Group of capital formation bills also includes measures on big banks' 'living wills,' global insurance rules, non-bank stress tests, derivatives trading rules

The House on July 17 passed, by a vote of 406-4, S. 488, the JOBS and Investor Confidence Act, a bipartisan package of 32 bills mostly oriented to capital formation. The bill passed under the expedited process called suspension of the rules, which is reserved for bipartisan legislation and requires a two-thirds supermajority for passage. The bills included in the package, which was negotiated by Financial Services Committee Chairman Jeb Hensarling (R-TX) and Ranking Member Maxine Waters (D-CA) and unveiled on Monday (July 16), had been approved by the House or the Financial Services Committee by large bipartisan votes. As part of a previous agreement with Hensarling after the Senate in March passed a Dodd-Frank financial reform bill easing rules for smaller banks (S. 2155), Senate Majority Leader Mitch McConnell had promised floor time for a group of capital formation bills.

A White House statement released after the vote said that as the bill now moves to the Senate, the administration will work with congressional leaders to make "several technical and substantive changes to the legislation, with the goal of presenting final legislation to the president as soon as possible." In press statements, House Speaker Paul Ryan (R-WI) said the package would "cut down on regulations that are holding back small businesses and start-ups. It's the third piece in a line of critical bipartisan bills aimed at creating jobs, unlocking innovation, and driving growth." Ranking Member Waters thanked Chairman Hensarling "and the staff of the Committee on both sides of the aisle for the work that they have been doing, working together to live up to what we always say — that we all support small businesses, their access to capital and protecting investors. This is true bipartisanship we are witnessing today."

The text of S. 488 is attached with this Alert. Below is an edited committee summary of the bills included in the package, a longer version of which is posted here.

HR 79, Helping Angels Lead Our Startups (HALOS) Act — Sponsored by Steve Chabot (R-OH) and Kyrsten Sinema (D-AZ), this bill defines an "angel investor group" and clarifies a regulation issued by the Securities and Exchange Commission (SEC) to ensure that startups have the opportunity to make a presentation to interested parties without running afoul of the securities laws. It passed the House on January 10, 2017 with strong bipartisan support, 344-73.

HR 435, The Credit Access and Inclusion Act — Sponsored by Keith Ellison (D-MN) and Robert Pittenger (R-NC), the bill amends the Fair Credit Reporting Act (FCRA) to authorize an entity, including the Department of Housing and Urban Development (HUD) to furnish data to consumer reporting agencies regarding an individual's history of on-time payments with respect to a lease, or contracts for utilities and telecommunications services. The bill passed the House by voice vote on June 25, 2018.

HR 477, Small Business Mergers, Acquisitions, Sales & Brokerage Simplification Act — Sponsored by Bill Huizenga (R-MI) and Brian Higgins (D-NY), the bill alleviates costs to small business owners by simplifying the securities registration system for mergers and acquisition brokers who help transfer the ownership of small, privately held companies. It also disqualifies "bad actors" from using the simplified process and does not allow transactions involving shell companies. HR 477 passed the House, 426-0, on December 7, 2017.

HR 1585, Fair Investment Opportunities for Professional Experts Act — Sponsored by David Schweikert (R-AZ) and Carolyn Maloney (D-NY), HR 1585 modernizes the definition of "accredited investor" so those who do not have a high income or high net worth but do have the education and job experience to evaluate investment risks and merits can participate in the growth of promising companies. The bill passed the house by voice vote on November 1, 2017.

HR 1645, Fostering Innovation Act — Sponsored by Kyrsten Sinema (D-AZ) and Trey Hollingsworth (R-IN), the bill amends Section 404(b) of the Sarbanes-Oxley Act to extend the exemption to comply with the law for certain low-revenue emerging growth companies that would otherwise lose their exempt status at the end of the five-year period that applies under current law. The bill passed the Financial Services Committee by a vote of 48-12 on October 12, 2017.

HR 2219, End Banking for Human Traffickers Act of 2018 — Sponsored by Ed Royce (R-CA) and Carolyn Maloney (D-NY), HR 2219 amends the Victims of Trafficking and Violence Protection Act of 2000 to add the Treasury Secretary to the President's Interagency Task Force to Monitor and Combat Trafficking, requires the task force to submit to Congress an analysis of anti-money laundering (AML) efforts of the U.S. government and financial institutions relating to human trafficking, and requires the Treasury Secretary to designate an office within the Office of Terrorism and Financial Intelligence to coordinate efforts to combat human trafficking. It passed the House, 408-2, on April 10, 2018.

HR 2364, Investing in Main Street Act — Sponsored by Judy Chu (D-CA) and Stephen Knight (R-CA), the bill amends the Small Business Investment Act by increasing the percentage a financial institution or federal savings association can invest in a small business investment company (SBIC) to 15% and require the financial institution or the federal savings association to be approved by their federal regulator prior to investing more than 5%. HR 2364 passed the House by voice vote on July 24, 2017.

HR 3555, Exchange Regulatory Improvement Act — Sponsored by Barry Loudermilk (R-GA) and Gregory Meeks (D-NY), the bill, as amended, requires the SEC to set forth the facts and circumstances it considers in determining what is a "facility" of an exchange. The bill passed the Financial Services Committee on July 11, 2018 by voice vote.

HR 3903, Encouraging Public Offerings Act — Sponsored by Ted Budd (R-NC) and Rep. Meeks (D-NY), the bill expands to all public companies certain provisions of the 2012 JOBS Act, which previously applied only to an emerging growth company (EGC). The bill allows issuers to submit to the SEC, for confidential review, draft registration statements for IPOs and for follow-on offerings within one year of an IPO. The bill also allows all companies to meet with qualified institutional buyers and other institutional investors to gauge interest. It passed the House, 419-0, on November 1, 2017.

HR 3972, Family Office Technical Correction Act — Sponsored by Carolyn Maloney (D-NY), HR 3972 clarifies that family offices and family clients, as defined in section 275.202(a)(11)(G)-1 of title 17, Code of Federal Regulations, are accredited investors under Regulation D of the SEC. HR 3972 passed the House by voice vote on October 24, 2017.

HR 4281, Expanding Access to Capital for Job Creators Act — Sponsored by Ruben Kihuen (D-NV) and Alex Mooney (R-WV), the bill amends the Securities Exchange Act of 1934 to have the SEC's Advocate for Small Business Capital Formation identify any unique challenges to rural area small businesses when identifying problems that small businesses have with securing access to capital. The bill passed the Financial Services Committee, 60-0, on November 15, 2017.

HR 4292, Financial Institution Living Will Improvement Act — Sponsored by Lee Zeldin (R-NY) and Carolyn Maloney (D-NY), the bill amends the Dodd-Frank Act to reform the resolution plan submission "living will," requiring bank holding companies to submit their plans to the Federal Reserve and the FDIC every two years. The Federal Reserve and FDIC must provide feedback on a resolution plan within six months after a submission, and must publicly disclose the assessment framework used to review plans' adequacy. It passed the House on January 30, 2018, by a vote of 414-0.

HR 4294, Prevention of Private Information Dissemination Act — Sponsored by David Kustoff (R-TN), the bill establishes criminal penalties for the unauthorized disclosure of living will and stress test determinations and other individually identifiable information by federal officials, consistent with existing penalties for other unauthorized disclosure of confidential records by federal officials. It passed the House on June 26, 2018, 392-2.

HR 4537, International Insurance Standards Act — Sponsored by Sean Duffy (R-WI) and Denny Heck (D-WA), the bill ensures that international insurance standards and agreements are consistent with the U.S. insurance system and provides greater congressional oversight and transparency on international insurance standard negotiations. The bill passed the House by voice vote on July 10, 2018.

HR 4566, Alleviating Stress Test Burdens to Help Investors Act (Secs. 2 and 3) — Sponsored by Bruce Poliquin (R-ME), the section of this legislation to be included in JOBS Act 3.0 amends the Dodd-Frank Act to exempt nonbank financial institutions not primarily regulated by either a federal banking agency or the Federal Housing Finance Agency from Dodd-Frank's mandatory company-run stress-testing requirements. The bill also clarifies that the SEC and the CFTC retain authority to issue regulations requiring nonbank financial companies to conduct periodic analysis of the financial condition of such companies. The full bill previously passed the House on March 20, 2018, by a vote of 395-19.

HR 4768, National Strategy for Combating the Financing of Transnational Criminal Organizations Act — Sponsored by David Kustoff (R-TN) and Kyrsten Sinema (D-AZ), HR 4768 requires the President, through the Secretary of the Treasury, to develop a national strategy to combat the financial networks of transnational criminal organizations (TCOs) not later than one year after enactment and every two years thereafter. Among other provisions, the strategy will assess the most significant TCO threats and the individuals, entities and networks that provide financial support or facilitation to those TCOs. HR 4768 passed the House by voice vote on March 6, 2018.

HR 5288, Common Sense Credit Union Capital Relief Act — Sponsored by Bill Posey (R-FL) and Denny Heck (D-WA), the bill delays the effective date of the rule used by the National Credit Union Administration titled "Risk-Based Capital" from 2019 to 2021.

HR 5749, Options Markets Stability Act — Sponsored by Randy Hultgren (R-IL) and Bill Foster (D-IL), the legislation requires the prudential regulators to implement a risk-adjusted approach to value centrally-cleared exchange-listed derivatives as it relates to capital rules to better and more accurately reflect exposure and to promote market-making activity. On July 10, 2018, the bill passed the House by a vote of 385-0.

HR 5783, Cooperate with Law Enforcement Agencies and Watch Act of 2018 — Sponsored by French Hill (R-AR) and Bill Foster (D-IL), the bill provides a safe harbor for financial institutions that maintain a customer account at the request of a Federal, State, tribal or local law enforcement agency. The bill passed the House, 379-4, on June 25, 2018.

HR 5877, Main Street Growth Act — Sponsored by Tom Emmer (R-MN), the bill allows venture exchanges to register with the SEC to provide a venue that is tailored to the needs of small and emerging companies and offers qualifying companies one venue in which their securities can trade. It passed the House by voice vote on July 10, 2018.

HR 5953, Building Up Independent Lives and Dreams (BUILD) Act — Sponsored by Barry Loudermilk (R-GA) and Brad Sherman (D-CA), HR 5953 allows certain non-profits that are conducting charitable mortgage loan transactions to use either the truth in lending (TIL), good faith estimate (GFE), and HUD-1 forms, or those required under the TILA-RESPA Integrated Disclosure (TRID) rule. HR 5953 passed the House by voice vote on July 10, 2018.

HR 5970, Modernizing Disclosures for Investors Act — Sponsored by Ann Wagner (R-MO), the bill requires the SEC to provide a report to Congress with a cost-benefit analysis of EGCs' use of SEC Form 10-Q, including the costs and benefits to investors of the current requirements for reporting on the form, as well as the expected impact of the use of alternative formats for quarterly reporting by EGCs. The House passed HR 5970 by voice vote on July 10, 2018.

HR 6069, Fight Illicit Networks and Detect (FIND) Trafficking Act — Sponsored by Juan Vargas (D-CA) and Keith Rothfus (R-PA), the bill requires the Comptroller General of the United States to carry out a study on how virtual currencies and online marketplaces are used to buy, sell, or facilitate the financing of goods or services associated with sex trafficking or drug trafficking, and for other purposes. The bill passed the House on June 25, 2018 by voice vote.

HR 6139, Improving Investment Research for Small and Emerging Issuers Act — Sponsored by Bill Huizenga (R-MI) and Maxine Waters (D-CA), the bill requires the SEC to carry out a study to evaluate the issues affecting the provision of and reliance upon investment research into small issuers and pre-IPO companies, including EGCs and other small issuers. It passed the House by voice vote on July 10, 2018.

HR 6177, Developing and Empowering our Aspiring Leaders (DEAL) Act — Sponsored by Trey Hollingsworth (R-IN), the bill requires the SEC to revise the definition of a qualifying investment to include equity securities acquired in a secondary transaction. The bill passed the Financial Services Committee on July 11, 2018 on voice vote.

HR 6319, Expanding Investment in Small Businesses Act — Sponsored by Randy Hultgren (R-IL), the bill requires the SEC to study whether the current diversified fund limit threshold for mutual funds constrains their ability to take meaningful positions in small-cap companies. The committee passed the bill by voice vote on July 11, 2018.

HR 6320, Promoting Transparent Standards for Corporate Insiders Act — Sponsored by Maxine Waters (D-CA), the bill requires the SEC to consider certain types of amendments to Rule 10b5-1 to ensure that corporate insiders are not able to indirectly engage in illegal insider trading through changes to their trading plans. The bill passed the Financial Services Committee on July 11, 2018 by voice vote.

HR 6321, Investment Adviser Regulatory Flexibility Improvement Act — Sponsored by Gwen Moore (D-WI) and Bill Huizenga (R-MI), the bill directs the SEC to consider alternative methods for businesses or organizations to qualify as a "small business" or "small organization" for the purposes of assessing the regulatory impact on investment advisers. HR 6321 passed the Financial Services Committee by voice vote on July 11, 2018.

HR 6322, Enhancing Multi-Class Share Disclosures Act — Sponsored by Gregory Meeks (D-NY), the bill requires issuers with a multi-class share structure to make certain disclosures in any proxy or consent solicitation material that provide enhanced transparency regarding certain shareholders' voting power. It passed the Financial Services Committee by voice vote on July 11, 2018.

HR 6323, National Senior Investor Initiative Act of 2018 — Sponsored by Josh Gottheimer (D-NJ) and Trey Hollingsworth (R-IN), the bill creates an interdivisional task force at the SEC to examine and identify challenges facing senior investors and requires the GAO to study the economic costs of the exploitation of senior citizens. The Financial Services Committee passed the bill by voice vote on July 11, 2018.

HR 6324, Middle Market IPO Underwriting Cost Act — Sponsored by Jim Himes (D-CT), the bill requires the SEC, in consultation with FINRA, to study the direct and indirect costs associated with small and medium-sized companies to undertake initial public offerings. The bill passed the Financial Services Committee on July 11, 2018 by voice vote.

HR 6380, Crowdfunding Amendments Act — Sponsored by Patrick McHenry (R-NC) and Maxine Waters (D-CA), the bill allows crowdfunding investors to pool their money together into a fund that is advised by an investment advisor.

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JOBS and Investor Confidence Act