Deregulatory Bills Clear the House Financial Services Committee
On October 12, the House Financial Services Committee approved almost two dozen financial deregulation bills. The measures included bills that allow more investors to participate in private stock offerings, expand the JOBS Act, and update the Dodd-Frank Act’s systemic risk designation process for banking institutions.
Several of the House-approved bills include the following:
- The Fostering Innovation Act of 2017 expands small company exemptions from the auditor attestation requirements of the Sarbanes-Oxley Act of 2002. The bill exempts a company from Section 404(b) compliance for an additional five years after losing its emerging growth company status, provided that the company remains under $50 million in revenue and maintains a public float below $700 million.
- The Fair Investment Opportunities for Professional Experts Act gives accredited investor status to investors with a securities-related license, or have other investment knowledge-related qualities that the Securities and Exchange Commission (“SEC”) considers.
- The Encouraging Public Offerings Act of 2017 allows companies to file with the SEC draft IPO paperwork before publicly releasing the registration statement. The bill codifies a change that the SEC put in place earlier this year. In addition, the bill now allows any company to benefit from the JOBS Act’s “test the waters” provisions to check investor interest before filing an IPO.
- The Systemic Risk Designation Improvement Act of 2017 eliminates the $50 billion asset limit wherein a bank is automatically labeled a Systemically Important Financial Institution (“SIFI”). Banks considered SIFIs under the Dodd-Frank Act face tougher Federal Reserve oversight and rules concerning regulatory capital. Instead of the $50 billion threshold, regulators are required to consider size, their relations with other financial institutions, and other factors to assess whether the institution’s failure would significantly impact the financial system and must be designated a SIFI.
- The Taking Account of Institutions with Low Operation Risk (“TAILOR”) Act requires banking regulators to consider the risk profiles and business models of their regulated entities, and form any new regulation as needed.
- The Micro Offering Safe Harbor Act loosens registration rules from the Securities Act of 1933 for private securities offerings under $500,000.
- The Market Data Protection Act of 2017 requires the SEC and others to strengthen their cybersecurity efforts before applying the Consolidated Audit Trail (“CAT”). Under the CAT, stock exchanges and self-regulatory organizations (e.g., Financial Industry Regulatory Authority) will be required to create a tracking and record-keeping method for all stock and options trades.
- The Small Business Mergers, Acquisitions, Sales, and Brokerage Simplification Act of 2017 removes an SEC registration exemption for brokers participating in small, private company mergers.