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May 27, 2014

House Committee Passes Slew of JOBS Act-Related Bills

As noted in this blog by Morrison & Foerster’s Anna Pinedo, the House Financial Services Committee recently passed these 9 different bills designed to promote capital formation (also see this blog about flailing US market competitiveness):

– HR 4200, the Small Business Investment Companies (SBICs) Advisers Relief Act, introduced by Rep. Blaine Luetkemeyer (R-MO). The bill was approved 56-0.

– H.R. 4200 amends the Investment Advisers Act of 1940 to reduce unnecessary regulatory costs and eliminate duplicative regulation of advisers to SBICs. Eliminating duplicative regulation will allow the private equity fund money that currently goes to pay for regulatory compliance and fees to flow directly to job-creating small businesses.

– H.R. 4554, the Restricted Securities Relief Act, introduced by Rep. Mick Mulvaney (R-SC). The bill was approved 29-28. H.R. 4554 would streamline the process for reselling restricted securities to the public under a Securities and Exchange Commission (SEC) rule in order to increase liquidity in the private securities markets and the availability of capital for small companies and to reduce its cost. By reducing the regulatory burdens surrounding the offering and resale of private securities offerings by small issuers, this bill will help enhance the liquidity in this space, making it easier for issuers to access capital.

– H.R. 4568 would simplify the SEC registration form for new securities offerings. Simplifying this disclosure regime will lower compliance costs associated with filing redundant paperwork, allowing eligible companies to direct more resources to growing their business.

РH.R. 4571, the Encouraging Employee Ownership Act of 2014, introduced by Rep. Randy Hultgren (R-IL). The bill was approved 36-23. H.R. 4571 modernizes SEC Rule 701, which was last updated in 1996. Updating this rule gives private companies more flexibility to reward employees with a company’s securities and thereby retain valuable employees without having to use other methods to compensate them, such as borrowing money or selling securities.

– H.R. 4569, the Disclosure Modernization and Simplification Act, introduced by Rep. Scott Garrett (R-NJ). The bill was approved 59-0. H.R. 4569 would direct the SEC to simplify its disclosure regime for issuers and help investors more easily navigate very lengthy and cumbersome public company disclosures. Permitting issuers to submit a summary page would enable companies to concisely disclose pertinent information to investors without exposing them to liability. This summary page would also enable investors to more easily access the most relevant information about a company.

– H.R. 4570, the Private Placement Improvement Act, introduced by Rep. Garrett. The bill was approved 31-28.

– H.R. 4570 would amend the Federal securities laws to ensure that small businesses do not face complicated and unnecessary regulatory burdens when attempting to raise capital through private securities offerings issued under SEC Regulation D.

– H.R. 4565, the Startup Capital Modernization Act of 2014, introduced by Rep. Patrick McHenry (R-NC). The bill was approved 31-28. H.R. 4565 would make it easier for issuers to take advantage of registration exemptions under SEC Regulation A to increase capital formation to grow the economy and create jobs.

Also note this Mofo blog summarizing recent remarks by Corp Fin’s Small Business Policy Chief Sebastian Gomez Abero…

Conflict Minerals: More Form SDs Filed

Since I blogged last Thursday about the 3rd & 4th Form SD being filed, these new ones have been filed:

Himax Technologies
Unisys Corp.
Smith & Nephew PLC
FMC Corp.
Royal Dutch Shell
Eltek LTD
Hill-Rom Holdings

SCOTUS: Awaiting the Halliburton v. Erica P. John Fund Decision

As we await the important fraud standard decision of Halliburton v. Erica P. John Fund from the Supreme Court – expected any day now – check out this Reuters article entitled “Behind major US case against shareholder suits, a tale of two professors.” Here’s an excerpt from the opening:

For two months last summer, Stanford Law School professor Joseph Grundfest locked himself away in his home office in California’s Portola Valley. Grundfest’s house overlooks the Santa Cruz Mountains, but his attention was fixed on the piles of paper – mostly U.S. Supreme Court opinions and Congressional reports from the 1930s – stacked on his desk and the surrounding floor. Grundfest researched and wrote for weeks with monastic obsessiveness, speaking to hardly anyone but his research assistants and his wife, who made sure he was eating.

When he emerged in August, Grundfest – an influential former Commissioner at the U.S. Securities and Exchange Commission who now sits on the board of the private equity firm KKR & Co – had in hand a 78-page paper larded with more than 400 footnotes. His aim was nothing less than to destroy securities fraud class action lawsuits by shareholders, which have been the bane of many businesses in the U.S. since the Supreme Court endorsed the cases 26 years ago.

Grundfest sent the draft around to several other law professors, including the University of Michigan’s Adam Pritchard, another favorite of pro-business groups. Pritchard read Grundfest’s paper with a sense of familiarity: Five years earlier, in a study for the Cato Institute, he had pinpointed the same obscure provision of a 1934 securities law as the means to curtail big settlements in securities fraud class actions. He sent Grundfest an email: “I see you’ve put a new twist on things.”

– Broc Romanek