[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3448 Engrossed in House (EH)]
113th CONGRESS
2d Session
H. R. 3448
_______________________________________________________________________
AN ACT
To amend the Securities Exchange Act of 1934 to provide for an optional
pilot program allowing certain emerging growth companies to increase
the tick sizes of their stocks.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Small Cap Liquidity Reform Act of
2014''.
SEC. 2. LIQUIDITY PILOT PROGRAM FOR SECURITIES OF CERTAIN EMERGING
GROWTH COMPANIES.
(a) In General.--Section 11A(c)(6) of the Securities Exchange Act
of 1934 (15 U.S.C. 78k-1(c)(6)) is amended to read as follows:
``(6) Liquidity Pilot Program for Securities of Certain Emerging
Growth Companies.--
``(A) Quoting increment.--Beginning on the date that is 90
days after the date of the enactment of the Small Cap Liquidity
Reform Act of 2014, the securities of a covered emerging growth
company shall be quoted using--
``(i) a minimum increment of $0.05; or
``(ii) if, not later than 60 days after such date
of enactment, the company so elects in the manner
described in subparagraph (D)--
``(I) a minimum increment of $0.10; or
``(II) the increment at which such
securities would be quoted without regard to
the minimum increments established under this
paragraph.
``(B) Trading increment.--In the case of a covered emerging
growth company the securities of which are quoted at a minimum
increment of $0.05 or $0.10 under this paragraph, the
Commission shall determine the increment at which the
securities of such company are traded.
``(C) Future right to opt out or change minimum
increment.--
``(i) In general.--At any time beginning on the
date that is 90 days after the date of the enactment of
the Small Cap Liquidity Reform Act of 2014, a covered
emerging growth company the securities of which are
quoted at a minimum increment of $0.05 or $0.10 under
this paragraph may elect in the manner described in
subparagraph (D)--
``(I) for the securities of such company to
be quoted at the increment at which such
securities would be quoted without regard to
the minimum increments established under this
paragraph; or
``(II) to change the minimum increment at
which the securities of such company are quoted
from $0.05 to $0.10 or from $0.10 to $0.05.
``(ii) When election effective.--An election under
this subparagraph shall take effect on the date that is
30 days after such election is made.
``(iii) Single election to change minimum
increment.--A covered emerging growth company may not
make more than one election under clause (i)(II).
``(D) Manner of election.--
``(i) In general.--An election is made in the
manner described in this subparagraph by informing the
Commission of such election.
``(ii) Notification of exchanges and other trading
venues.--Upon being informed of an election under
clause (i), the Commission shall notify each exchange
or other trading venue where the securities of the
covered emerging growth company are quoted or traded.
``(E) Issuers ceasing to be covered emerging growth
companies.--
``(i) In general.--If an issuer the securities of
which are quoted at a minimum increment of $0.05 or
$0.10 under this paragraph ceases to be a covered
emerging growth company, the securities of such issuer
shall be quoted at the increment at which such
securities would be quoted without regard to the
minimum increments established under this paragraph.
``(ii) Exceptions.--The Commission may by
regulation, as the Commission considers appropriate,
specify any circumstances under which an issuer shall
continue to be considered a covered emerging growth
company for purposes of this paragraph after the issuer
ceases to meet the requirements of subparagraph (L)(i).
``(F) Securities trading below $1.--
``(i) Initial price.--
``(I) At effective date.--If the trading
price of the securities of a covered emerging
growth company is below $1 at the close of the
last trading day before the date that is 90
days after the date of the enactment of the
Small Cap Liquidity Reform Act of 2014, the
securities of such company shall be quoted
using the increment at which such securities
would be quoted without regard to the minimum
increments established under this paragraph.
``(II) At ipo.--If a covered emerging
growth company makes an initial public offering
after the day described in subclause (I) and
the first share of the securities of such
company is offered to the public at a price
below $1, the securities of such company shall
be quoted using the increment at which such
securities would be quoted without regard to
the minimum increments established under this
paragraph.
``(ii) Average trading price.--If the average
trading price of the securities of a covered emerging
growth company falls below $1 for any 90-day period
beginning on or after the day before the date of the
enactment of the Small Cap Liquidity Reform Act of
2014, the securities of such company shall, after the
end of such period, be quoted using the increment at
which such securities would be quoted without regard to
the minimum increments established under this
paragraph.
``(G) Fraud or manipulation.--If the Commission determines
that a covered emerging growth company has violated any
provision of the securities laws prohibiting fraudulent,
manipulative, or deceptive acts or practices, the securities of
such company shall, after the date of the determination, be
quoted using the increment at which such securities would be
quoted without regard to the minimum increments established
under this paragraph.
``(H) Ineligibility for increased minimum increment
permanent.--The securities of an issuer may not be quoted at a
minimum increment of $0.05 or $0.10 under this paragraph at any
time after--
``(i) such issuer makes an election under
subparagraph (A)(ii)(II);
``(ii) such issuer makes an election under
subparagraph (C)(i)(I), except during the period before
such election takes effect; or
``(iii) the securities of such issuer are required
by this paragraph to be quoted using the increment at
which such securities would be quoted without regard to
the minimum increments established under this
paragraph.
``(I) Additional reports and disclosures.--The Commission
shall require a covered emerging growth company the securities
of which are quoted at a minimum increment of $0.05 or $0.10
under this paragraph to make such reports and disclosures as
the Commission considers necessary or appropriate in the public
interest or for the protection of investors.
``(J) Limitation of liability.--An issuer (or any officer,
director, manager, or other agent of such issuer) shall not be
liable to any person (other than such issuer) under any law or
regulation of the United States, any constitution, law, or
regulation of any State or political subdivision thereof, or
any contract or other legally enforceable agreement (including
any arbitration agreement) for any losses caused solely by the
quoting of the securities of such issuer at a minimum increment
of $0.05 or $0.10, by the trading of such securities at the
increment determined by the Commission under subparagraph (B),
or by both such quoting and trading, as provided in this
paragraph.
``(K) Report to congress.--Not later than 6 months after
the date of the enactment of the Small Cap Liquidity Reform Act
of 2014, and every 6 months thereafter, the Commission, in
coordination with each exchange on which the securities of
covered emerging growth companies are quoted or traded, shall
submit to Congress a report on the quoting and trading of
securities in increments permitted by this paragraph and the
extent to which such quoting and trading are increasing
liquidity and active trading by incentivizing capital
commitment, research coverage, and brokerage support, together
with any legislative recommendations the Commission may have.
``(L) Definitions.--In this paragraph:
``(i) Covered emerging growth company.--The term
`covered emerging growth company' means an emerging
growth company, as defined in the first paragraph (80)
of section 3(a), except that--
``(I) such paragraph shall be applied by
substituting `$750,000,000' for
`$1,000,000,000' each place it appears; and
``(II) subparagraphs (B), (C), and (D) of
such paragraph do not apply.
``(ii) Security.--The term `security' means an
equity security.
``(M) Savings provision.--Notwithstanding any other
provision of this paragraph, the Commission may--
``(i) make such adjustments to the pilot program
specified in this paragraph as the Commission considers
necessary or appropriate to ensure that such program
can provide statistically meaningful or reliable
results, including adjustments to eliminate selection
bias among participants, expand the number of
participants eligible to participate in such program,
and change the duration of such program for one or more
participants; and
``(ii) conduct any other study or pilot program, in
conjunction with or separate from the pilot program
specified in this paragraph (as such program may be
adjusted pursuant to clause (i)), to evaluate quoting
or trading in various minimum increments.''.
(b) Sunset.--Effective on the date that is 5 years after the date
of the enactment of this Act, section 11A(c)(6) of the Securities
Exchange Act of 1934 (15 U.S.C. 78k-1(c)(6)) is repealed.
Passed the House of Representatives February 11, 2014.
Attest:
Clerk.
113th CONGRESS
2d Session
H. R. 3448
_______________________________________________________________________
AN ACT
To amend the Securities Exchange Act of 1934 to provide for an optional
pilot program allowing certain emerging growth companies to increase
the tick sizes of their stocks.