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112th Congress                                            Rept. 112-406
                        HOUSE OF REPRESENTATIVES
 2d Session                                                      Part 2

======================================================================



 
REOPENING AMERICAN CAPITAL MARKETS TO EMERGING GROWTH COMPANIES ACT OF 
                                  2011

                                _______
                                

 March 6, 2012.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

         Mr. Bachus, from the Committee on Financial Services, 
                        submitted the following

                          SUPPLEMENTAL REPORT

                        [To accompany H.R. 3606]

    This supplemental report shows the cost estimate of the 
Congressional Budget Office with respect to the bill (H.R. 
3606), as reported, which was not included in part 1 of the 
report submitted by the Committee on Financial Services on 
March 1, 2012 (H. Rept. 112-406, Part 1).
    This supplemental report is submitted in accordance with 
clause 3(a)(2) of rule XIII of the Rules of the House of 
Representatives.
    This supplemental report contains the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974 that was not 
available at the time part 1 of the report was filed and 
updates other sections of the report accordingly. Any section 
appearing in this report should be deemed to supersede the same 
section in part 1 of this report.

   NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX EXPENDITURES

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of new budget authority, entitlement 
authority, or tax expenditures or revenues contained in the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to section 402 of the Congressional 
Budget Act of 1974.

                        COMMITTEE COST ESTIMATE

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                  CONGRESSIONAL BUDGET OFFICE ESTIMATE

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:
                                                     March 2, 2012.
Hon. Spencer Bachus,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3606, the 
Reopening American Capital Markets to Emerging Growth Companies 
Act of 2011.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Susan Willie.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

H.R. 3606--Reopening American Capital Markets to Emerging Growth 
        Companies Act of 2011

    H.R. 3606 would authorize the Securities and Exchange 
Commission (SEC) to exempt emerging growth companies from 
certain disclosure, auditing, and reporting requirements. The 
bill defines an emerging growth company (EGC) as an issuer of 
securities with less than $1 billion in annual revenues, and 
following an initial offering of securities, less than $700 
million in publicly traded shares. A company may retain the EGC 
designation for a limited time--until its gross revenues or 
publicly traded share volume exceed those levels, or five years 
after an initial public offering of stock, whichever comes 
earlier.
    The bill would exempt EGCs from requirements to:
           Allow shareholders to vote on executive 
        compensation;
           Provide certain financial information in 
        registration statements filed with the SEC;
           Comply with certain financial auditing 
        rules; and
           Limit certain communication with brokers and 
        dealers of securities, as well as investors.
    Based on information from the SEC, CBO estimates that the 
SEC would require 40 additional staff positions to handle new 
review and enforcement activities that would result from 
changes under the bill. CBO estimates that implementing H.R. 
3606 would cost about $50 million over the 2012-2017 period, 
assuming appropriation of the necessary amounts. Further, under 
current law, the SEC is authorized to collect fees to offset 
the cost of its annual appropriation each year; therefore, CBO 
estimates that the net cost to implement the provisions of H.R. 
3606 would not be significant, assuming annual appropriation 
actions consistent with the agency's authorities.
    Enacting H.R. 3606 would increase both direct spending and 
revenues by amending provisions of law that affect the 
activities of the Public Company Accounting Oversight Board 
(PCAOB); therefore, pay-as-you-go procedures apply. The PCAOB, 
whose spending authority is not subject to appropriation 
action, is authorized to collect fees to offset its operating 
expenses. Those fees are recorded in the budget as revenues. 
CBO estimates that the effect on both revenues and direct 
spending would be insignificant over the 2012-2022 period.
    H.R. 3606 contains no intergovernmental mandates as defined 
in the Unfunded Mandates Reform Act (UMRA) and would not affect 
the budgets of state, local, or tribal governments.
    H.R. 3606 would impose private-sector mandates, as defined 
in UMRA, on national securities associations registered with 
the SEC. Such associations, along with the SEC, govern the 
conduct of association members with regard to transactions 
related to securities. The bill would prohibit national 
securities associations from issuing rules to restrict certain 
oral and written communications related to public offerings of 
emerging growth companies. Currently, only one association is 
registered with the SEC--a self-regulatory organization for 
securities firms, brokers, and dealers. In addition, to the 
extent that the SEC would increase fee collections to recover 
any additional costs incurred to handle new review and 
enforcement activities, the bill could impose a mandate on 
private entities. Based on information from the SEC, CBO 
estimates that the cost of the mandates would be small relative 
to the annual threshold established in UMRA for private-sector 
mandates ($146 million in 2012, adjusted annually for 
inflation).
    On March 2, 2012, CBO transmitted a cost estimate for H.R. 
3606 as posted on the Web site of the House Committee on Rules 
on February 27, 2012. That version of the bill incorporates the 
version of H.R. 3606 as ordered reported by the House Committee 
on Financial Services on February 16, 2012. The CBO cost 
estimates for similar provisions of the bills are the same.
    The CBO staff contact for this estimate is Susan Willie 
(for federal costs) and Paige Piper/Bach and Vi Nguyen (for the 
impact on the private sector). This estimate was approved by 
Theresa Gullo, Deputy Assistant Director for Budget Analysis.

                       FEDERAL MANDATES STATEMENT

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.