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[Congressional Bills 114th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1675 Engrossed in House (EH)]

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114th CONGRESS
  2d Session
                                H. R. 1675

_______________________________________________________________________

                                 AN ACT

 
To direct the Securities and Exchange Commission to revise its rules so 
 as to increase the threshold amount for requiring issuers to provide 
      certain disclosures relating to compensatory benefit plans.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Capital Markets 
Improvement Act of 2016''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.
                TITLE I--ENCOURAGING EMPLOYEE OWNERSHIP

Sec. 101. Increased threshold for disclosures relating to compensatory 
                            benefit plans.
              TITLE II--FAIR ACCESS TO INVESTMENT RESEARCH

Sec. 201. Safe harbor for investment fund research.
 TITLE III--SMALL BUSINESS MERGERS, ACQUISITIONS, SALES, AND BROKERAGE 
                             SIMPLIFICATION

Sec. 301. Registration exemption for merger and acquisition brokers.
Sec. 302. Effective date.
           TITLE IV--SMALL COMPANY DISCLOSURE SIMPLIFICATION

Sec. 401. Exemption from XBRL requirements for emerging growth 
                            companies and other smaller companies.
Sec. 402. Analysis by the SEC.
Sec. 403. Report to Congress.
Sec. 404. Definitions.
     TITLE V--STREAMLINING EXCESSIVE AND COSTLY REGULATIONS REVIEW

Sec. 501. Regulatory review.

                TITLE I--ENCOURAGING EMPLOYEE OWNERSHIP

SEC. 101. INCREASED THRESHOLD FOR DISCLOSURES RELATING TO COMPENSATORY 
              BENEFIT PLANS.

    Not later than 60 days after the date of the enactment of this Act, 
the Securities and Exchange Commission shall revise section 230.701(e) 
of title 17, Code of Federal Regulations, so as to increase from 
$5,000,000 to $10,000,000 the aggregate sales price or amount of 
securities sold during any consecutive 12-month period in excess of 
which the issuer is required under such section to deliver an 
additional disclosure to investors. The Commission shall index for 
inflation such aggregate sales price or amount every 5 years to reflect 
the change in the Consumer Price Index for All Urban Consumers 
published by the Bureau of Labor Statistics, rounding to the nearest 
$1,000,000.

              TITLE II--FAIR ACCESS TO INVESTMENT RESEARCH

SEC. 201. SAFE HARBOR FOR INVESTMENT FUND RESEARCH.

    (a) Expansion of Safe Harbor.--Not later than the end of the 45-day 
period beginning on the date of enactment of this Act, the Securities 
and Exchange Commission shall propose, and not later than the end of 
the 120-day period beginning on such date, the Commission shall adopt, 
upon such terms, conditions, or requirements as the Commission may 
determine necessary or appropriate in the public interest, for the 
protection of investors, and for the promotion of capital formation, 
revisions to section 230.139 of title 17, Code of Federal Regulations, 
to provide that a covered investment fund research report--
            (1) shall be deemed, for purposes of sections 2(a)(10) and 
        5(c) of the Securities Act of 1933, not to constitute an offer 
        for sale or an offer to sell a security that is the subject of 
        an offering pursuant to a registration statement that the 
        issuer proposes to file, or has filed, or that is effective, 
        even if the broker or dealer is participating or will 
        participate in the registered offering of the covered 
        investment fund's securities; and
            (2) shall be deemed to satisfy the conditions of subsection 
        (a)(1) or (a)(2) of section 230.139 of title 17, Code of 
        Federal Regulations, or any successor provisions, for purposes 
        of the Commission's rules and regulations under the Federal 
        securities laws and the rules of any self-regulatory 
        organization.
    (b) Implementation of Safe Harbor.--In implementing the safe harbor 
pursuant to subsection (a), the Commission shall--
            (1) not, in the case of a covered investment fund with a 
        class of securities in substantially continuous distribution, 
        condition the safe harbor on whether the broker's or dealer's 
        publication or distribution of a covered investment fund 
        research report constitutes such broker's or dealer's 
        initiation or reinitiation of research coverage on such covered 
        investment fund or its securities;
            (2) not--
                    (A) require the covered investment fund to have 
                been registered as an investment company under the 
                Investment Company Act of 1940 or subject to the 
                reporting requirements of section 13 or 15(d) of the 
                Securities Exchange Act of 1934 for any period 
                exceeding twelve months; or
                    (B) impose a minimum float provision exceeding that 
                referenced in subsection (a)(1)(i)(A)(1)(i) of section 
                230.139 of title 17, Code of Federal Regulations;
            (3) provide that a self-regulatory organization may not 
        maintain or enforce any rule that would--
                    (A) condition the ability of a member to publish or 
                distribute a covered investment fund research report on 
                whether the member is also participating in a 
                registered offering or other distribution of any 
                securities of such covered investment fund;
                    (B) condition the ability of a member to 
                participate in a registered offering or other 
                distribution of securities of a covered investment fund 
                on whether the member has published or distributed a 
                covered investment fund research report about such 
                covered investment fund or its securities; or
                    (C) require the filing of a covered investment fund 
                research report with such self-regulatory organization; 
                and
            (4) provide that a covered investment fund research report 
        shall not be subject to sections 24(b) or 34(b) of the 
        Investment Company Act of 1940 or the rules and regulations 
        thereunder.
    (c) Rules of Construction.--Nothing in this section shall be 
construed as in any way limiting--
            (1) the applicability of the antifraud provisions of the 
        Federal securities laws; or
            (2) the authority of any self-regulatory organization to 
        examine or supervise a member's practices in connection with 
        such member's publication or distribution of a covered 
        investment fund research report for compliance with otherwise 
        applicable provisions of the Federal securities laws or self-
        regulatory organization rules.
    (d) Interim Effectiveness of Safe Harbor.--From and after the 120-
day period beginning on the date of enactment of this Act, if the 
Commission has not met its obligations pursuant to subsection (a) to 
adopt revisions to section 230.139 of title 17, Code of Federal 
Regulations, and until such time as the Commission has done so, a 
covered investment fund research report published or distributed by a 
broker or dealer after such date shall be deemed to meet the 
requirements of section 230.139 of title 17, Code of Federal 
Regulations, and to satisfy the conditions of subsection (a)(1) or 
(a)(2) thereof for purposes of the Commission's rules and regulations 
under the Federal securities laws and the rules of any self-regulatory 
organization, as if revised and implemented in accordance with 
subsections (a) and (b).
    (e) Definitions.--For purposes of this section:
            (1) Covered investment fund research report.--The term 
        ``covered investment fund research report'' means a research 
        report published or distributed by a broker or dealer about a 
        covered investment fund or any of its securities.
            (2) Covered investment fund.--The term ``covered investment 
        fund'' means--
                    (A) an investment company registered under, or that 
                has filed an election to be treated as a business 
                development company under, the Investment Company Act 
                of 1940 and that has filed a registration statement 
                under the Securities Act of 1933 for the public 
                offering of a class of its securities, which 
                registration statement has been declared effective by 
                the Commission; and
                    (B) a trust or other person--
                            (i) that has a class of securities listed 
                        for trading on a national securities exchange;
                            (ii) the assets of which consist primarily 
                        of commodities, currencies, or derivative 
                        instruments that reference commodities or 
                        currencies, or interests in the foregoing; and
                            (iii) that allows its securities to be 
                        purchased or redeemed, subject to conditions or 
                        limitations, for a ratable share of its assets.
            (3) Research report.--The term ``research report'' has the 
        meaning given to that term under section 2(a)(3) of the 
        Securities Act of 1933, except that such term shall not include 
        an oral communication.
            (4) Self-regulatory organization.--The term ``self-
        regulatory organization'' has the meaning given to that term 
        under section 3(a)(26) of the Securities Exchange Act of 1934.

 TITLE III--SMALL BUSINESS MERGERS, ACQUISITIONS, SALES, AND BROKERAGE 
                             SIMPLIFICATION

SEC. 301. REGISTRATION EXEMPTION FOR MERGER AND ACQUISITION BROKERS.

    Section 15(b) of the Securities Exchange Act of 1934 (15 U.S.C. 
78o(b)) is amended by adding at the end the following:
            ``(13) Registration exemption for merger and acquisition 
        brokers.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), an M&A broker shall be exempt from 
                registration under this section.
                    ``(B) Excluded activities.--An M&A broker is not 
                exempt from registration under this paragraph if such 
                broker does any of the following:
                            ``(i) Directly or indirectly, in connection 
                        with the transfer of ownership of an eligible 
                        privately held company, receives, holds, 
                        transmits, or has custody of the funds or 
                        securities to be exchanged by the parties to 
                        the transaction.
                            ``(ii) Engages on behalf of an issuer in a 
                        public offering of any class of securities that 
                        is registered, or is required to be registered, 
                        with the Commission under section 12 or with 
                        respect to which the issuer files, or is 
                        required to file, periodic information, 
                        documents, and reports under subsection (d).
                            ``(iii) Engages on behalf of any party in a 
                        transaction involving a public shell company.
                    ``(C) Disqualifications.--An M&A broker is not 
                exempt from registration under this paragraph if such 
                broker is subject to--
                            ``(i) suspension or revocation of 
                        registration under paragraph (4);
                            ``(ii) a statutory disqualification 
                        described in section 3(a)(39);
                            ``(iii) a disqualification under the rules 
                        adopted by the Commission under section 926 of 
                        the Investor Protection and Securities Reform 
                        Act of 2010 (15 U.S.C. 77d note); or
                            ``(iv) a final order described in paragraph 
                        (4)(H).
                    ``(D) Rule of construction.--Nothing in this 
                paragraph shall be construed to limit any other 
                authority of the Commission to exempt any person, or 
                any class of persons, from any provision of this title, 
                or from any provision of any rule or regulation 
                thereunder.
                    ``(E) Definitions.--In this paragraph:
                            ``(i) Control.--The term `control' means 
                        the power, directly or indirectly, to direct 
                        the management or policies of a company, 
                        whether through ownership of securities, by 
                        contract, or otherwise. There is a presumption 
                        of control for any person who--
                                    ``(I) is a director, general 
                                partner, member or manager of a limited 
                                liability company, or officer 
                                exercising executive responsibility (or 
                                has similar status or functions);
                                    ``(II) has the right to vote 20 
                                percent or more of a class of voting 
                                securities or the power to sell or 
                                direct the sale of 20 percent or more 
                                of a class of voting securities; or
                                    ``(III) in the case of a 
                                partnership or limited liability 
                                company, has the right to receive upon 
                                dissolution, or has contributed, 20 
                                percent or more of the capital.
                            ``(ii) Eligible privately held company.--
                        The term `eligible privately held company' 
                        means a privately held company that meets both 
                        of the following conditions:
                                    ``(I) The company does not have any 
                                class of securities registered, or 
                                required to be registered, with the 
                                Commission under section 12 or with 
                                respect to which the company files, or 
                                is required to file, periodic 
                                information, documents, and reports 
                                under subsection (d).
                                    ``(II) In the fiscal year ending 
                                immediately before the fiscal year in 
                                which the services of the M&A broker 
                                are initially engaged with respect to 
                                the securities transaction, the company 
                                meets either or both of the following 
                                conditions (determined in accordance 
                                with the historical financial 
                                accounting records of the company):
                                            ``(aa) The earnings of the 
                                        company before interest, taxes, 
                                        depreciation, and amortization 
                                        are less than $25,000,000.
                                            ``(bb) The gross revenues 
                                        of the company are less than 
                                        $250,000,000.
                            ``(iii) M&A broker.--The term `M&A broker' 
                        means a broker, and any person associated with 
                        a broker, engaged in the business of effecting 
                        securities transactions solely in connection 
                        with the transfer of ownership of an eligible 
                        privately held company, regardless of whether 
                        the broker acts on behalf of a seller or buyer, 
                        through the purchase, sale, exchange, issuance, 
                        repurchase, or redemption of, or a business 
                        combination involving, securities or assets of 
                        the eligible privately held company, if the 
                        broker reasonably believes that--
                                    ``(I) upon consummation of the 
                                transaction, any person acquiring 
                                securities or assets of the eligible 
                                privately held company, acting alone or 
                                in concert, will control and, directly 
                                or indirectly, will be active in the 
                                management of the eligible privately 
                                held company or the business conducted 
                                with the assets of the eligible 
                                privately held company; and
                                    ``(II) if any person is offered 
                                securities in exchange for securities 
                                or assets of the eligible privately 
                                held company, such person will, prior 
                                to becoming legally bound to consummate 
                                the transaction, receive or have 
                                reasonable access to the most recent 
                                fiscal year-end financial statements of 
                                the issuer of the securities as 
                                customarily prepared by the management 
                                of the issuer in the normal course of 
                                operations and, if the financial 
                                statements of the issuer are audited, 
                                reviewed, or compiled, any related 
                                statement by the independent 
                                accountant, a balance sheet dated not 
                                more than 120 days before the date of 
                                the offer, and information pertaining 
                                to the management, business, results of 
                                operations for the period covered by 
                                the foregoing financial statements, and 
                                material loss contingencies of the 
                                issuer.
                            ``(iv) Public shell company.--The term 
                        `public shell company' is a company that at the 
                        time of a transaction with an eligible 
                        privately held company--
                                    ``(I) has any class of securities 
                                registered, or required to be 
                                registered, with the Commission under 
                                section 12 or that is required to file 
                                reports pursuant to subsection (d);
                                    ``(II) has no or nominal 
                                operations; and
                                    ``(III) has--
                                            ``(aa) no or nominal 
                                        assets;
                                            ``(bb) assets consisting 
                                        solely of cash and cash 
                                        equivalents; or
                                            ``(cc) assets consisting of 
                                        any amount of cash and cash 
                                        equivalents and nominal other 
                                        assets.
                    ``(F) Inflation adjustment.--
                            ``(i) In general.--On the date that is 5 
                        years after the date of the enactment of the 
                        Small Business Mergers, Acquisitions, Sales, 
                        and Brokerage Simplification Act of 2015, and 
                        every 5 years thereafter, each dollar amount in 
                        subparagraph (E)(ii)(II) shall be adjusted by--
                                    ``(I) dividing the annual value of 
                                the Employment Cost Index For Wages and 
                                Salaries, Private Industry Workers (or 
                                any successor index), as published by 
                                the Bureau of Labor Statistics, for the 
                                calendar year preceding the calendar 
                                year in which the adjustment is being 
                                made by the annual value of such index 
                                (or successor) for the calendar year 
                                ending December 31, 2012; and
                                    ``(II) multiplying such dollar 
                                amount by the quotient obtained under 
                                subclause (I).
                            ``(ii) Rounding.--Each dollar amount 
                        determined under clause (i) shall be rounded to 
                        the nearest multiple of $100,000.''.

SEC. 302. EFFECTIVE DATE.

    This title and any amendment made by this title shall take effect 
on the date that is 90 days after the date of the enactment of this 
Act.

           TITLE IV--SMALL COMPANY DISCLOSURE SIMPLIFICATION

SEC. 401. EXEMPTION FROM XBRL REQUIREMENTS FOR EMERGING GROWTH 
              COMPANIES AND OTHER SMALLER COMPANIES.

    (a) Exemption for Emerging Growth Companies.--Emerging growth 
companies are exempted from the requirements to use Extensible Business 
Reporting Language (XBRL) for financial statements and other periodic 
reporting required to be filed with the Commission under the securities 
laws. Such companies may elect to use XBRL for such reporting.
    (b) Exemption for Other Smaller Companies.--Issuers with total 
annual gross revenues of less than $250,000,000 are exempt from the 
requirements to use XBRL for financial statements and other periodic 
reporting required to be filed with the Commission under the securities 
laws. Such issuers may elect to use XBRL for such reporting. An 
exemption under this subsection shall continue in effect until--
            (1) the date that is 5 years after the date of enactment of 
        this Act; or
            (2) the date that is 2 years after a determination by the 
        Commission, by order after conducting the analysis required by 
        section 402, that the benefits of such requirements to such 
        issuers outweigh the costs, but no earlier than three years 
        after enactment of this Act.
    (c) Modifications to Regulations.--Not later than 60 days after the 
date of enactment of this Act, the Commission shall revise its 
regulations under parts 229, 230, 232, 239, 240, and 249 of title 17, 
Code of Federal Regulations, to reflect the exemptions set forth in 
subsections (a) and (b).

SEC. 402. ANALYSIS BY THE SEC.

    The Commission shall conduct an analysis of the costs and benefits 
to issuers described in section 401(b) of the requirements to use XBRL 
for financial statements and other periodic reporting required to be 
filed with the Commission under the securities laws. Such analysis 
shall include an assessment of--
            (1) how such costs and benefits may differ from the costs 
        and benefits identified by the Commission in the order relating 
        to interactive data to improve financial reporting (dated 
        January 30, 2009; 74 Fed. Reg. 6776) because of the size of 
        such issuers;
            (2) the effects on efficiency, competition, capital 
        formation, and financing and on analyst coverage of such 
        issuers (including any such effects resulting from use of XBRL 
        by investors);
            (3) the costs to such issuers of--
                    (A) submitting data to the Commission in XBRL;
                    (B) posting data on the website of the issuer in 
                XBRL;
                    (C) software necessary to prepare, submit, or post 
                data in XBRL; and
                    (D) any additional consulting services or filing 
                agent services;
            (4) the benefits to the Commission in terms of improved 
        ability to monitor securities markets, assess the potential 
        outcomes of regulatory alternatives, and enhance investor 
        participation in corporate governance and promote capital 
        formation; and
            (5) the effectiveness of standards in the United States for 
        interactive filing data relative to the standards of 
        international counterparts.

SEC. 403. REPORT TO CONGRESS.

    Not later than 1 year after the date of enactment of this Act, the 
Commission shall provide the Committee on Financial Services of the 
House of Representatives and the Committee on Banking, Housing, and 
Urban Affairs of the Senate a report regarding--
            (1) the progress in implementing XBRL reporting within the 
        Commission;
            (2) the use of XBRL data by Commission officials;
            (3) the use of XBRL data by investors;
            (4) the results of the analysis required by section 402; 
        and
            (5) any additional information the Commission considers 
        relevant for increasing transparency, decreasing costs, and 
        increasing efficiency of regulatory filings with the 
        Commission.

SEC. 404. DEFINITIONS.

    As used in this title, the terms ``Commission'', ``emerging growth 
company'', ``issuer'', and ``securities laws'' have the meanings given 
such terms in section 3 of the Securities Exchange Act of 1934 (15 
U.S.C. 78c).

     TITLE V--STREAMLINING EXCESSIVE AND COSTLY REGULATIONS REVIEW

SEC. 501. REGULATORY REVIEW.

    (a) Review and Action.--Not later than 5 years after the date of 
enactment of this Act, and at least once within each 10-year period 
thereafter, the Securities and Exchange Commission shall--
            (1) review each significant regulation issued by the 
        Commission;
            (2) determine by Commission vote whether each such 
        regulation--
                    (A) is outmoded, ineffective, insufficient, or 
                excessively burdensome; or
                    (B) is no longer necessary in the public interest 
                or consistent with the Commission's mandate to protect 
                investors, maintain fair, orderly, and efficient 
                markets, and facilitate capital formation;
            (3) provide notice and solicit public comment as to whether 
        a regulation described in subparagraph (A) or (B) of paragraph 
        (2) (as determined by Commission vote pursuant to such 
        paragraph) should be amended to improve or modernize such 
        regulation so that such regulation is in the public interest, 
        or whether such regulation should be repealed; and
            (4) amend or repeal any regulation described in 
        subparagraph (A) or (B) of paragraph (2), as determined by 
        Commission vote pursuant to such paragraph.
    (b) Definition.--As used in this section and for purposes of the 
review required by subsection (a) the term ``significant regulation'' 
has the meaning given the term ``major rule'' in section 804(2) of 
title 5, United States Code.
    (c) Report to Congress.--Not later than 45 days after any final 
Commission vote described in subsection (a)(2), the Commission shall 
transmit a report to the Committee on Financial Services of the House 
of Representatives and the Committee on Banking, Housing, and Urban 
Affairs of the Senate describing the Commission's review under 
subsection (a), its vote or votes, and the actions taken pursuant to 
paragraph (3) of such subsection. If the Commission determines that 
legislation is necessary to amend or repeal any regulation described in 
subparagraph (A) or (B) of subsection (a)(2), the Commission shall 
include in the report recommendations for such legislation.
    (d) Not Subject to Judicial Review.--Any vote by the Commission 
made pursuant to subsection (a)(2) shall be final and not subject to 
judicial review.

            Passed the House of Representatives February 3, 2016.

            Attest:

                                                                 Clerk.
114th CONGRESS

  2d Session

                               H. R. 1675

_______________________________________________________________________

                                 AN ACT

To direct the Securities and Exchange Commission to revise its rules so 
 as to increase the threshold amount for requiring issuers to provide 
      certain disclosures relating to compensatory benefit plans.
```