Floor Updates

Toomey, Durbin, Merkley

JOBS Act (H.R. 3606)

Mar 22 2012

12:31 PM

Senator Toomey: (11:50 AM)
  • Spoke in support of the JOBS Act.
    • SUMMARY "One of the pieces in this jobs package that's very constructive is a bill that I introduced with Senator Tester. This is a bill that takes the existing Regulation A and in the securities law, the body of law, Regulation A allows companies to issue a security in a streamlined regulatory fashion. It streamlines the process, reduces costs somewhat and the problem is the current limit is only $5 million making it not very practical for the vast majority of companies. Our bill would take that limit to $50 million and make this an option to raise capital and grow a business that would be available to far more companies. The second piece that I introduced with senator carper and for which I'm very grateful to Senator Carper for his work is to lift the permissible number of shareholders that a small, privately held business can have without triggering the full very expensive and onerous SEC compliance regime. Our bill would take that from a current level of 500 up to 2,000, and there are many, many companies throughout Pennsylvania, across the country that are successful, they're thriving, they're growing but they've got a number of shareholders that's bumping up against that limit. They're close to 500, they need to raise capital, they don't want to go public and they've got plenty of people who would like to invest in their business so that they can grow but they can't do it because they're so close to the threshold. We would live the threshold to 2,000 so they can raids money in the private markets. Finally what is in some ways the centerpiece of this legislation in my mind, a bill with Senator Schumer and I thank him for his work on this. This is a bill that facilitates going public. When a company reaches that point in its growth, we are - in order to grow further, to hire more workers, in order to expand it needs to become a publicly traded company, we make it more affordable for more companies to do that so they can do it sooner, they can grow sooner, they can hire the additional workers sooner. We do it with what we call an onramp. A process by which a company if it has less than a billion dollars in sales, less than $750 million in market float, such a company would be able to do a public offering without being subject to all of the most expensive parts of the SEC regulatory regime. They would be required to comply with a big majority of all of the existing reporting requirements, but there would be some pieces, especially section 404-b of the Sarbanes-Oxley Act which is extremely complex and expensive to comply with, they wouldn't have to couple fully comply with that for five years or until they reached a billion dollars in sales or $750 million in market float, whichever came first. So what we're really doing with this part of the JOBS Act is we're giving small and growing companies an opportunity to grow into the ability to afford the most expensive regulation to which they would be applied. Nobody's exempted permanently, everybody who goes public would be subject to the full panoply of regulations within five years or sooner if they grow faster and it's only available to companies who have sales as I said, less than a billion dollars."

Senator Durbin: (12:07 PM)
  • Spoke in opposition to the JOBS Act.
    • SUMMARY "Supporters of this bill claim that investors will just jump at the opportunity to invest in a company as soon as we reduce disclosure, auditing and accounting standards. They say this is a perfect way to create jobs. But why should investors choose to invest in companies under conditions that do less to protect their money? Why should investors who were burned during the dot-com crash put more capital in companies that are exempt from the same rules we put in place to ensure it would never happen again? Why would investors who were left with nothing after the financial crisis because of risky behavior by executives with golden parachutes find companies exempt from compensation standards more attractive? The answer is, they won't. And the ones that do will be more exposed to deceit and fraud. The result won't be more jobs, it will be less transparency, less accountability. Professor John Coates of Harvard law school agrees. And here what he said, "The proposals here not only reduce front-page scandals but they reduce the very thing they're promoted to increase, job growth." Listen to what Lynn turner said, "The proposed legislation is a dangerous, risky experiment with U.S. capital markets. I do not believe it will add jobs but may certainly result in investor loss." The House-passed bill, as written, won't create jobs but let me tell you what it will do. It would exempt firms with more than a billion dollars in revenue - that's 90% of the newly public companies - more than a billion dollars in annual revenue exempted from the standards that help ensure audits based on facts, not on the managing - not on who is managing the auditor's contract. These are the same internal controls that we just adopted after Enron, after we were burned there after investors lost their money, after pension funds lost their investments, after people lost their jobs. We set up standards and said, let it never happen again. Now in this euphoria, we are going to repeal the Enron standards for these companies. This bill would allow companies to use billboards and cold calls to lure unsophisticated investors with the promise of making a quick buck investing in new companies. According to the New York Times, it will allow anyone with an idea to post that idea on-line and raise a million dollars without ever providing financial statements. This is a scam. How many times have you picked up your cell phone to see there's a Nigerian opportunity out there? Be prepared after this bill passes. They won't be from Nigeria, they may be from next door. And we are giving them the opportunity to ask people all across America for their hard-earned savings on investments that are not backed up with financial statements. Last Friday, SEC Commissioner joined the Chairman of the SEC, Mary Shapiro, in raising concerns about this House-passed bill. Isn't that fair warning that we ought to at least have a hearing on this bill before it passes?"

Senator Merkley: (12:20 PM)
  • Spoke in support of Reid (for Merkley et al) amendment #1884 (crowd funding).
    • SUMMARY "The House bill, as it came over to us, has crowd funding provisions that are simply a pathway to predatory scams, a paved highway to predatory scams. What do I mean by that? Well, they say basically that a company seeking to raise investment capital doesn't have to give any financial information of any kind about their company, and if they do provide information, they don't have to have any accountability for the accuracy of that information. And by the way, they can hire people to pump their stock, and that's okay under the law. In other words, everything you associate with the worst boiler rooms, the worst pump-and-dump schemes is made legal by the house legislation. That's why we need to fix this here on the floor of the senate. We lay out a provision that says, if you raise less than $100,000, you, as the CEO, assert the accuracy of the information you're putting out. You proceed to have an accountant-reviewed statement that you vouch for. If you raise yet more funds, a higher level of funds, then you have an audited financial statement. It streamlines it based on the amount of investment you're asking for. This amendment says then that the directors and officers take responsibility for the accuracy of that information. And that gives investors a great deal more confidence that what they're reading is actually truly the case. And that's the foundation for successful investment."