Pat Toomey (R-PA) speaks during a news conference to introduce the Republican infrastructure plan, at the US Capitol in Washington on April 22, 2021.
erin-scott | Reuters
Senate Republicans on Monday unveiled a plan to accelerate commercial startups by encouraging young companies to trade on public markets, protecting retail investors and tailoring regulations for smaller businesses.
The discussion draft released by Sen. Pat Toomey, R-Pennsylvania, is an early attempt to solicit comment from Republicans and Democrats on nearly 30 bills that could help companies leverage capital in both the public and private markets. private.
Toomey, the ranking member on the Senate Banking Committee, named the proposal in honor of the landmark 2012 JOBS Act, which celebrates its 10th anniversary Tuesday. The acronym for that law stands for Jump-start Our Business Start-ups.
The new draft of JOBS Act 4.0 comes more than a year after Toomey called for plans to boost gross domestic product growth and job creation by increasing access to capital, his office said.
“The JOBS Act helped reinvigorate interest in public markets and spur economic growth, but it’s clear that much work remains to be done to give retail investors access to higher returns and ensure that US markets remain the deepest and liquids of the world”. Toomey said in a statement.
The new plan includes ideas from businessmen, retail investors and others, and includes numerous provisions that have strong bipartisan support, the senator added. Twenty-four of the 29 bills included in the discussion draft have already been introduced on Capitol Hill.
Some of those ideas already have bipartisan support, which they would need to become law since Democrats control the White House and both houses of Congress. It’s unclear how many of the bills could get the 60 votes needed to pass legislation in a Senate split 50-50 by party.
A provision backed by Republican Sen. John Kennedy of Louisiana and Democratic Sen. Tina Smith of Minnesota, for example, would require the Securities and Exchange Commission to study access to private capital in rural areas of the country.
Another section, supported by Democratic Sens. Mark Warner of Virginia and Kyrsten Sinema of Arizona, would push for a study of the underwriting costs of mid-market IPOs. His goal would be to encourage more mid-sized companies to go public.
GOP staffers said they were optimistic about a part of the plan known as the Equal Opportunity for All Investors Act, which would edit the rules around SEC Regulation D.
If enacted, the legislation would expand the SEC’s definition of an “accredited investor” and allow investors of more modest means to buy shares of promising but private companies.
Under current law, any company that wants to sell securities to the public must register with the SEC and file regular financial reports or qualify for a statutory exemption. The most common, known as Regulation D, allows companies to sell shares to so-called “accredited investors” who have an annual income of more than $200,000 or a net worth of at least $1 million.
However, some sections of Toomey’s plan could prove a harder sell in a Democratic Congress.
A proposal by Sen. Thom Tillis, RN.C., would allow public companies to choose between filing quarterly or semi-annual financial reports “to reduce short-term thinking by public companies and reduce costly and unnecessary regulatory filings.”
Former President Donald Trump advocated such a move in 2018 after speaking with “business leaders” about obstacles to corporate growth. While some executives have applauded the effort to shift investors’ focus to longer-term trends and away from short-term earnings results, quarterly reporting is seen by many stakeholders as a critical pillar of corporate transparency.
Another proposal, backed by Republican Sens. Bill Hagerty of Tennessee, Cynthia Lummis of Wyoming, Steve Daines of Montana and Tillis, would make it harder for interested parties to bring proposals to a company’s shareholder meetings.
Under what is known as the Shareholder Transparency Restoration Act, a shareholder wishing to include a proposal would have to control at least 1% of the company’s securities, an attempt to reduce what supporters of the plan call frivolous presentations.
Democrats are likely to be skeptical of those plans. The White House and progressives aim to crack down on what they see as a long list of corporate abuses, including excessive executive compensation and unprecedented share buybacks.
While Republican aides who spoke to CNBC acknowledged that some of the draft’s components may face major difficulties in the current Congress, they added that they expect bipartisan support for parts of the legislation that do not yet have a Democratic sponsor.
The main purpose of the discussion draft is to solicit comments to see what proposals might be feasible, an attendee added.
“We think there is value in identifying bipartisan bills that could pass this Congress,” an aide said Friday afternoon.
“But I think the second thing is to put out something that can be a road map of what the Republicans stand for when it comes to capital formation,” the adviser added.