Date: 2016-02-03
Speaker: MAXINE WATERS (democrat)
Chamber: H
State: California

Mr. Chairman. I yield myself such time as I may consume. Mr. Chairman. I rise today in strong opposition to H.R. 1675. It is really a package of five bills which will harm investors and. perversely. the very small businesses Republicans say they want to help. It does so by ignoring and supplanting the good judgment of the Securities and Exchange Commission. which has already sought to provide small businesses with regulatory relief in these same areas while also ensuring that investors in those businesses have the protections they deserve. The SECs balanced approach makes sense as investors who are not confident in the integrity of our markets will simply not invest. which means that jobcreating companies will not have the capital they need to grow. In particular. this bill would reduce corporate transparency for employee stockholders by allowing private companies to compensate their employees with up to $10 million in stock every year without having to provide them with relatively simple disclosures about the financials of the company or the risk associated with these securities. Mr. Chairman and Members. I am not going to attempt to hide the facts of this bill with a lot of rhetoric. The fact of the matter is. if employees are being given stock up to $10 million that they dont know the value of. and the companies dont have to disclose anything about the stock. they could end up with worthless stock. not worth anything. where they had great expectations that somehow in lieu of raises and more money that they probably deserve. they are being given rotten stock. This provision would double the current disclosure threshold. allowing larger companies with at least $34 million in total assets to encourage overinvestment by employees in a company that they cannot value and that may never permit them to sell except back to the company at a price set by the company. That is another aspect of this. This type of deregulation invites more Enrontype fraud into the market. Remember Enron? I hope we have not forgotten it already and what happened to those employees. Sometimes you had two members of the family. the husband and the wife. who both had this bad stock that they couldnt sell back. they couldnt do anything with. where employees have to trust the accounting of their companies but instead are left with valueless stock. Similarly. this bill would exempt over 60 percent of public companies from using a computerreadable format known as XBRL in their SEC filings. Exempting such a large number of filers would prevent these companies from being easily compared to other companies that use XBRL. to the disadvantage of analysts. researchers and the SEC. investors. and even the companies themselves. Basically. what you are doing is saying. we are going to have a bill here that would prevent the kind of information that analysts and researchers. the SEC and investors should have. comparing them with other companies because somehow we want to protect those who dont want people to really know what their worth is. This is very serious stuff. According to the SECs Investor Advocate. this exemption seriously impedes the ability of the SEC to bring disclosure into the 21st century. That is their quote. Title III of the bill further supplants the SECs good judgment by significantly expanding the Commissions recently provided relief for certain mergers and acquisition brokers without imposing eight important investor protections granted by the SEC. As a result. bad actors who may have committed fraud and shell companies could use this relief and brokers wouldnt have to make basic disclosures about their conflict of interest. In committee markup. Democrats attempted to close these loopholes. but our efforts were rejected in a partyline vote. Can you imagine that the SEC has taken a big step. and they have listened to concerns. they have listened to complaints. and they have gone overboard to make sure that they were providing relief for certain kinds of mergers and acquisitions. What this bill would do is take away the ability of the SEC to have investor protections that they have already been granted. So again. this bill. which includes five bills all designed. basically. to disregard the investors. disregard the smallbusiness people. disregard the average American citizen. is a bill that would simply go in the wrong direction. helping the corporations who would simply not want to disclose and not want to be seen for what they are. Title II also fails to sufficiently protect investors. as it eliminates offering liability for brokers who. under the guise of providing exchangetraded funds. or ETFs. could selectively use data to promote and sell highly risky. complex. and littleknown ETFs to unsuspecting investors. Finally. the bill seeks to impose additional regulatory burdens on the SEC by requiring it to conduct a duplicative and more onerous retrospective review of its rules. Specifically. title V would require the SEC to. within 5 years of enactment. review and revise all of its rules. which I should mention date back to 1934. It would also allow the SEC to override congressional mandates. including those in the DoddFrank Wall Street reform bill. Republicans on the Financial Services Committee are always claiming that the SEC is unresponsive to Congress. yet this provision in the bill would allow the Commission to unilaterally repeal the will of Congress at their whim. Indeed. this title is a thinly veiled Republican attempt to impose costbenefit type analyses on our regulators as a means of eliminating rules designed to benefit the public and protect investors. H.R. 1675 is an antiinvestor bill that will reduce transparency. establish additional administrative burdens on the SEC. and create easily exploited loopholes for bad actors. It is well known that Members on the opposite side of the aisle do not like our "cop on the block." which is the SEC. While they talk about what the SEC will. can. or will not do. they simply try and strangle it by being opposed to them having the adequate funding that they need in order to do their job. So. when we hear today. for example. as the chairman said. that he would be willing to support some funding for the SEC. it is very important that they put their money where their mouths are and make sure that the SEC has the money to do its job. In conclusion. this bill goes in the wrong direction. It is unfortunate that. at a time when we have gone through a recession based on 2008 and the unwillingness or the inability for our regulatory agencies to watch over our investors and to watch over our average smallbusiness people and homeowners. et cetera. and while we are trying desperately to clean up this mess with DoddFrank reforms. we would come in here at this time. having experienced all of this. with a bill like this that would try and protect the worst actors in the financial services industry. I urge my colleagues to oppose H.R. Mr. Chairman. I reserve the balance of my time.