Earlier this month, on March 2, 2016, the House Financial Services Committee reported favorably on two bills that propose changes to the federal securities laws: the Main Street Growth Act (H.R. 4638) and the Fostering Innovation Act of 2015 (H.R. 4139).

Main Street Growth Act Seeks to Authorize “Venture Exchanges” to Promote Liquidity for Securities Sold in Regulation A Offerings

The Main Street Growth Act seeks to authorize national securities exchanges with the authority to establish special exchanges for the purpose of promoting liquidity to so-called “venture securities.” The bill would also exempt such exchanges from various regulations including:

  • Regulation NMS (17 C.F.R. §§ 242.600–.612);
  • Rule ATS (17 C.F.R. §§ 242.300–.303);
  • Requirements related to submitting data to securities information processors; and
  • Using decimal pricing.

The bill defines venture securities as: “(i) securities of an early-stage, growth company that are exempt from registration pursuant to section 3(b) of the Securities Act of 1933; and (ii) securities of an emerging growth company.”

An “early-stage, growth company,” in turn, would be issuers that have not conducted an IPO of any of its securities and with a market capitalization of less than $1 billion. Moreover, an issuer would not cease to be an early-stage, growth company until it maintains a market capitalization of over $1.5 billion for 12 consecutive months.

The text of the bill can be found here.

The Fostering Innovation Act of 2015 Seeks to Enlarge SOX § 404 Auditor Attestation Exemption For EGCs

This bill proposes to exempt temporarily emerging growth companies (EGCs) from the auditor attestation requirements regarding internal controls over financial reporting required by Sarbannes-Oxley § 404(b).

The exemption would expire upon the earlier of (i) ten years after the issuer files its registration statement, (ii) the end of the fiscal year in which the issuer’s gross revenues exceed $50 million or (iii) when the issuer becomes a large accelerated filer.

Since the JOBS Act bestows EGC status for a maximum of five years, this bill would potentially extend that treatment, albeit solely for SOX § 404(b), for up to an additional five years.

The text of the bill can be found here.