Washington, D.C. – Congressman David Schweikert (R-AZ), member of the House Financial Services Committee and author of this bill, and Rep. Anna G. Eshoo (D-CA), the lead Democratic sponsor of this legislation made the following statements after the passage of H.R. 1070, the Small Company Capital Formation Act Wednesday. The House of Representatives passed the bill by a total of 421-1:
“Small businesses are the backbone of job growth in our country. Taking a small business public is an important, but expensive process that requires millions in underwriting costs.
“This bill relieves companies from these costs and excessive burdens and will assist them in efficiently raising funds to hire new employees.
“I am glad my colleagues stand with me in unwinding regulation to make our capital markets more vibrant and competitive.”
“I’m proud to represent the innovation capital of our country, Silicon Valley, where we know if we don’t constantly innovate, we will stagnate,” said Rep. Anna G. Eshoo (D-Palo Alto), lead Democrat on this bipartisan legislation.
“In these difficult economic times, it’s critical for Congress to facilitate capital formation and bolster American innovation. Five million falls far short of what many companies require to develop the cutting-edge technologies needed in today’s economy. It’s outdated, it fails to serve its intended purpose and that’s why this legislation is needed. What better time than now, when our economy needs this important boost.”
The Small Company Capital Formation Act reduces regulation and makes it easier for small businesses to raise capital and test the waters for a future initial public offering.
H.R. 1070 reduces regulation on small business by increasing the SEC Regulation A exemption from $5 million to $50 million.
Regulation A, on the books since 1933, exempts small companies from the SEC’s filing requirements for less than $5 million. Though Regulation A has periodically increased from its initial ceiling of $100,000 in 1933 to the current $5 million ceiling in 1992, it has not been increased to reflect the rising costs associated with bringing a small company public over the last two decades.
Increasing the Regulation A threshold will lower the cost of raising capital for small businesses.
The Small Company Capital Formation Act ensures that this ceiling is raised when necessary and as economic conditions warrant by requiring that the SEC revisit this ceiling every two years. Should the SEC find that the ceiling needs to be higher, this bill provides them with the authority to increase the limit.
In his joint session to Congress addressing jobs, President Obama also endorsed this bill saying we needed to “cut away the red tape that prevents too many rapidly growing startup companies from raising capital and going public.”
The White House released a Fact Sheet and Overview of the president’s jobs agenda that included H.R. 1070, Small Company Capital Formation Act.
To see Rep. Schweikert discuss his bill on the floor, click here.