HR 3448 RFS
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Small Cap Liquidity 
Reform Act of 2014’’. 
SEC. 2. LIQUIDITY PILOT PROGRAM FOR SECURITIES OF 
CERTAIN EMERGING GROWTH COMPANIES. 
(a) IN GENERAL.—Section 11A(c)(6) of the Securi-
ties Exchange Act of 1934 (15 U.S.C. 78k–1(c)(6)) is 
amended to read as follows: 
‘‘(6) LIQUIDITY PILOT PROGRAM FOR SECURITIES 
OF CERTAIN EMERGING GROWTH COMPANIES.— 
‘‘(A) QUOTING INCREMENT.—Beginning on the 
date that is 90 days after the date of the enactment 
of the Small Cap Liquidity Reform Act of 2014, the 
securities of a covered emerging growth company 
shall be quoted using— 
‘‘(i) a minimum increment of $0.05; or 
‘‘(ii) if, not later than 60 days after such 
date of enactment, the company so elects in the 
manner described in subparagraph (D)— 
‘‘(I) a minimum increment of $0.10; 
or 
‘‘(II) the increment at which such se-
curities would be quoted without regard to 
the minimum increments established under 
this paragraph. 
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‘‘(B) TRADING INCREMENT.—In the case of a 
covered emerging growth company the securities of 
which are quoted at a minimum increment of $0.05 
or $0.10 under this paragraph, the Commission shall 
determine the increment at which the securities of 
such company are traded. 
‘‘(C) FUTURE RIGHT TO OPT OUT OR CHANGE 
MINIMUM INCREMENT.— 
‘‘(i) IN GENERAL.—At any time beginning 
on the date that is 90 days after the date of the 
enactment of the Small Cap Liquidity Reform 
Act of 2014, a covered emerging growth com-
pany the securities of which are quoted at a 
minimum increment of $0.05 or $0.10 under 
this paragraph may elect in the manner de-
scribed in subparagraph (D)— 
‘‘(I) for the securities of such com-
pany to be quoted at the increment at 
which such securities would be quoted 
without regard to the minimum increments 
established under this paragraph; or 
‘‘(II) to change the minimum incre-
ment at which the securities of such com-
pany are quoted from $0.05 to $0.10 or 
from $0.10 to $0.05. 
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‘‘(ii) WHEN
ELECTION
EFFECTIVE.—An 
election under this subparagraph shall take ef-
fect on the date that is 30 days after such elec-
tion is made. 
‘‘(iii) SINGLE ELECTION TO CHANGE MIN-
IMUM INCREMENT.—A covered emerging growth 
company may not make more than one election 
under clause (i)(II). 
‘‘(D) MANNER OF ELECTION.— 
‘‘(i) IN GENERAL.—An election is made in 
the manner described in this subparagraph by 
informing the Commission of such election. 
‘‘(ii) NOTIFICATION OF EXCHANGES AND 
OTHER
TRADING
VENUES.—Upon being in-
formed of an election under clause (i), the Com-
mission shall notify each exchange or other 
trading venue where the securities of the cov-
ered emerging growth company are quoted or 
traded. 
‘‘(E) ISSUERS
CEASING
TO
BE
COVERED 
EMERGING GROWTH COMPANIES.— 
‘‘(i) IN GENERAL.—If an issuer the securi-
ties of which are quoted at a minimum incre-
ment of $0.05 or $0.10 under this paragraph 
ceases to be a covered emerging growth com-
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pany, the securities of such issuer shall be 
quoted at the increment at which such securi-
ties would be quoted without regard to the min-
imum increments established under this para-
graph. 
‘‘(ii) EXCEPTIONS.—The Commission may 
by regulation, as the Commission considers ap-
propriate, specify any circumstances under 
which an issuer shall continue to be considered 
a covered emerging growth company for pur-
poses of this paragraph after the issuer ceases 
to meet the requirements of subparagraph 
(L)(i). 
‘‘(F) SECURITIES TRADING BELOW $1.— 
‘‘(i) INITIAL PRICE.— 
‘‘(I) AT
EFFECTIVE
DATE.—If the 
trading price of the securities of a covered 
emerging growth company is below $1 at 
the close of the last trading day before the 
date that is 90 days after the date of the 
enactment of the Small Cap Liquidity Re-
form Act of 2014, the securities of such 
company shall be quoted using the incre-
ment at which such securities would be 
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quoted without regard to the minimum in-
crements established under this paragraph. 
‘‘(II) AT IPO.—If a covered emerging 
growth company makes an initial public of-
fering after the day described in subclause 
(I) and the first share of the securities of 
such company is offered to the public at a 
price below $1, the securities of such com-
pany shall be quoted using the increment 
at which such securities would be quoted 
without regard to the minimum increments 
established under this paragraph. 
‘‘(ii) AVERAGE TRADING PRICE.—If the av-
erage trading price of the securities of a cov-
ered emerging growth company falls below $1 
for any 90-day period beginning on or after the 
day before the date of the enactment of the 
Small Cap Liquidity Reform Act of 2014, the 
securities of such company shall, after the end 
of such period, be quoted using the increment 
at which such securities would be quoted with-
out regard to the minimum increments estab-
lished under this paragraph. 
‘‘(G) FRAUD OR MANIPULATION.—If the Com-
mission determines that a covered emerging growth 
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company has violated any provision of the securities 
laws prohibiting fraudulent, manipulative, or decep-
tive acts or practices, the securities of such company 
shall, after the date of the determination, be quoted 
using the increment at which such securities would 
be quoted without regard to the minimum incre-
ments established under this paragraph. 
‘‘(H) INELIGIBILITY FOR INCREASED MINIMUM 
INCREMENT
PERMANENT.—The securities of an 
issuer may not be quoted at a minimum increment 
of $0.05 or $0.10 under this paragraph at any time 
after— 
‘‘(i) such issuer makes an election under 
subparagraph (A)(ii)(II); 
‘‘(ii) such issuer makes an election under 
subparagraph (C)(i)(I), except during the pe-
riod before such election takes effect; or 
‘‘(iii) the securities of such issuer are re-
quired by this paragraph to be quoted using the 
increment at which such securities would be 
quoted without regard to the minimum incre-
ments established under this paragraph. 
‘‘(I) 
ADDITIONAL
REPORTS
AND
DISCLO-
SURES.—The Commission shall require a covered 
emerging growth company the securities of which 
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