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114th Congress    }                                        {    Report
                        HOUSE OF REPRESENTATIVES
 1st Session      }                                        {   114-201

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



 
             SMALL COMPANY SIMPLE REGISTRATION ACT OF 2015

                                _______
                                

 July 14, 2015.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

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

                              R E P O R T

                        [To accompany H.R. 1723]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 1723) to direct the Securities and Exchange 
Commission to revise Form S-1 so as to permit smaller reporting 
companies to use forward incorporation by reference for such 
form, having considered the same, report favorably thereon 
without amendment and recommend that the bill do pass.

                          PURPOSE AND SUMMARY

    H.R. 1723, the ``Small Company Simple Registration Act of 
2015,'' simplifies the securities registration process by 
amending the Securities and Exchange Commission's Form S-1 
registration statement, which is the basic registration form 
for new securities offerings, to allow smaller reporting 
companies to incorporate by reference any documents filed with 
the SEC after the effective date of the Form S-1.

                  BACKGROUND AND NEED FOR LEGISLATION

    H.R. 1723, the ``Small Company Simple Registration Act of 
2015,'' simplifies the securities registration process by 
amending the SEC's Form S-1 registration statement, which is 
the basic registration form for new securities offerings, to 
allow smaller reporting companies to incorporate by reference 
any documents filed with the SEC after the effective date of 
the Form S-1. This ``forward incorporation by reference'' 
eliminates the need for filing excessive paperwork with each 
subsequent filing. Simplifying this disclosure regime will 
lower compliance costs associated with filing redundant 
paperwork, which allows eligible companies to direct more 
resources to growing their business.
    The provisions in H.R. 1723 are derived from 
recommendations in the SEC's Government-Business Forum on Small 
Business Capital Formation Final Report for 2012. In January 
2014, SEC Commissioner Dan Gallagher endorsed this 
recommendation by calling on the SEC to reduce redundant 
disclosure requirements and streamline registration statements 
by permitting forward incorporation by reference in Form S-1 
registration statements. During the 113th Congress, Rep. Wagner 
included H.R. 1723 as a provision in a larger bill that the 
Committee approved on a roll-call vote of 32-26.
    At the April 29, 2015 Subcommittee hearing, Shane Kovacs 
testified that ``the friction costs with raising capital can be 
quite high, and any way that you can reduce those costs yields 
more capital to the companies that need it. By allowing forward 
incorporation on an S-1 per se means that you don't have to be 
continually--if there's some delay in the offering, you don't 
have to continually update those statements.''
    At the same hearing, Tom Quaadman noted that ``that [H.R. 
1723] is getting at is that if you create a company file, you 
can use forward incorporation as a way to streamline 
disclosures and get the information out to investors without 
repetitive disclosures. So what we're faced with here is that 
the explosion of disclosures isn't particularly--for smaller 
companies, isn't providing material information to investors.''
    At a 2014 hearing before the Subcommittee on similar 
legislation, Professor John Coffee from Columbia University Law 
School testified that ``For some time, the SEC's Government-
Business Forum on Small Business Capital Formation has called 
for changes to permit smaller reporting companies that have 
filed a Form S-1 to incorporate by reference documents filed 
with the SEC . . . I believe this one does have real efficiency 
justifications and could help smaller issuers.''

                                HEARINGS

    The Committee on Financial Services held a hearing on April 
29, 2015, titled ``Legislative Proposals to Enhance Capital 
Formation and Reduce Regulatory Burdens,'' at which this matter 
was examined.

                        COMMITTEE CONSIDERATION

    The Committee on Financial Services met in open session on 
May 20, 2015, and ordered H.R. 1723 to be reported favorably to 
the House without amendment by a recorded vote of 60 yeas to 0 
nays (Record vote no. FC-31), a quorum being present.

                            COMMITTEE VOTES

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. The 
sole vote in committee was a motion by Chairman Hensarling to 
report the bill favorably to the House without amendment. The 
motion was agreed to by a recorded vote of 60 yeas to 0 nays 
(Record vote no. FC-31), a quorum being present.


                      COMMITTEE OVERSIGHT FINDINGS

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the findings and recommendations of 
the Committee, based on oversight activities under clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
are incorporated in the descriptive portions of this report.

                    PERFORMANCE GOALS AND OBJECTIVES

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee states that H.R. 1723 
will reduce regulatory compliance costs by permitting smaller 
reporting companies to incorporate by reference in their Form 
S-1 registration statement any documents filed with the SEC 
after the effective date of such statement.

   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 ESTIMATES

    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:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, June 23, 2015.
Hon. Jeb Hensarling,
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. 1723, the Small 
Company Simple Registration Act of 2015.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Susan 
Willie and Ben Christopher.
            Sincerely,
                                                Keith Hall,
                                                          Director.
    Enclosure.

H.R. 1723--Small Company Simple Registration Act of 2015

    H.R. 1723 would change the registration process for small 
businesses that file statements with the Securities and 
Exchange Commission (SEC) in order to sell securities to the 
public. Specifically, for certain small issuers, the bill would 
reduce information that such firms must provide to the SEC 
after filing a registration statement.
    Based on information from the SEC, CBO estimates that 
implementing H.R. 1723 would cost about $1 million in fiscal 
year 2016 to complete a rulemaking process as required under 
the bill. Under current law the SEC is authorized to collect 
fees sufficient to offset its appropriation each year; 
therefore, we estimate that the net cost to the SEC would not 
be significant, assuming appropriation action consistent with 
that authority. CBO estimates that enacting H.R. 1723 would not 
affect direct spending or revenues; therefore, pay-as-you-go 
procedures do not apply.
    H.R. 1723 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.
    If the SEC increases fees to offset the costs associated 
with implementing the bill, H.R. 1723 would increase the cost 
of an existing mandate on private entities required to pay 
those fees. Based on information from the SEC, CBO estimates 
that the aggregate cost of the mandate would amount to about $1 
million in 2016 and would fall well below the annual threshold 
for private-sector mandates established in UMRA ($154 million 
in 2015, adjusted annually for inflation).
    The CBO staff contacts for this estimate are Susan Willie 
and Ben Christopher (for federal costs) and Logan Smith (for 
the private-sector impact). The estimate was approved by H. 
Samuel Papenfuss, 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.

                      ADVISORY COMMITTEE STATEMENT

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                  APPLICABILITY TO LEGISLATIVE BRANCH

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of the section 
102(b)(3) of the Congressional Accountability Act.

                         EARMARK IDENTIFICATION

    H.R. 1723 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

                    DUPLICATION OF FEDERAL PROGRAMS

    Pursuant to section 3(g) of H. Res. 5, 114th Cong. (2015), 
the Committee states that no provision of H.R. 1723 establishes 
or reauthorizes a program of the Federal Government known to be 
duplicative of another Federal program, a program that was 
included in any report from the Government Accountability 
Office to Congress pursuant to section 21 of Public Law 111-
139, or a program related to a program identified in the most 
recent Catalog of Federal Domestic Assistance.

                   DISCLOSURE OF DIRECTED RULEMAKING

    Pursuant to section 3(i) of H. Res. 5, 114th Cong. (2015), 
the Committee states that H.R. 1723 does not require any 
directed rulemakings.

             SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title

    This section cites H.R. 1723 as the ``Small Company Simple 
Registration Act of 2015.''

Section 2. Forward incorporation by reference for Form S-1

    This section provides that, within 45 days of enactment of 
the Act, the SEC must revise Form S-1 to permit a smaller 
reporting company (as defined in section 230.405 of title 17, 
Code of Federal Regulations) to incorporate by reference in a 
registration statement filed on such form any documents that 
such company files with the SEC after the effective date of 
such registration statement.

         CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

    H.R. 1723 does not amend any section of a statute. 
Therefore, the Office of Legislative Counsel did not prepare 
the report contemplated by Clause 3(e)(1)(B) of rule XIII of 
the House of Representatives.

                                  [all]