INCREASING SHAREHOLDER THRESHOLD FOR SEC REGISTRATION
(House of Representatives - November 02, 2011)

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[Pages H7226-H7229]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                              {time}  1250
         INCREASING SHAREHOLDER THRESHOLD FOR SEC REGISTRATION

  Mr. SCHWEIKERT. Mr. Speaker, I move to suspend the rules and pass the 
bill (H.R. 1965) to amend the securities laws to establish certain 
thresholds for shareholder registration, and for other purposes, as 
amended.
  The Clerk read the title of the bill.
  The text of the bill is as follows:

                               H.R. 1965

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

     SECTION 1. SHAREHOLDER REGISTRATION THRESHOLD.

       (a) Amendments to Section 12 of the Securities Exchange Act 
     of 1934.--Section 12(g) of the Securities Exchange Act of 
     1934 (15 U.S.C. 78l (g)) is amended--
       (1) in paragraph (1)--
       (A) by striking ``$1,000,000'' both places it appears and 
     inserting ``$10,000,000'';
       (B) in subparagraph (A), by striking ``; and'' and 
     inserting a semicolon;
       (C) in subparagraph (B), by striking the comma at the end 
     and inserting ``; and''; and
       (D) by inserting after subparagraph (B) the following:
       ``(C) in the case of an issuer that is a bank, as such term 
     is defined in section 3(a)(6) of this title, or a bank 
     holding company, as such term is defined in section 2 of the 
     Bank Holding Company Act of 1956 (12 U.S.C. 1841), not later 
     than 120 days after the last day of its first fiscal year 
     ended after the effective date of this subsection, on which 
     the issuer has total assets exceeding $10,000,000 and a class 
     of equity security (other than an exempted security) held of 
     record by 2,000 or more persons,''; and
       (2) in paragraph (4), by striking ``three hundred'' and 
     inserting ``300 persons, or, in the case of a bank, as such 
     term is defined in section 3(a)(6), or a bank holding 
     company, as such term is defined in section (2) of the Bank 
     Holding Company Act of 1956 (12 U.S.C. 1841), 1,200''.

[[Page H7227]]

       (b) Amendments to Section 15 of the Securities Exchange Act 
     of 1934.--Section 15(d) of the Securities Exchange Act of 
     1934 (15 U.S.C. 78o(d)) is amended, in the third sentence, by 
     striking ``three hundred'' and inserting ``300 persons, or, 
     in the case of bank, as such term is defined in section 
     3(a)(6), or a bank holding company, as such term is defined 
     in section (2) of the Bank Holding Company Act of 1956 (12 
     U.S.C. 1841), 1,200''.

     SEC. 2. STUDY AND REPORT ON REGISTRATION THRESHOLDS.

       (a) Study.--
       (1) Analysis required.--The Chief Economist and Director of 
     the Division of Corporation Finance of the Commission shall 
     jointly conduct a study, including a cost-benefit analysis, 
     of shareholder registration thresholds.
       (2) Costs and benefits.--The cost-benefit analysis under 
     paragraph (1) shall take into account--
       (A) the incremental costs and benefits to investors of the 
     increased disclosure that results from registration;
       (B) the incremental costs and benefits to issuers 
     associated with registration and reporting requirements; and
       (C) the incremental administrative costs to the Commission 
     associated with different thresholds.
       (3) Thresholds.--The cost-benefit analysis under paragraph 
     (1) shall evaluate whether it is advisable to--
       (A) increase the asset threshold;
       (B) index the asset threshold to a measure of inflation;
       (C) increase the shareholder threshold;
       (D) change the shareholder threshold to be based on the 
     number of beneficial owners; and
       (E) create new thresholds based on other criteria.
       (b) Report.--Not later than 2 years after the date of 
     enactment of this Act, the Chief Economist and the Director 
     of the Division of Corporation Finance of the Commission 
     shall jointly submit to the Committee on Banking, Housing, 
     and Urban Affairs of the Senate and the Committee on 
     Financial Services of the House of Representatives a report 
     that includes--
       (1) the findings of the study required under subsection 
     (a); and
       (2) recommendations for statutory changes to improve the 
     shareholder registration thresholds.

     SEC. 3. RULEMAKING.

       Not later than one year after the date of enactment of this 
     Act, the Commission shall issue final regulations to 
     implement this Act and the amendments made by this Act.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Arizona (Mr. Schweikert) and the gentleman from Connecticut (Mr. Himes) 
each will control 20 minutes.
  The Chair recognizes the gentleman from Arizona.


                             General Leave

  Mr. SCHWEIKERT. Mr. Speaker, I ask unanimous consent that all Members 
may have 5 legislative days in which to revise and extend their remarks 
and to add extraneous material on this bill.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Arizona?
  There was no objection.
  Mr. SCHWEIKERT. I reserve the balance of my time.
  Mr. HIMES. Mr. Speaker, I yield myself such time as I may consume.
  If we've learned one thing in the last 5 years, it is that the body 
of financial regulation which keeps us, as a people, safe must not be 
static, must not be dead, but, rather, a living thing that evolves and 
changes, not just to make sure that innovations and new products and 
new businesses don't get us into the kinds of troubles that we've 
experienced in the last 5 years, but also to make sure that the 
financial services industry remains entrepreneurial, that people who 
want to start small banks, small asset managers, small businesses of 
any kind have an opportunity to get started, to raise capital and to do 
well.
  The securities laws that were established in 1933 and 1934 need to 
evolve and adapt to reflect the conditions in today's market. This is 
why I've introduced H.R. 1965. This bill would allow banks and bank 
holding companies to remain private to a point at which they believe it 
is in their interest to go public, undertake the fairly lengthy and 
complicated process of public registration at a moment when it makes 
sense for them to go into the public markets.
  The original securities laws stipulated that banks would have to 
register with the SEC when they had more than 500 shareholders. Our 
small banks, our community banks experience difficulties because as 
original investors move on or pass on and leave shares to their 
beneficiaries, very rapidly banks reach that 500 shareholder number and 
are required to undertake the very complicated, up-front processes, but 
also the ongoing reporting requirements associated with public 
registration.
  H.R. 1965 would very simply raise that threshold from 500 
shareholders to 2,000 shareholders, again allowing these small banks to 
pick the optimal moment at which they go public, to allow them to 
continue to raise money in the private markets from private investors 
until such point that it makes sense for them to register and go 
public.
  Now, it might be asked, is this prudent? And the answer to that 
question, of course, is that the banks and the bank holding companies 
are very heavily regulated by their prudential regulators. From the 
moment they are chartered, they are overseen by State and Federal 
entities that are designed to keep them from any sort of fraud from 
imprudent activities, and so this is an industry that is already 
heavily regulated, even for these companies who remain private.
  I'd like to note that this bill provides relief to small banks by 
recognizing that unique characteristic, that they are regulated, and 
that they should continue to have access to the capital sources that 
got them started until they choose to go public.
  I will note that this bill passed with broad bipartisan support in 
both subcommittee and committee, and I'd like to close my statement by 
thanking Chairman Bachus and Ranking Member Frank, as well as 
subcommittee Chair Garrett and Ranking Member Waters, for their hard 
work and cooperation in putting this bill together.
  With that, I yield 4 minutes to the minority whip, Mr. Hoyer of 
Maryland.
  Mr. HOYER. I thank the gentleman for yielding, and I congratulate him 
for his leadership on this effort.
  I thank my friend, Chairman Bachus, for his facilitating the passage 
of this legislation.
  Community banks, Mr. Speaker, are the life blood of our local 
economies. They are locally owned and operated. They know their local 
businesses and residents intimately, and lend to them, not just because 
it's a sound business decision, but also because it benefits the 
greater community.
  With the credit and lending crisis we have experienced over the past 
couple of years, the small banks that operate in our local communities 
face numerous challenges just to stay afloat. These are the banks we 
need to see lending to small businesses and homeowners, but they are 
hamstrung in their attempt to raise capital by outdated SEC 
registration requirements. This one is over half a century old.
  Under the nearly 50-year-old 500 investor exemption rule, banks have 
to register with the SEC if they have more than 500 shareholders. The 
gentleman from Connecticut (Mr. Himes), whose bill this is, explained 
why that is difficult and why it changes as people who have stock die 
and leave their stock to more people and to heirs. Banks that have 
exceeded this low threshold must provide extensive and costly financial 
disclosure under our Federal securities laws.
  Now, over the years, we have upped the threshold in terms of dollars 
that the bank assets have, but we have not affected the number of 
shareholders. To reverse this registration, they are then forced to 
lower their number of shareholders by buying back stock which, all too 
often, means losing local shareholders who keep these banks connected 
with their local communities.
  The rationale behind SEC registration rules generally is to provide 
effective and timely disclosure to protect investors, which of course 
all of us support. However, as Maryland's Banking Supervisor Mark 
Kaufman notes, the current rule adds to banks' cost with little 
associated benefits, especially considering that, unlike most private 
companies, banks file public disclosure already on a quarterly basis 
and do so on a more timely basis than public companies, as the 
gentleman from Connecticut pointed out in his remarks.

                              {time}  1300

  The American Bankers Association, the Independent Community Bankers 
of America, State groups like the Maryland Bankers Association and 
small banks throughout Maryland and the Nation support raising this 
threshold to 2,000, which is what this bipartisan legislation would do. 
This will lift a significant regulatory burden on

[[Page H7228]]

our community banks without any offsetting price in regulatory 
oversight and make it easier for them to raise capital so they can 
continue to lend and support job growth in our communities.
  I strongly urge my colleagues on both sides of the aisle to support 
H.R. 1965.
  I note that my friend from Arkansas (Mr. Womack) is also on the 
floor. I want to thank him for his leadership in this effort as well.
  Mr. HIMES. Mr. Speaker, I ask unanimous consent that the gentleman 
from Michigan (Mr. Peters) be designated to control the balance of my 
time.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Connecticut?
  There was no objection.
  The SPEAKER pro tempore. Without objection, the gentleman from 
Alabama will control the 20 minutes for the majority.
  There was no objection.
  Mr. BACHUS. Thank you, Mr. Speaker.
  At this time I would like to yield 2 minutes to the gentleman from 
Arkansas (Mr. Womack), an original cosponsor of the legislation.
  Mr. WOMACK. I thank the distinguished chairman for the time this 
afternoon, and I'd also like to offer my thanks and appreciation to my 
friend from Connecticut for his leadership on the issue. I am indeed an 
original cosponsor.
  The unemployment rate in our Nation is still in excess of 9 percent. 
Millions of Americans are out of work. I just recently came back from 
my district where we had a job fair, and of the 300 or 400 jobs that 
were allegedly available on that particular day, there were several 
times more than that looking. It is a painful reminder to me that job 
creation is still critical to our country.
  I'm also reminded as to how important it is that this job creation is 
linked to access to capital by businesses large and small. The slow 
pace of the recovery, the burdens of archaic and oftentimes unnecessary 
regulation have fallen disproportionately on small businesses, and 
particularly community banks.
  As was commented on just a moment ago by the distinguished minority 
whip, the community banks are the lifeblood of our communities. They 
help a family purchase a home. They allow that mechanic the necessary 
capital to open his first shop. They help a chef open her first 
restaurant. Small businesses rely on these banks to give them a chance, 
a chance to take advantage of the American Dream.
  Today, this Chamber has the opportunity to make it easier for 
community banks and small businesses to operate by removing a barrier 
to raising capital. So today we have the opportunity to pass H.R. 1965, 
and I strongly encourage my colleagues to support it. Your support will 
result in the fact that community banks will have the flexibility they 
need to raise capital without having to comply with onerous SEC 
regulations intended for larger banks. They will use this money in my 
district, the Third District of Arkansas, to create jobs, and that will 
be good for my district, it will be good for our State, and it will be 
good for America.
  Again, my thanks for the time given to me by leadership and to my 
friend from Connecticut, and I strongly encourage support of H.R. 1965.
  Mr. PETERS. I reserve the balance of my time.
  Mr. BACHUS. Mr. Speaker, at this time I would like to yield 1\1/2\ 
minutes to the subcommittee chair, Mrs. Capito from West Virginia, to 
speak in favor of the bill.
  Mrs. CAPITO. I thank the chairman of the committee, for recognizing 
me.
  I would like to speak in support of the gentleman from Connecticut's 
legislation, H.R. 1965, which would amend the securities law to 
establish certain thresholds for shareholder registration.
  We all recognize that capital is tight for lenders and for 
businesses, and this bill, along with several others that were passed 
out of the Financial Services Committee, will address the issue of 
capital formation and allow institutions much needed resources to 
stimulate our economy. More capital equals more jobs, equals more 
people back to work, equals a growing economy.
  Cost of public companies to register with the SEC can be very, very 
burdensome, and this cost is augmented when it's applied to smaller 
institutions. They don't have the resources to be able to meet the 
demands that larger companies do. So this bill would allow banks and 
bank holding companies access to more capital for that very precious 
and much needed impetus of job creation.
  By raising the threshold from 500 to 2,000, it would permit easier 
deregistration, and the expenses that are tied up with registering 
would then go to stimulating our economy. More lending, more lending 
for a florist, a restaurant. I noticed in Charleston, a long-time 
restaurant that had been out of business was reopened under new 
ownership just this morning. And that's good news, and that's the kind 
of capital that small businesses need to be able to create jobs and 
stimulate the economy.
  I believe this is a good piece of legislation whose effect on the 
economy will far outweigh any risks that it could propose, and I 
heartily endorse the gentleman from Connecticut's legislation, H.R. 
1965.
  Mr. PETERS. Mr. Speaker, I currently do not have additional speakers; 
so I reserve the balance of my time.
  Mr. BACHUS. I thank the gentleman from Michigan.
  At this time I would like to yield 1\1/2\ minutes to the gentleman 
from Michigan (Mr. Huizenga).
  Mr. HUIZENGA of Michigan. Mr. Speaker, I rise today in support of 
H.R. 1965.
  We missed that number by one. It should be 1964, because 1964 was the 
last time that they actually updated these registration numbers. That 
is a very long time. I can tell you, at age 42, it was a number of 
years before I was even born the last time that this happened, and it's 
high time that it does happen.
  I can also tell you, Mr. Speaker, that here with the Republican 
Americans' Job Creators Plan, the first thing on that list is: Empower 
small businesses and reduce government barriers to job creation.
  And I really hope that this bipartisan bill doesn't become part of 
that lost 15 over in the Senate. This is a very proactive, bipartisan 
step that this body is taking that as it goes over across to that next 
Chamber needs to be addressed. We need to do this because we must 
modernize; we must update; we must do these things to remain 
competitive on a world market.
  Mr. Speaker, I appreciate the opportunity and am pleased that I could 
rise in support of that bill.
  Mr. BACHUS. Mr. Speaker, I yield 5 minutes to the gentleman from 
Arizona (Mr. Schweikert).
  Mr. SCHWEIKERT. First, I would like to offer a thank you to my 
chairman, Mr. Bachus, and also to the sponsor of the bill, my friend 
from Connecticut.
  H.R. 1965 actually has an opportunity here to actually solve some 
things that have been of frustration, and learning some of the story 
was fascinating.
  In Arizona, many of our community banks are quite new, but across the 
country you hear the story of community banks that have been there for 
many, many, many years. And we had one come testify and was telling us 
the story off to the side that most of its shareholders actually go 
back to returning soldiers of World War II, and they've literally had 
the same families, the same family members holding these shares for 50, 
60 years. It causes one little technical problem: They've literally 
been up against their 500 shareholders for all of those years. So their 
ability to access new capital has been limited by these rules.
  So this is a classic case of, if we want our banking system, 
particularly our community banks, our local lenders, to be capitalized, 
which they're typically capitalized with local investments, what a 
terrific piece of legislation. And it's one of those moments where you 
stand here and you look across the aisle and you find yourself smiling, 
saying, This is terrific. We're doing something bipartisan. We're doing 
something that actually produces capital in our Main Street of our 
communities, particularly for those lenders that often fund our local 
neighborhood businesses. We're heading in the right direction here.

[[Page H7229]]

                              {time}  1310

  Mr. PETERS. I continue to reserve the balance of my time.
  Mr. BACHUS. Mr. Speaker, I yield myself such time as I may consume.
  About 2 years ago, the gentleman from Michigan (Mr. Peters) and I 
were in Kabul and Kandahar together on a trip.
  I remember talking to my Democratic colleague, saying that there must 
be things that Republicans and Democrats can work together on to solve. 
We were obviously in a country that was torn apart by differences, but 
we both had something in common--we were concerned about our 
constituents; we were concerned about unemployment; and we were 
concerned about jobs. I think that's true of every Member in this body.
  We know that the path to prosperity is jobs and that, if Americans 
are working, if they're earning, they feel better about themselves and 
that, if they're losing their jobs, then it's going to be not only a 
problem for them and their families but for their communities and for 
their country.
  I am happy to report--and I think it's fitting that the gentleman 
from Michigan would be across the aisle from me managing the time for 
the minority--that here we are moving four pieces of legislation today, 
tomorrow, and on Friday, legislation which will create jobs and will do 
so without government expense. In fact, they'll do so with some 
marginal savings to the government but with a great savings to those 
businesses.
  This morning--and I don't know that it was a coincidence--the job 
figures came out. Large corporations lost 1,000 employees last month, 
but our middle-sized and small businesses created 108,000 jobs. Now, 
those aren't enough jobs; those aren't enough jobs for the people 
graduating and going into the workforce, but that's where job creation 
is coming from in the economy now--from small- and middle-sized 
businesses, those with under 500 employees particularly, and from that 
midrange of 50 to 500 employees.
  This bill that the gentleman from Connecticut (Mr. Himes) has brought 
forward has won bipartisan support because it actually will create jobs 
in those small community banks and credit unions because it will make 
their cost of capital less. In a recent survey, 70 percent of small- 
and middle-sized businesses, those with 500 or fewer employees, said if 
we had more capital, if we had more funding, we would hire. This is 70 
percent. Only 14 percent said they were going to hire. The difference 
in that number is that the others weren't sure that they could get 
capital. There are two ways that you obtain capital to create jobs. One 
is you go and borrow it from a bank, or from an insurance company in 
some cases, or from someone else. But there is another way, which is by 
someone willing to invest in your company.
  As a small boy, I can remember my father had a business, and before 
that, he'd invested with another man in a business. I think that one of 
the American Dreams is not only owning a house--and that's still an 
American Dream to own your own home even in the circumstances we've 
been through--but either to have your own business or to be able to 
invest in somebody else's business.
  The gentleman from Connecticut's legislation will allow that 
threshold of people who want to invest in a community-based financial 
institution, and it will encourage those community banks to allow more 
shareholders, more people, to participate. Yes, they will be 
participating in the risk, but they'll also be participating in the 
profit, which is really the American system. When you invest, you take 
risks, but if things are successful, you profit. That's where the risks 
and the profits ought to be taken. They shouldn't be taken by the 
taxpayers involuntarily, and they shouldn't be taken by the government. 
The government shouldn't take the taxpayers' money and invest in 
business. It is those taxpayers--our constituents, our citizens--who 
ought to make the decisions on what companies they want to invest in. 
We all know community banks are struggling today. It will allow them to 
attract investors, people who say, ``I want to invest in your bank.'' 
They may be people who do business with the banks, and will probably be 
people who live in the community.
  This bill will be the first of four bills that we bring forward, and 
they are going to be successful. They're going to move from the House 
to the Senate, I'll predict this week, because, as the minority whip, 
the gentleman from Maryland, said, there is agreement that this is the 
right thing to do and that we do have an obligation not only to oppose 
some things but to also be for positive legislation. The House this 
week will be for something. It will be for job creation. It will be for 
allowing people to invest. It will be enabling companies to attract 
that capital and hire people. So we can feel very good about ourselves 
this week, and it can start with this bill.
  This is not a minor piece of legislation, but it's on suspension 
because it enjoys widespread support, as does the bill tomorrow. As for 
the two in the following days, we've worked out the differences. The 
gentleman from Colorado (Mr. Perlmutter) had a concern about a bill 
later this week. He felt like it didn't have enough investor 
protection. We've addressed that concern and have added his suggestion 
to the bill.
  All four of these bills that will move this week are bipartisan 
bills. They're not Republican bills, they're not Democratic bills. 
They're bipartisan bills. I commend the minority whip for speaking out 
for these bills--I think that bodes well--and I hope the Senate was 
listening. I also appreciate the gentleman from Connecticut for a bill 
that really is long overdue. It will immediately allow our community 
banks to invest and not be dependent on the government for help.
  With that, I yield back the balance of my time.
  Mr. PETERS. Mr. Speaker, I just want to join in and thank the 
gentleman from Connecticut for bringing this very commonsense piece of 
legislation before us. It is essential to bringing capital into our 
local communities and creating jobs, as Chairman Bachus mentioned. I 
also want to thank Chairman Bachus for his leadership on this issue.
  I remember very fondly our trip to Afghanistan. It is nice that we 
have found common ground and that we are working today in a bipartisan 
fashion to make sure that our communities are strong and are vibrant 
and have the tools necessary to create additional jobs.
  So, with that, I would certainly encourage my colleagues to support 
this important piece of legislation, and I yield back the balance of my 
time.
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentleman from Arizona (Mr. Schweikert) that the House suspend the 
rules and pass the bill, H.R. 1965, as amended.
  The question was taken.
  The SPEAKER pro tempore. In the opinion of the Chair, two-thirds 
being in the affirmative, the ayes have it.
  Mr. BACHUS. Mr. Speaker, on that I demand the yeas and nays.
  The yeas and nays were ordered.
  The SPEAKER pro tempore. Pursuant to clause 8 of rule XX, further 
proceedings on this question will be postponed.

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