Date: 2012-03-07
Speaker: JACKSON LEE (democrat)
Chamber: H
State: Texas

Mr. Chairman. let me just maintain that this is a simple premise of protecting the less sophisticated investor. and I have no desire to not see jobs being created or the opportunity for emerging growth entities to have access to opportunities for investment. It is quite clear that qualified institutional investors are far more sophisticated than the accredited investors status. and so I cant get clearer than that. trying to make sure that we protect those. And as we noted for the Democrats who served on the Financial Services Committee. they made certain statements. if you would. to ensure that we have the greatest amount of protection for those who we want to see having greater opportunities. So with that. Mr. Chairman. I happily yield back my time and ask my colleagues to support this very simple amendment that seeks to protect accredited investors. Mr. Chair. I rise today to offer my amendment # 7 to H.R. 3606 "The Reopening American Capital Markets to Emerging Growth Companies Act of 2011." This amendment strikes language in the bill that allows an emerging growth company or its underwriter to communicate with "institutions that are accredited investors." H.R. 3606 would exempt certain regulatory requirements until the earliest of three dates: (1) five years from the date of the EGCs 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. The bill 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. My amendment narrows the permissible exemption to allow oral or written communications with potential investors who are "qualified institutional investors." but omits "accredited investors from this exemption. in the name of investor protection." For example. this amendment would ensure that an accredited investor would not be considered a qualified institutional investor and therefore would not be able to engage in certain types of investments. Under the bill. the commonly known "test the waters provision." would amend the Securities Act of 1933 to expand the range of permissible prefiling communications to sophisticated institutional investors to allow Emerging Growth Companies (EGCs) to determine whether qualified institutional or accredited investors might have an interest in a contemplated securities offering. I believe that while many Accredited Investors are sophisticated and prosperous. and meet the brokerage firm requirements for alternative investments. My amendment is merely a continuation of the investor protection theme of DoddFrank. Specifically. investors that lack the necessary capital to absorb the losses that can arise when investing in an Emerging Growth Company. Moreover. I would note that many qualified institutional investors have a minimum of $1 billion to invest. which simply may not be the case with accredited investors. My sentiments are similar to those expressed by my Democratic colleagues on the Financial Services Committee: that they and Republicans share the desire to create an accessible. robust and efficient capital market for the benefit of small businesses and investors. alike. I too. expect that as H.R. 3606 moves forward. further refinements will be adopted to ensure that investor protections are not sacrificed. Again. as my Democratic colleagues on the Financial Services Committee stated: H.R. 3606 encourages emerging growth companies (EGOs) to access the public capital markets by temporarily exempting EGOs 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 todays environment. but are concerned H.R. 3606 goes beyond what is necessary at the expense of protecting the investor. I encourage my colleagues to vote for this consumer and investorfriendly amendment.