of the securities 

2 laws prohibiting fraudulent, manipulative, or decep3 tive acts or practices, the securities of such company 

4 shall, after the date of the determination, be quoted 

5 using the increment at which such securities would 

6 be quoted without regard to the minimum incre7 ments established under this paragraph. 

8 ‘‘(H) INELIGIBILITY FOR INCREASED MINIMUM

9 INCREMENT PERMANENT.—The securities of an 

10 issuer may not be quoted at a minimum increment 

11 of $0.05 or $0.10 under this paragraph at any time 

12 after— 

13 ‘‘(i) such issuer makes an election under 

14 subparagraph (A)(ii)(II); 

15 ‘‘(ii) such issuer makes an election under 

16 subparagraph (C)(i)(I), except during the pe17 riod before such election takes effect; or 

18 ‘‘(iii) the securities of such issuer are re19 quired by this paragraph to be quoted using the 

20 increment at which such securities would be 

21 quoted without regard to the minimum incre22 ments established under this paragraph. 

23 ‘‘(I) ADDITIONAL REPORTS AND DISCLO24 SURES.—The Commission shall require a covered 

25 emerging growth company the securities of which 
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1 are quoted at a minimum increment of $0.05 or 

2 $0.10 under this paragraph to make such reports 

3 and disclosures as the Commission considers nec4 essary or appropriate in the public interest or for 

5 the protection of investors. 

6 ‘‘(J) LIMITATION OF LIABILITY.—An issuer (or 

7 any officer, director, manager, or other agent of 

8 such issuer) shall not be liable to any person (other 

9 than such issuer) under any law or regulation of the 

10 United States, any constitution, law, or regulation of 

11 any State or political subdivision thereof, or any con12 tract or other legally enforceable agreement (includ13 ing any arbitration agreement) for any losses caused 

14 solely by the quoting of the securities of such issuer 

15 at a minimum increment of $0.05 or $0.10, by the 

16 trading of such securities at the increment deter17 mined by the Commission under subparagraph (B), 

18 or by both such quoting and trading, as provided in 

19 this paragraph. 

20 ‘‘(K) REPORT TO CONGRESS.—Not later than 6 

21 months after the date of the enactment of the Small 

22 Cap Liquidity Reform Act of 2014, and every 6 

23 months thereafter, the Commission, in coordination 

24 with each exchange on which the securities of cov25 ered emerging growth companies are quoted or trad-
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1 ed, shall submit to Congress a report on the quoting 

2 and trading of securities in increments permitted by 

3 this paragraph and the extent to which such quoting 

4 and trading are increasing liquidity and active trad5 ing by incentivizing capital commitment, research 

6 coverage, and brokerage support, together with any 

7 legislative recommendations the Commission may 

8 have. 

9 ‘‘(L) DEFINITIONS.—In this paragraph: 

10 ‘‘(i) COVERED EMERGING GROWTH COM11 PANY.—The term ‘covered emerging growth 

12 company’ means an emerging growth company, 

13 as defined in the first paragraph (80) of section 

14 3(a), except that— 

15 ‘‘(I) such paragraph shall be applied 

16 by substituting ‘$750,000,000’ for 

17 ‘$1,000,000,000’ each place it appears; 

18 and 

19 ‘‘(II) subparagraphs (B), (C), and (D) 

20 of such paragraph do not apply. 

21 ‘‘(ii) SECURITY.—The term ‘security’ 

22 means an equity security. 

23 ‘‘(M) SAVINGS PROVISION.—Notwithstanding 

24 any other provision of this paragraph, the Commis25 sion may— 
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1 ‘‘(i) make such adjustments to the pilot 

2 program specified in this paragraph as the 

3 Commission considers necessary or appropriate 

4 to ensure that such program can provide statis5 tically meaningful or reliable results, including 

6 adjustments to eliminate selection bias among 

7 participants, expand the number of participants 

8 eligible to participate in such program, and 

9 change the duration of such program for one or 

10 more participants; and 

11 ‘‘(ii) conduct any other study or pilot pro12 gram, in conjunction with or separate from the 

13 pilot program specified in this paragraph (as 

14 such program may be adjusted pursuant to 

15 clause (i)), to evaluate quoting or trading in 

16 various minimum increments.’’. 

17 (b) SUNSET.—Effective on the date that is 5 years 

18 after the date of the enactment of this Act, section 

19 11A(c)(6) of the Securities Exchange Act of 1934 (15 

20 U.S.C. 78k–1(c)(6)) is repealed. 

Passed the House of Representatives February 11, 

2014. 

Attest: 

Clerk. 

113TH CONGRESS 

2D SESSION H. R. 3448 

AN ACT 

To amend the Securities Exchange Act of 1934 to 

the tick sizes of their stocks. certain emerging growth companies to increase provide for an optional pilot program allowing