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112th Congress Rept. 112-406
HOUSE OF REPRESENTATIVES
2d Session Part 2
REOPENING AMERICAN CAPITAL MARKETS TO EMERGING GROWTH COMPANIES ACT OF
March 6, 2012.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
Mr. Bachus, from the Committee on Financial Services,
submitted the following
[To accompany H.R. 3606]
This supplemental report shows the cost estimate of the
Congressional Budget Office with respect to the bill (H.R.
3606), as reported, which was not included in part 1 of the
report submitted by the Committee on Financial Services on
March 1, 2012 (H. Rept. 112-406, Part 1).
This supplemental report is submitted in accordance with
clause 3(a)(2) of rule XIII of the Rules of the House of
This supplemental report contains the cost estimate
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974 that was not
available at the time part 1 of the report was filed and
updates other sections of the report accordingly. Any section
appearing in this report should be deemed to supersede the same
section in part 1 of this report.
NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX EXPENDITURES
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee adopts as its
own the estimate of new budget authority, entitlement
authority, or tax expenditures or revenues contained in the
cost estimate prepared by the Director of the Congressional
Budget Office pursuant to section 402 of the Congressional
Budget Act of 1974.
COMMITTEE COST ESTIMATE
The Committee adopts as its own the cost estimate prepared
by the Director of the Congressional Budget Office pursuant to
section 402 of the Congressional Budget Act of 1974.
CONGRESSIONAL BUDGET OFFICE ESTIMATE
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, the following is the cost estimate
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974:
March 2, 2012.
Hon. Spencer Bachus,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 3606, the
Reopening American Capital Markets to Emerging Growth Companies
Act of 2011.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Susan Willie.
Douglas W. Elmendorf.
H.R. 3606--Reopening American Capital Markets to Emerging Growth
Companies Act of 2011
H.R. 3606 would authorize the Securities and Exchange
Commission (SEC) to exempt emerging growth companies from
certain disclosure, auditing, and reporting requirements. The
bill defines an emerging growth company (EGC) as an issuer of
securities with less than $1 billion in annual revenues, and
following an initial offering of securities, less than $700
million in publicly traded shares. A company may retain the EGC
designation for a limited time--until its gross revenues or
publicly traded share volume exceed those levels, or five years
after an initial public offering of stock, whichever comes
The bill would exempt EGCs from requirements to:
Allow shareholders to vote on executive
Provide certain financial information in
registration statements filed with the SEC;
Comply with certain financial auditing
Limit certain communication with brokers and
dealers of securities, as well as investors.
Based on information from the SEC, CBO estimates that the
SEC would require 40 additional staff positions to handle new
review and enforcement activities that would result from
changes under the bill. CBO estimates that implementing H.R.
3606 would cost about $50 million over the 2012-2017 period,
assuming appropriation of the necessary amounts. Further, under
current law, the SEC is authorized to collect fees to offset
the cost of its annual appropriation each year; therefore, CBO
estimates that the net cost to implement the provisions of H.R.
3606 would not be significant, assuming annual appropriation
actions consistent with the agency's authorities.
Enacting H.R. 3606 would increase both direct spending and
revenues by amending provisions of law that affect the
activities of the Public Company Accounting Oversight Board
(PCAOB); therefore, pay-as-you-go procedures apply. The PCAOB,
whose spending authority is not subject to appropriation
action, is authorized to collect fees to offset its operating
expenses. Those fees are recorded in the budget as revenues.
CBO estimates that the effect on both revenues and direct
spending would be insignificant over the 2012-2022 period.
H.R. 3606 contains no intergovernmental mandates as defined
in the Unfunded Mandates Reform Act (UMRA) and would not affect
the budgets of state, local, or tribal governments.
H.R. 3606 would impose private-sector mandates, as defined
in UMRA, on national securities associations registered with
the SEC. Such associations, along with the SEC, govern the
conduct of association members with regard to transactions
related to securities. The bill would prohibit national
securities associations from issuing rules to restrict certain
oral and written communications related to public offerings of
emerging growth companies. Currently, only one association is
registered with the SEC--a self-regulatory organization for
securities firms, brokers, and dealers. In addition, to the
extent that the SEC would increase fee collections to recover
any additional costs incurred to handle new review and
enforcement activities, the bill could impose a mandate on
private entities. Based on information from the SEC, CBO
estimates that the cost of the mandates would be small relative
to the annual threshold established in UMRA for private-sector
mandates ($146 million in 2012, adjusted annually for
On March 2, 2012, CBO transmitted a cost estimate for H.R.
3606 as posted on the Web site of the House Committee on Rules
on February 27, 2012. That version of the bill incorporates the
version of H.R. 3606 as ordered reported by the House Committee
on Financial Services on February 16, 2012. The CBO cost
estimates for similar provisions of the bills are the same.
The CBO staff contact for this estimate is Susan Willie
(for federal costs) and Paige Piper/Bach and Vi Nguyen (for the
impact on the private sector). This estimate was approved by
Theresa Gullo, Deputy Assistant Director for Budget Analysis.
FEDERAL MANDATES STATEMENT
The Committee adopts as its own the estimate of Federal
mandates prepared by the Director of the Congressional Budget
Office pursuant to section 423 of the Unfunded Mandates Reform