[House Report 114-409]
[From the U.S. Government Publishing Office]
114th Congress } { Report
HOUSE OF REPRESENTATIVES
2d Session } { 114-409
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SMALL BUSINESS CAPITAL FORMATION ENHANCEMENT ACT
_______
February 1, 2016.--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. 4168]
[Including cost estimate of the Congressional Budget Office]
The Committee on Financial Services, to whom was referred
the bill (H.R. 4168) to amend the Small Business Investment
Incentive Act of 1980 to require an annual review by the
Securities and Exchange Commission of the annual government-
business forum on capital formation that is held pursuant to
such Act, having considered the same, report favorably thereon
without amendment and recommend that the bill do pass.
Purpose and Summary
Introduced by Representative Poliquin on December 3, 2015,
H.R. 4168, the Small Business Capital Formation Enhancement
Act, requires the Securities and Exchange Commission (SEC) to
respond to any findings and recommendations put forth by the
SEC's annual Government-Business Forum on Small Business
Capital Formation (Forum). This statutory requirement is
consistent with the current obligations related to findings and
recommendations submitted by the Investor Advisory Committee as
required by Title IX of the Dodd-Frank Wall Street Reform and
Consumer Protection Act.
Background and Need for Legislation
In 1980, Congress required the SEC to conduct an annual
government-business forum to review the current status of
problems and programs relating to small business capital
formation. A summary of the proceedings of the forum--known as
the Government-Business Forum on Small Business Capital
Formation--and any related findings and recommendations are
submitted to, among others, the SEC and the appropriate
congressional committees for review. The Forum has generated a
number of sound recommendations that the Financial Services
Committee has used to develop legislation, including many
provisions of the bipartisan Jumpstart Our Business Startups
(JOBS) Act.
Unfortunately, the SEC is not statutorily obligated to
respond to the Forum's recommendations and findings. Although
Congress has deemed the recommendations worthy of response and
action, the SEC has not. Interestingly, SEC Commissioners
typically offer opening statements at Forum meetings that
praise the Forum's work and the expertise of its members. For
example, at the November 19, 2015, commencement of this year's
forum, Chair White observed that:
This is . . . the latest in a remarkable series of
open and direct discussions that have given the
Commission critical insight into the impact of our
rules on small businesses and on their efforts to raise
capital. This Forum can be counted on to be another
frank and productive conversation, and we welcome all
of your perspectives as leaders of the small business
community.
Unfortunately, the interest and excitement reflected by the
Forum's opening statements have not generated rule proposals
once the SEC issues a summary of the Forum's recommendations
the following year. As SEC Commissioner Michael Piwowar told
attendees of the 2015 Forum:
[g]iven your tremendous efforts to develop thoughtful
recommendations, I believe that the Commission should
respond to each one. By statute, the Commission is
required to respond to each recommendation provided by
the Investor Advisory Committee. It should not take a
law to require the Commission to respond to the Forum's
recommendations--it is more of a matter of common
courtesy and good government.
Other experts have spoken about the need to statutorily
obligate the SEC to respond to any findings and recommendations
put forth by the Forum. At a December 2, 2015, Subcommittee on
Capital Markets and Government Sponsored Enterprises hearing,
Brian Hahn, who appeared on behalf of the Biotechnology
Industry Organization and is the Chief Financial Officer of
GlycoMimetics, testified that:
small businesses understand their own regulatory
environment, and are uniquely equipped to advise the
SEC on how it could be reformed to enhance capital
formation. However, despite the fact that most Forum
recommendations could be adopted by the SEC through its
standard rule proposal process, the SEC is often
reluctant to act.
Chris Mathieu, who testified at the same hearing on behalf
of the Small Business Investor Alliance, also noted that ``in
its current form, the Forum is weak and unfortunately most of
its ideas are left for dead.''
At the December 2nd hearing, Tom Quaadman, Vice President
of the U.S. Chamber of Commerce's Center for Capital Markets
Competitiveness, testified that:
[t]oo often, regulatory restructures remain stagnant
over the course of decades while the marketplace is
constantly evolving. In fact, the proactive efforts by
this Subcommittee and Congress in passing the JOBS Act
and other bills to advance capital formation are
directly related to the inertia of the SEC to modernize
regulations . . . This bill would require the
Commission to pay closer attention to the Forum and
take affirmative action to move forward or not.
Therefore, the needs of capital formation cannot simply
be ignored.
Hearings
The Committee on Financial Services' Subcommittee on
Capital Markets and Government Sponsored Enterprises held a
hearing examining matters relating to H.R. 4168 on December 2,
2015.
Committee Consideration
The Committee on Financial Services met in open session on
December 8, 2015 and December 9, 2015, and ordered H.R. 4168 to
be reported favorably to the House without amendment by a
recorded vote of 55 yeas to 1 nay (recorded vote no. FC-81), 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 record vote was a motion by Chairman Hensarling to report
the bill favorably to the House without amendment. That motion
was agreed to by a recorded vote of 55 yeas to 1 nay (Record
vote no. FC-81), 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. 4168
will remedy the SEC's lack of response to the Government-
Business Forum on Small Business Capital Formation's
recommendations and findings by statutorily obligating the SEC
to respond to any findings and recommendations put forth by the
Forum.
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, January 15, 2016.
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. 4168, the Small
Business Capital Formation Enhancement Act.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Susan Willie.
Sincerely,
Robert A. Sunshine,
(For Keith Hall, Director).
Enclosure.
H.R. 4168--Small Business Capital Formation Enhancement Act
H.R. 4168 would require the Securities and Exchange
Commission (SEC) to review the recommendations generated at an
annual forum of government and business experts brought
together to discuss small business capital formation. The bill
also would require the SEC to assess each recommendation made
by the forum and disclose any action the agency intends to take
with respect to such recommendations.
Based on information from the SEC, CBO estimates that
implementing H.R. 4168 would cost less than $500,000 over the
2016-2020 period to complete the review and assessment of
recommendations as directed under the bill. Under current law,
the SEC is authorized to collect fees sufficient to offset its
annual appropriation; therefore, CBO estimates that
implementing the bill would have a negligible effect on net
discretionary costs, assuming appropriation actions consistent
with that authority.
Enacting H.R. 4168 would not affect direct spending or
revenues; therefore, pay-as-you-go procedures do not apply. CBO
estimates that enacting H.R. 4168 would not increase net direct
spending or on-budget deficits in any of the four consecutive
10-year periods beginning in 2026.
H.R. 4168 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act and
would not affect the budgets of state, local, or tribal
governments.
The CBO staff contact for this estimate is Susan Willie.
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. 4168 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. 4168 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. 4168 contains no directed
rulemaking.
Section-by-Section Analysis of the Legislation
Section 1. Short title
This section cites H.R. 4168 as the ``Small Business
Capital Formation Enhancement Act.''
Section 2. Annual review of government-business forum on capital
formation
This section requires the Securities and Exchange
Commission to review the findings and recommendations of the
forum. It also requires the Commission to assess the finding
and disclose any action the Commission intends to take with
respect to the finding or recommendation.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (new matter is
printed in italics and existing law in which no change is
proposed is shown in roman):
SECTION 503 OF THE SMALL BUSINESS INVESTMENT INCENTIVE ACT OF 1980
ANNUAL GOVERNMENT-BUSINESS FORUM ON CAPITAL FORMATION
Sec. 503. (a) Pursuant to the consultation called for in
section 502, the Securities and Exchange Commission shall
conduct an annual Government-business forum to review the
current status of problems and programs relating to small
business capital formation.
(b) The Commission shall invite other Federal agencies, such
as the Department of the Treasury, the Board of Governors of
the Federal Reserve System, the Small Business Administration,
organizations representing State securities commissioners, and
leading small business and professional organizations concerned
with capital formation, to participate in the planning for such
forums.
(c) The Commission may request any of the Federal
departments, agencies, or organizations such as those specified
in subsection (b), or other groups or individuals, to prepare
statements and reports to be delivered at such forums. Such
departments and agencies shall cooperate in this effort.
(d) A summary of the proceedings of such forums and any
findings or recommendations thereof shall be prepared and
transmitted to the participants, appropriate committees of the
Congress, and others who may be interested in the subject
matter.
(e) The Commission shall--
(1) review the findings and recommendations of the
forum; and
(2) each time the forum submits a finding or
recommendation to the Commission, promptly issue a
public statement--
(A) assessing the finding or recommendation
of the forum; and
(B) disclosing the action, if any, the
Commission intends to take with respect to the
finding or recommendation.