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115th Congress    }                                 {        Report
                        HOUSE OF REPRESENTATIVES
 2d Session       }                                 {        115-1077

======================================================================



 
ACCESS TO CAPITAL CREATES ECONOMIC STRENGTH AND SUPPORTS RURAL AMERICA 
                                  ACT

                                _______
                                

 December 12, 2018.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

Mr. Hensarling, from the Committee on Financial Services, submitted the 
                               following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 6745]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 6745) to amend the Securities Exchange Act of 
1934 to revise the shareholder threshold for registration under 
such Act for issuers that receive support through certain 
Federal universal service support mechanisms, and for other 
purposes, having considered the same, report favorably thereon 
with an amendment and recommend that the bill as amended do 
pass.
    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Access to Capital Creates Economic 
Strength and Supports Rural America Act'' or the ``ACCESS Rural America 
Act''.

SEC. 2. SHAREHOLDER THRESHOLD FOR REGISTRATION OF CERTAIN ISSUERS.

  Section 12(g) of the Securities Exchange Act of 1934 (15 U.S.C. 78a 
et seq.) is amended--
          (1) in paragraph (1)--
                  (A) in subparagraph (A)(ii), by striking ``and'' at 
                the end;
                  (B) in subparagraph (B), by adding ``and'' at the 
                end;
                  (C) by inserting after subparagraph (B) the 
                following:
          ``(C) in the case of an issuer that, during its previous 
        fiscal year, received support, directly or through an 
        affiliate, through any Federal universal service support 
        mechanism established under section 254 of the Communications 
        Act of 1934 and filed the report described under paragraph (7) 
        with respect to such fiscal year, not later than 120 days after 
        the last day of its first fiscal year ended after the effective 
        date of this subsection on which the issuer has total assets 
        exceeding $10,000,000 and a class of equity security (other 
        than an exempted security) held of record by either--
                  ``(i) 2,000 persons, or
                  ``(ii) 1,250 persons who are not accredited 
                investors,''; and
                  (D) by adding at the end the following: ``The dollar 
                figures in this paragraph shall be indexed for 
                inflation every 5 years by the Commission to reflect 
                the change in the Consumer Price Index for All Urban 
                Consumers published by the Bureau of Labor Statistics, 
                rounded to the nearest $100,000.''; and
          (2) by adding at the end the following:
          ``(7) Report by universal service support mechanism 
        recipients.--
                  ``(A) In general.--The Commission shall issue 
                regulations to establish a financial summary form that 
                may be annually filed by an issuer that--
                          ``(i) during its previous fiscal year, 
                        received support, directly or through an 
                        affiliate, through any Federal universal 
                        service support mechanism established under 
                        section 254 of the Communications Act of 1934; 
                        and
                          ``(ii) has a class of equity security held of 
                        record by 500 or more persons who are not 
                        accredited investors, but less than 1,250 
                        persons who are not accredited investors.
                  ``(B) Contents.--The form described under 
                subparagraph (A) shall include a summary of the 
                consolidated balance sheet and the consolidated income 
                statement of the issuer, and such other information as 
                the Commission determines is necessary and appropriate 
                in the public interest and for the protection of 
                investors.
                  ``(C) Public availability of forms.--The Commission 
                shall make financial summary forms filed under this 
                paragraph available to the public, including on the 
                website of the Commission.''.

SEC. 3. SEC STUDY.

  (a) Study.--After the end of the 3-year period beginning on the date 
of enactment of this Act, the Securities and Exchange Commission shall 
carry out a study on--
          (1) the effect of the amendments under section 2; and
          (2) to what extent those changes have improved capital 
        formation by the issuers described under section 12(g)(1)(C) of 
        the Securities Exchange Act of 1934.
  (b) Report.--Not later than the end of the 180-day period beginning 
after the end of the 3-year period described under subsection (a), the 
Commission shall issue a report to the Congress containing--
          (1) all findings and determinations made in carrying out the 
        study required under subsection (a); and
          (2) a recommendation as to whether issuers in other sectors 
        of the economy could also benefit from the sort of changes made 
        by the amendments under section 2.

                          Purpose and Summary

    On September 7, 2018, Representatives Duffy and Sinema 
introduced H.R. 6745, the ``Access to Capital Creates Economic 
Strength and Supports Rural America Act'' or the ``ACCESS Rural 
America Act''. As modified by an amendment in the nature of a 
substitute, H.R. 6745 amends section 12(g) of the Securities 
Exchange Act of 1934 (Exchange Act) to raise the threshold for 
issuers to register as a public reporting company with the U.S. 
Securities and Exchange Commission (SEC) if the issuer receives 
support through the Federal universal service fund (USF) in the 
previous fiscal year. Specifically, the bill raises the 
threshold for such issuers who have total assets exceeding 
$10,000,000 from 500 non-accredited investors to 1,250 
investors, regardless of accredited investor status, with the 
dollar threshold indexed for inflation. Additionally, the bill 
requires the SEC to issue regulations to establish a financial 
summary form that such issuers may file to include a summary of 
the consolidated balance sheet and the consolidated income 
statement of the issuer, as well as any other information the 
SEC determines is necessary and appropriate in the public 
interest and for the protection of investors. Finally, the 
legislation directs the SEC to conduct a study three (3) years 
after enactment on the effects of the bill on such issuers and 
to what extent it has improved capital formation for these 
issuers and whether the SEC should adjust shareholder 
thresholds for registration for other issuers.

                  Background and Need for Legislation

    The goal of H.R. 6745 is to modernize and tailor U.S. 
federal securities laws to promote capital formation tools in a 
manner that allows companies to stay private with less concern 
for inadvertently triggering requirements to become a reporting 
company for purposes of the federal securities laws. H.R. 6745 
will help those companies that promote universal access to 
telecommunication and broadband services, including in rural 
areas, to raise capital without triggering costly SEC 
registration requirements. The legislation will also reduce the 
burdens associated with many such companies who find themselves 
having to divert resources from broadband deployment and 
instead retain legal counsel to comply with SEC rules as they 
have difficulty remaining under the current investor 
registration threshold.
    Section 12(g) of the Exchange Act establishes the 
thresholds at which an issuer is required to register a class 
of securities with the SEC. Once a company registers securities 
under 12(g) they become subject to the periodic and current 
reporting requirements under Section 13(a) of the Exchange Act, 
and most companies cannot terminate a registration or suspend 
reporting until the class of securities is held by fewer than 
300 persons.
    On May 3, 2016 the SEC implemented the amendments made by 
Title V and Title VI of the Jumpstart Our Business Startups Act 
(JOBS Act) (P.L. 112-106) and Title LXXXV of the Fixing 
America's Surface Transportation Act (FAST Act) to Section 
12(g). These amendments raised the threshold for registration 
and termination of registration for a class of equity 
securities under Section 12(g). Specifically, the JOBS Act 
amendments require an issuer to register a class of equity 
securities with the SEC if the issuer has more than $10 million 
in total assets held by either 2,000 persons, or 500 persons 
who are not accredited investors. The Congress also adopted 
amendments in regards to banks and bank holding companies, with 
the issuer having to register with the SEC if the issuer had 
more than $10 million in total assets held by 2,000 persons 
regardless of accredited investor status.
    The JOBS Act also amended the threshold under which issuers 
can terminate a class of securities under section 12(g) or 
suspend reporting under Section 15(d)(1). For banks and bank 
holding companies, the issuer can terminate or suspend a class 
of securities if they are held by fewer than 1,200 persons. For 
issuers that are not banks or bank holding companies, that 
threshold for termination remained at 300.
    The purpose of the JOBS Act amendments was to help private 
companies expand their abilities to raise capital and to reduce 
the regulatory burdens associated with staying private until 
the company is ready to shoulder the significant costs 
associated with going and being public. By increasing the asset 
and persons threshold, private companies are able attract 
larger capital investments from a diverse range of investors 
without have to register under the Exchange Act or engage in an 
initial public offering.
    While a laudable goal, the implementation of these 
provisions has actually created problems for many companies 
looking to extend their securities offerings to a greater 
number of investors, particularly through crowdfunding. For 
example, as a result of the 500 persons non-accredited investor 
exemption, companies are limited in the number of people to 
whom they can offer securities and must monitor this closely. 
This is not only problematic for companies that may want to 
raise capital, but the Committee has learned that the burdens 
are especially felt by established companies that raise money 
based on wide ownership in their communities--such as many 
rural broadband cooperatives. Now, such companies can 
potentially trigger the 12(g) registration requirements that 
are expensive and can ultimately drive community businesses out 
of existence.
    The current thresholds can be particularly difficult to 
manage for firms that operate in capital-intensive industries, 
like rural telecommunications and broad infrastructure. The 
direct capital investments required to operate in rural areas 
are significantly more than in urban and suburban areas. Urban 
areas are the least costly to operate, and as compared to 
suburban areas, the differences are stark. For example, 
according to a review of rural broadband economics by Steve G. 
Parsons and James Stegeman, the capital investment for 
broadband per customer location for conduit and poles is 
approximately 5.6 times higher in rural areas as in suburban 
areas; and for fiber optic cable, the capital investment is 
approximately 4.2 times higher in rural areas as in suburban 
areas. More specifically, a report published in July 2017 by 
Deloitte Consulting LLP estimates that the United States needs 
an estimated $130-to-$150 billion of fiber investment in the 
next 5-to-7 years to support broadband competition, rural 
coverage, and wireless densification. In other words, in such 
network industries the $10 million limit is not difficult to 
exceed, requiring companies who want to stay private to spend 
significant capital on avoiding the risk of triggering 
registration requirements--including on monitoring, consulting, 
and legal services, as well as efforts to buy back stock to 
manage the number of shareholders. Additionally, these costs 
typically add on to other costs that rural telecommunication 
companies already face such as telecommunications regulatory 
requirements and costs of deploying and operating advanced 
fiber optic networks in high-cost rural areas. Reducing the 
regulatory burden on such providers is essential because rural 
areas not only are much more expensive to serve, they often are 
served by smaller companies. For many of these small companies, 
this capital would be better spent on investment in jobs and 
growth.
    Similar to the elimination of the non-accredited investor 
distinction for banks and bank holding companies, it makes 
sense to eliminate this requirement for nonbank companies who 
already share information with shareholders and otherwise could 
provide financial information in a more streamlined manner--a 
reason such relief was extended to banks and bank holding 
companies previously.
    H.R. 6745 neither weakens investor protection nor does it 
deny retail investors with essential information necessary to 
make informed investment decisions. At a June 2018 hearing of 
the Subcommittee on Capital Markets, Securities, and 
Investment, the co-directors of the SEC's Division of 
Enforcement reinforced the SEC's enforcement focus and 
testified that ``Retail investors depend on fair, orderly, and 
efficient markets to build savings to buy homes, pay for 
college, or plan for retirement, among other things. They are 
not only often the most prevalent participants in our markets, 
but, in many cases, also the most vulnerable and least able to 
weather financial loss.'' Securities fraud is illegal and it 
remains illegal under H.R. 6745. Nothing in this bill either 
prohibits or inhibits the SEC or the Department of Justice from 
investigating and prosecuting companies that are engaging in 
fraud. As SEC Chairman Clayton testified before the Committee 
on June 21, 2018 about the importance of Enforcement, ``After 
more than a year on the job, I continue to firmly believe that 
Enforcement's work is essential to protecting investors and 
maintaining confidence in the integrity and fairness of our 
capital markets.''
    Recipients of Universal Service Funding--which are 
generally rural telecommunications and broad infrastructure 
companies--are such nonbank companies. Ultimately, by allowing 
rural broadband providers to raise capital from up to 1,250 
investors, regardless of accredited investor status, more 
capital will be infused into our markets and such companies can 
better raise the capital they need to reinvest in technological 
upgrades and more appropriately navigate the securities 
regulatory landscape.

                                Hearings

    The Committee on Financial Services held hearings examining 
matters relating to H.R. 6745 on April 26, 2018 and April 28, 
2018.

                        Committee Consideration

    The Committee on Financial Services met in open session on 
September 13, 2018, and ordered H.R. 6745 to be reported 
favorably to the House, as amended, by a vote of 37 yeas to 15 
nays (FC-205), a quorum being present.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. An 
amendment in the nature of a substitute was agreed to by voice 
vote. The sole recorded vote was a motion by Chairman 
Hensarling to report the bill favorably to the House as 
amended. The motion was agreed to by a recorded vote of 37 yeas 
to 15 nays (FC-205), a quorum being present.






[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]







                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the findings and recommendations of 
the Committee based on oversight activities under clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
are incorporated in the descriptive portions of this report.

                    Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee states that H.R. 6745 
will help companies to raise the capital that they need to grow 
and become public by eliminating unnecessary compliance costs 
for small and emerging companies.

   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.

                 Congressional Budget Office Estimates

    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:

                                     U.S. Congress,
                               Congressional Budget Office,
                                 Washington, DC, November 15, 2018.
Hon. Jeb Hensarling,
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. 6745, the ACCESS 
Rural America Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Stephen 
Rabent.
            Sincerely,
                                                Keith Hall,
                                                          Director.
    Enclosure.

H.R. 6745--ACCESS Rural America Act

    Under current law, securities issuers with total assets 
exceeding $10 million and whose securities are held by either 
500 nonaccredited investors or by 2,000 people must file a 
securities registration statement with the Securities and 
Exchange Commission (SEC). H.R. 6745 would raise the threshold 
to 1,250 nonaccredited investors if the issuer received support 
directly, or through an affiliate, from a federal universal 
service support program and would index the $10 million asset 
threshold to inflation. The SEC would be required to conduct a 
study and issue a report on the effects of the changes. Under 
the bill, the SEC also would be required to develop a financial 
summary form that issuers that receive support through a 
federal universal service support program and have securities 
held by between 500 and 1,250 nonaccredited investors could 
file.
    Using information from the SEC, CBO estimates that 
implementing H.R. 6745 would cost $2 million over the 2019-2023 
period for the agency to develop the new form, conduct the 
study, and issue its report. However, the SEC is authorized to 
collect fees sufficient to offset its annual appropriation; 
therefore, CBO estimates that the net effect on discretionary 
spending would be negligible, assuming appropriation actions 
consistent with that authority.
    Enacting H.R. 6745 would not affect direct spending or 
revenues; therefore, pay-as-you-go procedures do not apply.
    CBO estimates that enacting H.R. 6745 would not increase 
net direct spending or on-budget deficits in any of the four 
consecutive 10-year periods beginning in 2029.
    H.R. 6745 contains no intergovernmental mandates as defined 
in the Unfunded Mandates Reform Act (UMRA).
    If the SEC increased fees to offset the costs associated 
with implementing the bill, H.R. 6745 would increase the cost 
of an existing mandate on private entities required to pay 
those assessments. CBO estimates that the incremental cost of 
the mandate would be less than $2 million, well below the 
annual threshold for private-sector mandates established in 
UMRA ($160 million in 2018, adjusted annually for inflation).
    The CBO staff contacts for this estimate are Stephen Rabent 
(for federal costs), and Rachael Austin (for mandates). The 
estimate was reviewed by H. Samuel Papenfuss, Deputy Assistant 
Director for Budget Analysis.

                       Federal Mandates Statement

    This information is provided in accordance with section 423 
of the Unfunded Mandates Reform Act of 1995.
    The Committee has determined that the bill does not contain 
Federal mandates on the private sector. The Committee has 
determined that the bill does not impose a Federal 
intergovernmental mandate on State, local, or tribal 
governments.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of the section 
102(b)(3) of the Congressional Accountability Act.

                         Earmark Identification

    With respect to clause 9 of rule XXI of the Rules of the 
House of Representatives, the Committee has carefully reviewed 
the provisions of the bill and states that the provisions of 
the bill do not contain any congressional earmarks, limited tax 
benefits, or limited tariff benefits within the meaning of the 
rule.

                    Duplication of Federal Programs

    In compliance with clause 3(c)(5) of rule XIII of the Rules 
of the House of Representatives, the Committee states that no 
provision of the bill establishes or reauthorizes: (1) a 
program of the Federal Government known to be duplicative of 
another Federal program; (2) a program included in any report 
from the Government Accountability Office to Congress pursuant 
to section 21 of Public Law 111-139; or (3) a program related 
to a program identified in the most recent Catalog of Federal 
Domestic Assistance, published pursuant to the Federal Program 
Information Act (Pub. L. No. 95-220, as amended by Pub. L. No. 
98-169).

                   Disclosure of Directed Rulemaking

    Pursuant to section 3(i) of H. Res. 5, (115th Congress), 
the following statement is made concerning directed rule 
makings: The Committee estimates that the bill requires one 
directed rulemaking to direct the SEC to issue regulations to 
establish a financial summary form to be filed by the issuer 
with the SEC to include a summary of the consolidated balance 
sheet and the consolidated income of the issuer, as well as any 
other such information as the SEC determines necessary.

             Section-by-Section Analysis of the Legislation


Section 1. Short title

    This section cites H.R. 6745 as the ``Access to Capital 
Create Economic Strength and Supports Rural America Act,'' or 
the ``ACCESS Rural America Act.''

Section 2. Shareholder thresholds for registration of certain issuers

    This section amends section 12(g) of the Securities 
Exchange Act of 1934 to raise the threshold to register as a 
public reporting company with the SEC from 500 non-accredited 
investors to 1,250 investors, with the $10 million threshold 
indexed for inflation. Additionally, this section requires the 
SEC to issue regulations to establish a financial summary form 
that is publicly available, to be filed by issuers that 
includes a summary of the consolidated balance sheet and the 
consolidated income statement of the issuer, as well as any 
other information the SEC deems necessary.

Section 3. SEC study

    This section requires the SEC to conduct a study on the 
effects of the bill on such issuers and to what extent it has 
improved capital formation, with the SEC required to issue a 
report to Congress containing the findings of the study as well 
as a recommendation to whether shareholder thresholds should be 
adjusted for other issuers.

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, and existing law in which no 
change is proposed is shown in roman):

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, and existing law in which no 
change is proposed is shown in roman):

                    SECURITIES EXCHANGE ACT OF 1934


TITLE I--REGULATION OF SECURITIES EXCHANGES

           *       *       *       *       *       *       *



                registration requirements for securities

  Sec. 12. (a) It shall be unlawful for any member, broker, or 
dealer to effect any transaction in any security (other than an 
exempted security) on a national securities exchange unless a 
registration is effective as to such security for such exchange 
in accordance with the provisions of this title and the rules 
and regulations thereunder. The provisions of this subsection 
shall not apply in respect of a security futures product traded 
on a national securities exchange.
  (b) A security may be registered on a national securities 
exchange by the issuer filing an application with the exchange 
(and filing with the Commission such duplicate originals 
thereof as the Commission may require), which application shall 
contain--
          (1) Such information, in such detail, as to the 
        issuer and any person directly or indirectly 
        controlling or controlled by, or under direct or 
        indirect common control with, the issuer, and any 
        guarantor of the security as to principal or interest 
        or both, as the Commission may by rules and regulations 
        require, as necessary or appropriate in the public 
        interest or for the protection of investors, in respect 
        of the following:
                  (A) the organization, financial structures, 
                and nature of the business;
                  (B) the terms, position, rights, and 
                privileges of the different classes of 
                securities outstanding;
                  (C) the terms on which their securities are 
                to be, and during the preceding three years 
                have been, offered to the public or otherwise;
                  (D) the directors, officers, and 
                underwriters, and each security holder of 
                record holding more than 10 per centum of any 
                class of any equity security of the issuer 
                (other than an exempted security), their 
                remuneration and their interests in the 
                securities of, and their material contracts 
                with, the issuer and any person directly or 
                indirectly controlling or controlled by, or 
                under direct or indirect common control with, 
                the issuer;
                  (E) remuneration to others than directors and 
                officers exceeding $20,000 per annum;
                  (F) bonus and profit-sharing arrangements;
                  (G) management and service contracts;
                  (H) options existing or to be created in 
                respect of their securities;
                  (I) material contracts, not made in the 
                ordinary course of business, which are to be 
                executed in whole or in part at or after the 
                filing of the application or which were made 
                not more than two years before such filing, and 
                every material patent or contract for a 
                material patent right shall be deemed a 
                material contract;
                  (J) balance sheets for not more than the 
                three preceding fiscal years, certified if 
                required by the rules and regulations of the 
                Commission by a registered public accounting 
                firm;
                  (K) profit and loss statements for not more 
                than the three preceding fiscal years, 
                certified if required by the rules and 
                regulations of the Commission by a registered 
                public accounting firm; and
                  (L) any further financial statements which 
                the Commission may deem necessary or 
                appropriate for the protection of investors.
          (2) Such copies of articles of incorporation, bylaws, 
        trust indentures, or corresponding documents by 
        whatever name known, underwriting arrangements, and 
        other similar documents of, and voting trust agreements 
        with respect to, the issuer and any person directly or 
        indirectly controlling or controlled by, or under 
        direct or indirect common control with, the issuer as 
        the Commission may require as necessary or appropriate 
        for the proper protection of investors and to insure 
        fair dealing in the security.
          (3) Such copies of material contracts, referred to in 
        paragraph (1)(I) above, as the Commission may require 
        as necessary or appropriate for the proper protection 
        of investors and to insure fair dealing in the 
        security.
  (c) If in the judgment of the Commission any information 
required under subsection (b) of this section is inapplicable 
to any specified class or classes of issuers, the Commission 
shall require in lieu thereof the submission of such other 
information of comparable character as it may deem applicable 
to such class of issuers.
  (d) If the exchange authorities certify to the Commission 
that the security has been approved by the exchange for listing 
and registration, the registration shall become effective 
thirty days after the receipt of such certification by the 
Commission or within such shorter period of time as the 
Commission may determine. A security registered with a national 
securities exchange may be withdrawn or stricken from listing 
and registration in accordance with the rules of the exchange 
and, upon such terms as the Commission may deem necessary to 
impose for the protection of investors, upon application by the 
issuer or the exchange to the Commission; whereupon the issuer 
shall be relieved from further compliance with the provisions 
of this section and section 13 of this title and any rules or 
regulations under such sections as to the securities so 
withdrawn or stricken. An unissued security may be registered 
only in accordance with such rules and regulations as the 
Commission may prescribe as necessary or appropriate in the 
public interest or for the protection of investors.
  (e) Notwithstanding the foregoing provisions of this section, 
the Commission may by such rules and regulations as it deems 
necessary or appropriate in the public interest or for the 
protection of investors permit securities listed on any 
exchange at the time the registration of such exchange as a 
national securities exchange becomes effective, to be 
registered for a period ending not later than July 1, 1935, 
without complying with the provisions of this section.
  (f)(1)(A) Notwithstanding the preceding subsections of this 
section, any national securities exchange, in accordance with 
the requirements of this subsection and the rules hereunder, 
may extend unlisted trading privileges to--
          (i) any security that is listed and registered on a 
        national securities exchange, subject to subparagraph 
        (B); and
          (ii) any security that is otherwise registered 
        pursuant to this section, or that would be required to 
        be so registered except for the exemption from 
        registration provided in subparagraph (B) or (G) of 
        subsection (g)(2), subject to subparagraph (E) of this 
        paragraph.
  (B) A national securities exchange may not extend unlisted 
trading privileges to a security described in subparagraph 
(A)(i) during such interval, if any, after the commencement of 
an initial public offering of such security, as is or may be 
required pursuant to subparagraph (C).
  (C) Not later than 180 days after the date of enactment of 
the Unlisted Trading Privileges Act of 1994, the Commission 
shall prescribe, by rule or regulation, the duration of the 
interval referred to in subparagraph (B), if any, as the 
Commission determines to be necessary or appropriate for the 
maintenance of fair and orderly markets, the protection of 
investors and the public interest, or otherwise in furtherance 
of the purposes of this title. Until the earlier of the 
effective date of such rule or regulation or 240 days after 
such date of enactment, such interval shall begin at the 
opening of trading on the day on which such security commences 
trading on the national securities exchange with which such 
security is registered and end at the conclusion of the next 
day of trading.
  (D) The Commission may prescribe, by rule or regulation such 
additional procedures or requirements for extending unlisted 
trading privileges to any security as the Commission deems 
necessary or appropriate for the maintenance of fair and 
orderly markets, the protection of investors and the public 
interest, or otherwise in furtherance of the purposes of this 
title.
  (E) No extension of unlisted trading privileges to securities 
described in subparagraph (A)(ii) may occur except pursuant to 
a rule, regulation, or order of the Commission approving such 
extension or extensions. In promulgating such rule or 
regulation or in issuing such order, the Commission--
          (i) shall find that such extension or extensions of 
        unlisted trading privileges is consistent with the 
        maintenance of fair and orderly markets, the protection 
        of investors and the public interest, and otherwise in 
        furtherance of the purposes of this title;
          (ii) shall take account of the public trading 
        activity in such securities, the character of such 
        trading, the impact of such extension on the existing 
        markets for such securities, and the desirability of 
        removing impediments to and the progress that has been 
        made toward the development of a national market 
        system; and
          (iii) shall not permit a national securities exchange 
        to extend unlisted trading privileges to such 
        securities if any rule of such national securities 
        exchange would unreasonably impair the ability of a 
        dealer to solicit or effect transactions in such 
        securities for its own account, or would unreasonably 
        restrict competition among dealers in such securities 
        or between such dealers acting in the capacity of 
        market makers who are specialists and such dealers who 
        are not specialists.
  (F) An exchange may continue to extend unlisted trading 
privileges in accordance with this paragraph only if the 
exchange and the subject security continue to satisfy the 
requirements for eligibility under this paragraph, including 
any rules and regulations issued by the Commission pursuant to 
this paragraph, except that unlisted trading privileges may 
continue with regard to securities which had been admitted on 
such exchange prior to July 1, 1964, notwithstanding the 
failure to satisfy such requirements. If unlisted trading 
privileges in a security are discontinued pursuant to this 
subparagraph, the exchange shall cease trading in that 
security, unless the exchange and the subject security 
thereafter satisfy the requirements of this paragraph and the 
rules issued hereunder.
  (G) For purposes of this paragraph--
          (i) a security is the subject of an initial public 
        offering if--
                  (I) the offering of the subject security is 
                registered under the Securities Act of 1933; 
                and
                  (II) the issuer of the security, immediately 
                prior to filing the registration statement with 
                respect to the offering, was not subject to the 
                reporting requirements of section 13 or 15(d) 
                of this title; and
          (ii) an initial public offering of such security 
        commences at the opening of trading on the day on which 
        such security commences trading on the national 
        securities exchange with which such security is 
        registered.
  (2)(A) At any time within 60 days of commencement of trading 
on an exchange of a security pursuant to unlisted trading 
privileges, the Commission may summarily suspend such unlisted 
trading privileges on the exchange. Such suspension shall not 
be reviewable under section 25 of this title and shall not be 
deemed to be a final agency action for purposes of section 704 
of title 5, United States Code. Upon such suspension--
          (i) the exchange shall cease trading in the security 
        by the close of business on the date of such 
        suspension, or at such time as the Commission may 
        prescribe by rule or order for the maintenance of fair 
        and orderly markets, the protection of investors and 
        the public interest, or otherwise in furtherance of the 
        purposes of this title; and
          (ii) if the exchange seeks to extend unlisted trading 
        privileges to the security, the exchange shall file an 
        application to reinstate its ability to do so with the 
        Commission pursuant to such procedures as the 
        Commission may prescribe by rule or order for the 
        maintenance of fair and orderly markets, the protection 
        of investors and the public interest, or otherwise in 
        furtherance of the purposes of this title.
  (B) A suspension under subparagraph (A) shall remain in 
effect until the Commission, by order, grants approval of an 
application to reinstate, as described in subparagraph (A)(ii).
  (C) A suspension under subparagraph (A) shall not affect the 
validity or force of an extension of unlisted trading 
privileges in effect prior to such suspension.
  (D) The Commission shall not approve an application by a 
national securities exchange to reinstate its ability to extend 
unlisted trading privileges to a security unless the Commission 
finds, after notice and opportunity for hearing, that the 
extension of unlisted trading privileges pursuant to such 
application is consistent with the maintenance of fair and 
orderly markets, the protection of investors and the public 
interest, and otherwise in furtherance of the purposes of this 
title. If the application is made to reinstate unlisted trading 
privileges to a security described in paragraph (1)(A)(ii), the 
Commission--
          (i) shall take account of the public trading activity 
        in such security, the character of such trading, the 
        impact of such extension on the existing markets for 
        such a security, and the desirability of removing 
        impediments to and the progress that has been made 
        toward the development of a national market system; and
          (ii) shall not grant any such application if any rule 
        of the national securities exchange making application 
        under this subsection would unreasonably impair the 
        ability of a dealer to solicit or effect transactions 
        in such security for its own account, or would 
        unreasonably restrict competition among dealers in such 
        security or between such dealers acting in the capacity 
        of marketmakers who are specialists and such dealers 
        who are not specialists.
  (3) Notwithstanding paragraph (2), the Commission shall by 
rules and regulations suspend unlisted trading privileges in 
whole or in part for any or all classes of securities for a 
period not exceeding twelve months, if it deems such suspension 
necessary or appropriate in the public interest or for the 
protection of investors or to prevent evasion of the purposes 
of this title.
  (4) On the application of the issuer of any security for 
which unlisted trading privileges on any exchange have been 
continued or extended pursuant to this subsection, or of any 
broker or dealer who makes or creates a market for such 
security, or of any other person having a bona fide interest in 
the question of termination or suspension of such unlisted 
trading privileges, or on its own motion, the Commission shall 
by order terminate, or suspend for a period not exceeding 
twelve months, such unlisted trading privileges for such 
security if the Commission finds, after appropriate notice and 
opportunity for hearing, that such termination or suspension is 
necessary or appropriate in the public interest or for the 
protection of investors.
  (5) In any proceeding under this subsection in which 
appropriate notice and opportunity for hearing are required, 
notice of not less than ten days to the applicant in such 
proceeding, to the issuer of the security involved, to the 
exchange which is seeking to continue or extend or has 
continued or extended unlisted trading privileges for such 
security, and to the exchange, if any, on which such security 
is listed and registered, shall be deemed adequate notice, and 
any broker or dealer who makes or creates a market for such 
security, and any other person having a bona fide interest in 
such proceeding, shall upon application be entitled to be 
heard.
  (6) Any security for which unlisted trading privileges are 
continued or extended pursuant to this subsection shall be 
deemed to be registered on a national securities exchange 
within the meaning of this title. The powers and duties of the 
Commission under this title shall be applicable to the rules of 
an exchange in respect to any such security. The Commission 
may, by such rules and regulations as it deems necessary or 
appropriate in the public interest or for the protection of 
investors, either unconditionally or upon specified terms and 
conditions, or for stated periods, exempt such securities from 
the operation of any provision of section 13, 14, or 16 of this 
title.
  (g)(1) Every issuer which is engaged in interstate commerce, 
or in a business affecting interstate commerce, or whose 
securities are traded by use of the mails or any means or 
instrumentality of interstate commerce shall--
          (A) within 120 days after the last day of its first 
        fiscal year ended on which the issuer has total assets 
        exceeding $10,000,000 and a class of equity security 
        (other than an exempted security) held of record by 
        either--
          (i) 2,000 persons, or
          (ii) 500 persons who are not accredited investors (as 
        such term is defined by the Commission), [and]
          (B) in the case of an issuer that is a bank, a 
        savings and loan holding company (as defined in section 
        10 of the Home Owners' Loan Act), or a bank holding 
        company, as such term is defined in section 2 of the 
        Bank Holding Company Act of 1956 (12 U.S.C. 1841), not 
        later than 120 days after the last day of its first 
        fiscal year ended after the effective date of this 
        subsection, on which the issuer has total assets 
        exceeding $10,000,000 and a class of equity security 
        (other than an exempted security) held of record by 
        2,000 or more persons, and
          (C) in the case of an issuer that, during its 
        previous fiscal year, received support, directly or 
        through an affiliate, through any Federal universal 
        service support mechanism established under section 254 
        of the Communications Act of 1934 and filed the report 
        described under paragraph (7) with respect to such 
        fiscal year, not later than 120 days after the last day 
        of its first fiscal year ended after the effective date 
        of this subsection on which the issuer has total assets 
        exceeding $10,000,000 and a class of equity security 
        (other than an exempted security) held of record by 
        either--
                  (i) 2,000 persons, or
                  (ii) 1,250 persons who are not accredited 
                investors,
register such security by filing with the Commission a 
registration statement (and such copies thereof as the 
Commission may require) with respect to such security 
containing such information and documents as the Commission may 
specify comparable to that which is required in an application 
to register a security pursuant to subsection (b) of this 
section. Each such registration statement shall become 
effective sixty days after filing with the Commission or within 
such shorter period as the Commission may direct. Until such 
registration statement becomes effective it shall not be deemed 
filed for the purposes of section 18 of this title. Any issuer 
may register any class of equity security not required to be 
registered by filing a registration statement pursuant to the 
provisions of this paragraph. The Commission is authorized to 
extend the date upon which any issuer or class of issuers is 
required to register a security pursuant to the provisions of 
this paragraph. The dollar figures in this paragraph shall be 
indexed for inflation every 5 years by the Commission to 
reflect the change in the Consumer Price Index for All Urban 
Consumers published by the Bureau of Labor Statistics, rounded 
to the nearest $100,000.
  (2) The provisions of this subsection shall not apply in 
respect of--
          (A) any security listed and registered on a national 
        securities exchange.
          (B) any security issued by an investment company 
        registered pursuant to section 8 of the Investment 
        Company Act of 1940.
          (C) any security, other than permanent stock, 
        guaranty stock, permanent reserve stock, or any similar 
        certificate evidencing nonwithdrawable capital, issued 
        by a savings and loan association, building and loan 
        association, cooperative bank, homestead association, 
        or similar institution, which is supervised and 
        examined by State or Federal authority having 
        supervision over any such institution.
          (D) any security of an issuer organized and operated 
        exclusively for religious, educational, benevolent, 
        fraternal, charitable, or reformatory purposes and not 
        for pecuniary profit, and no part of the net earnings 
        of which inures to the benefit of any private 
        shareholder or individual; or any security of a fund 
        that is excluded from the definition of an investment 
        company under section 3(c)(10)(B) of the Investment 
        Company Act of 1940.
          (E) any security of an issuer which is a 
        ``cooperative association'' as defined in the 
        Agricultural Marketing Act, approved June 15, 1929, as 
        amended, or a federation of such cooperative 
        associations, if such federation possesses no greater 
        powers or purposes than cooperative associations so 
        defined.
          (F) any security issued by a mutual or cooperative 
        organization which supplies a commodity or service 
        primarily for the benefit of its members and operates 
        not for pecuniary profit, but only if the security is 
        part of a class issuable only to persons who purchase 
        commodities or services from the issuer, the security 
        is transferable only to a successor in interest or 
        occupancy of premises serviced or to be served by the 
        issuer, and no dividends are payable to the holder of 
        the security.
          (G) any security issued by an insurance company if 
        all of the following conditions are met:
                  (i) Such insurance company is required to and 
                does file an annual statement with the 
                Commissioner of Insurance (or other officer or 
                agency performing a similar function) of its 
                domiciliary State, and such annual statement 
                conforms to that prescribed by the National 
                Association of Insurance Commissioners or in 
                the determination of such State commissioner, 
                officer or agency substantially conforms to 
                that so prescribed.
                  (ii) Such insurance company is subject to 
                regulation by its domiciliary State of proxies, 
                consents, or authorizations in respect of 
                securities issued by such company and such 
                regulation conforms to that prescribed by the 
                National Association of Insurance 
                Commissioners.
                  (iii) After July 1, 1966, the purchase and 
                sales of securities issued by such insurance 
                company by beneficial owners, directors, or 
                officers of such company are subject to 
                regulation (including reporting) by its 
                domiciliary State substantially in the manner 
                provided in section 16 of this title.
          (H) any interest or participation in any collective 
        trust funds maintained by a bank or in a separate 
        account maintained by an insurance company which 
        interest or participation is issued in connection with 
        (i) a stock-bonus, pension, or profit-sharing plan 
        which meets the requirements for qualification under 
        section 401 of the Internal Revenue Code of 1954, (ii) 
        an annuity plan which meets the requirements for 
        deduction of the employer's contribution under section 
        404(a)(2) of such Code, or (iii) a church plan, 
        company, or account that is excluded from the 
        definition of an investment company under section 
        3(c)(14) of the Investment Company Act of 1940.
  (3) The Commission may by rules or regulations or, on its own 
motion, after notice and opportunity for hearing, by order, 
exempt from this subsection any security of a foreign issuer, 
including any certificate of deposit for such a security, if 
the Commission finds that such exemption is in the public 
interest and is consistent with the protection of investors.
  (4) Registration of any class of security pursuant to this 
subsection shall be terminated ninety days, or such shorter 
period as the Commission may determine, after the issuer files 
a certification with the Commission that the number of holders 
of record of such class of security is reduced to less than 300 
persons, or, in the case of a bank, a savings and loan holding 
company (as defined in section 10 of the Home Owners' Loan 
Act), or a bank holding company, as such term is defined in 
section 2 of the Bank Holding Company Act of 1956 (12 U.S.C. 
1841), 1,200 persons persons. The Commission shall after notice 
and opportunity for hearing deny termination of registration if 
it finds that the certification is untrue. Termination of 
registration shall be deferred pending final determination on 
the question of denial.
  (5) For the purposes of this subsection the term ``class'' 
shall include all securities of an issuer which are of 
substantially similar character and the holders of which enjoy 
substantially similar rights and privileges. The Commission may 
for the purpose of this subsection define by rules and 
regulations the terms ``total assets'' and ``held of record'' 
as it deems necessary or appropriate in the public interest or 
for the protection of investors in order to prevent 
circumvention of the provisions of this subsection. For 
purposes of this subsection, a security futures product shall 
not be considered a class of equity security of the issuer of 
the securities underlying the security futures product. For 
purposes of determining whether an issuer is required to 
register a security with the Commission pursuant to paragraph 
(1), the definition of ``held of record'' shall not include 
securities held by persons who received the securities pursuant 
to an employee compensation plan in transactions exempted from 
the registration requirements of section 5 of the Securities 
Act of 1933.
          (6) Exclusion for persons holding certain 
        securities.--The Commission shall, by rule, exempt, 
        conditionally or unconditionally, securities acquired 
        pursuant to an offering made under section 4(6) of the 
        Securities Act of 1933 from the provisions of this 
        subsection.
          (7) Report by universal service support mechanism 
        recipients.--
          (A) In general.--The Commission shall issue 
        regulations to establish a financial summary form that 
        may be annually filed by an issuer that--
                  (i) during its previous fiscal year, received 
                support, directly or through an affiliate, 
                through any Federal universal service support 
                mechanism established under section 254 of the 
                Communications Act of 1934; and
                  (ii) has a class of equity security held of 
                record by 500 or more persons who are not 
                accredited investors, but less than 1,250 
                persons who are not accredited investors.
          (B) Contents.--The form described under subparagraph 
        (A) shall include a summary of the consolidated balance 
        sheet and the consolidated income statement of the 
        issuer, and such other information as the Commission 
        determines is necessary and appropriate in the public 
        interest and for the protection of investors.
          (C) Public availability of forms.--The Commission 
        shall make financial summary forms filed under this 
        paragraph available to the public, including on the 
        website of the Commission.
  (h) The Commission may by rules and regulations, or upon 
application of an interested person, by order, after notice and 
opportunity for hearing, exempt in whole or in part any issuer 
or class of issuers from the provisions of subsection (g) of 
this section or from section 13, 14, or 15(d) or may exempt 
from section 16 any officer, director, or beneficial owner of 
securities of any issuer, any security of which is required to 
be registered pursuant to subsection (g) hereof, upon such 
terms and conditions and for such period as it deems necessary 
or appropriate, if the Commission finds, by reason of the 
number of public investors, amount of trading interest in the 
securities, the nature and extent of the activities of the 
issuer, income or assets of the issuer, or otherwise, that such 
action is not inconsistent with the public interest or the 
protection of investors. The Commission may, for the purposes 
of any of the above-mentioned sections or subsections of this 
title, classify issuers and prescribe requirements appropriate 
for each such class.
  (i) In respect of any securities issued by banks and savings 
associations the deposits of which are insured in accordance 
with the Federal Deposit Insurance Act, the powers, functions, 
and duties vested in the Commission to administer and enforce 
sections 10A(m), 12, 13, 14(a), 14(c), 14(d), 14(f), and 16 of 
this Act, and sections 302, 303, 304, 306, 401(b), 404, 406, 
and 407 of the Sarbanes-Oxley Act of 2002, (1) with respect to 
national banks and Federal savings associations, the accounts 
of which are insured by the Federal Deposit Insurance 
Corporation are vested in the Comptroller of the Currency, (2) 
with respect to all other member banks of the Federal Reserve 
System are vested in the Board of Governors of the Federal 
Reserve System, and (3) with respect to all other insured banks 
and State savings associations, the accounts of which are 
insured by the Federal Deposit Insurance Corporation, are 
vested in the Federal Deposit Insurance Corporation. The 
Comptroller of the Currency, the Board of Governors of the 
Federal Reserve System, and the Federal Deposit Insurance 
Corporation shall have the power to make such rules and 
regulations as may be necessary for the execution of the 
functions vested in them as provided in this subsection. In 
carrying out their responsibilities under this subsection, the 
agencies named in the first sentence of this subsection shall 
issue substantially similar regulations to regulations and 
rules issued by the Commission under sections 10A(m), 12, 13, 
14(a), 14(c), 14(d), 14(f) and 16 of this Act, and sections 
302, 303, 304, 306, 401(b), 404, 406, and 407 of the Sarbanes-
Oxley Act of 2002, unless they find that implementation of 
substantially similar regulations with respect to insured banks 
and insured institutions are not necessary or appropriate in 
the public interest or for protection of investors, and publish 
such findings, and the detailed reasons therefor, in the 
Federal Register. Such regulations of the above-named agencies, 
or the reasons for failure to publish such substantially 
similar regulations to those of the Commission, shall be 
published in the Federal Register within 120 days of the date 
of enactment of this subsection, and, thereafter, within 60 
days of any changes made by the Commission in its relevant 
regulations and rules.
  (j) The Commission is authorized, by order, as it deems 
necessary or appropriate for the protection of investors to 
deny, to suspend the effective date of, to suspend for a period 
not exceeding twelve months, or to revoke the registration of a 
security, if the Commission finds, on the record after notice 
and opportunity for hearing, that the issuer of such security 
has failed to comply with any provision of this title or the 
rules and regulations thereunder. No member of a national 
securities exchange, broker, or dealer shall make use of the 
mails or any means or instrumentality of interstate commerce to 
effect any transaction in, or to induce the purchase or sale 
of, any security the registration of which has been and is 
suspended or revoked pursuant to the preceding sentence.
  (k) Trading Suspensions; Emergency Authority.--
          (1) Trading suspensions.--If in its opinion the 
        public interest and the protection of investors so 
        require, the Commission is authorized by order--
                  (A) summarily to suspend trading in any 
                security (other than an exempted security) for 
                a period not exceeding 10 business days, and
                  (B) summarily to suspend all trading on any 
                national securities exchange or otherwise, in 
                securities other than exempted securities, for 
                a period not exceeding 90 calendar days.
        The action described in subparagraph (B) shall not take 
        effect unless the Commission notifies the President of 
        its decision and the President notifies the Commission 
        that the President does not disapprove of such 
        decision. If the actions described in subparagraph (A) 
        or (B) involve a security futures product, the 
        Commission shall consult with and consider the views of 
        the Commodity Futures Trading Commission.
          (2) Emergency orders.--
                  (A) In general.--The Commission, in an 
                emergency, may by order summarily take such 
                action to alter, supplement, suspend, or impose 
                requirements or restrictions with respect to 
                any matter or action subject to regulation by 
                the Commission or a self-regulatory 
                organization under the securities laws, as the 
                Commission determines is necessary in the 
                public interest and for the protection of 
                investors--
                          (i) to maintain or restore fair and 
                        orderly securities markets (other than 
                        markets in exempted securities);
                          (ii) to ensure prompt, accurate, and 
                        safe clearance and settlement of 
                        transactions in securities (other than 
                        exempted securities); or
                          (iii) to reduce, eliminate, or 
                        prevent the substantial disruption by 
                        the emergency of--
                                  (I) securities markets (other 
                                than markets in exempted 
                                securities), investment 
                                companies, or any other 
                                significant portion or segment 
                                of such markets; or
                                  (II) the transmission or 
                                processing of securities 
                                transactions (other than 
                                transactions in exempted 
                                securities).
                  (B) Effective period.--An order of the 
                Commission under this paragraph shall continue 
                in effect for the period specified by the 
                Commission, and may be extended. Except as 
                provided in subparagraph (C), an order of the 
                Commission under this paragraph may not 
                continue in effect for more than 10 business 
                days, including extensions.
                  (C) Extension.--An order of the Commission 
                under this paragraph may be extended to 
                continue in effect for more than 10 business 
                days if, at the time of the extension, the 
                Commission finds that the emergency still 
                exists and determines that the continuation of 
                the order beyond 10 business days is necessary 
                in the public interest and for the protection 
                of investors to attain an objective described 
                in clause (i), (ii), or (iii) of subparagraph 
                (A). In no event shall an order of the 
                Commission under this paragraph continue in 
                effect for more than 30 calendar days.
                  (D) Security futures.--If the actions 
                described in subparagraph (A) involve a 
                security futures product, the Commission shall 
                consult with and consider the views of the 
                Commodity Futures Trading Commission.
                  (E) Exemption.--In exercising its authority 
                under this paragraph, the Commission shall not 
                be required to comply with the provisions of--
                          (i) section 19(c); or
                          (ii) section 553 of title 5, United 
                        States Code.
          (3) Termination of emergency actions by president.--
        The President may direct that action taken by the 
        Commission under paragraph (1)(B) or paragraph (2) of 
        this subsection shall not continue in effect.
          (4) Compliance with orders.--No member of a national 
        securities exchange, broker, or dealer shall make use 
        of the mails or any means or instrumentality of 
        interstate commerce to effect any transaction in, or to 
        induce the purchase or sale of, any security in 
        contravention of an order of the Commission under this 
        subsection unless such order has been stayed, modified, 
        or set aside as provided in paragraph (5) of this 
        subsection or has ceased to be effective upon direction 
        of the President as provided in paragraph (3).
          (5) Limitations on review of orders.--An order of the 
        Commission pursuant to this subsection shall be subject 
        to review only as provided in section 25(a) of this 
        title. Review shall be based on an examination of all 
        the information before the Commission at the time such 
        order was issued. The reviewing court shall not enter a 
        stay, writ of mandamus, or similar relief unless the 
        court finds, after notice and hearing before a panel of 
        the court, that the Commission's action is arbitrary, 
        capricious, an abuse of discretion, or otherwise not in 
        accordance with law.
          (6) Consultation.--Prior to taking any action 
        described in paragraph (1)(B), the Commission shall 
        consult with and consider the views of the Secretary of 
        the Treasury, the Board of Governors of the Federal 
        Reserve System, and the Commodity Futures Trading 
        Commission, unless such consultation is impracticable 
        in light of the emergency.
          (7) Definition.--For purposes of this subsection, the 
        term ``emergency'' means--
                  (A) a major market disturbance characterized 
                by or constituting--
                          (i) sudden and excessive fluctuations 
                        of securities prices generally, or a 
                        substantial threat thereof, that 
                        threaten fair and orderly markets; or
                          (ii) a substantial disruption of the 
                        safe or efficient operation of the 
                        national system for clearance and 
                        settlement of transactions in 
                        securities, or a substantial threat 
                        thereof; or
                  (B) a major disturbance that substantially 
                disrupts, or threatens to substantially 
                disrupt--
                          (i) the functioning of securities 
                        markets, investment companies, or any 
                        other significant portion or segment of 
                        the securities markets; or
                          (ii) the transmission or processing 
                        of securities transactions.
  (l) It shall be unlawful for an issuer, any class of whose 
securities is registered pursuant to this section or would be 
required to be so registered except for the exemption from 
registration provided by subsection (g)(2)(B) or (g)(2)(G) of 
this section, by the use of any means or instrumentality of 
interstate commerce, or of the mails, to issue, either 
originally or upon transfer, any of such securities in a form 
or with a format which contravenes such rules and regulations 
as the Commission may prescribe as necessary or appropriate for 
the prompt and accurate clearance and settlement of 
transactions in securities. The provisions of this subsection 
shall not apply to variable annuity contracts or variable life 
policies issued by an insurance company or its separate 
accounts.

           *       *       *       *       *       *       *


                             MINORITY VIEWS

    H.R. 6745 would increase retail investor exposure to risky 
private offerings by more than doubling the cap on the number 
of non-accredited investors that can hold certain companies' 
unregistered stock without triggering the full protections of 
federal securities laws.
    Pursuant to Section 12(g) of the Securities Exchange Act of 
1934, as amended by the Jumpstart Our Business Startups Act 
(``JOBS Act''), a private business that is not a bank, bank 
holding company, or savings and loan holding company, can issue 
shares to up to 2,000 investors without registering with the 
Securities and Exchange Commission (SEC), provided that fewer 
than 500 of the investors are non-accredited. The JOBS Act 
permits banks to issue shares to up to 2,000 persons, without 
respect to accredited status.
    ``Accredited investors'' are persons and entities with the 
financial resources to withstand the increased risks associated 
with unregistered securities offerings, which include reduced 
or no disclosures of the company's financial condition, fewer 
investor protections, and significant obstacles to reselling 
the security. As set forth in SEC Rule 501 of Regulation D,\1\ 
a natural person can qualify as an accredited investor if they 
have an annual income of more than $200,000 (or $300,000 
together with a spouse) or a net worth exceeding $1 million, 
excluding their primary residence. Qualifying entities include 
financially sophisticated enterprises such as banks, brokers, 
insurance companies, and investment companies.
---------------------------------------------------------------------------
    \1\17 CFR Sec. 230.501(a).
---------------------------------------------------------------------------
    H.R. 6745 would raise the non-accredited investor threshold 
for telecommunications companies that receive certain federal 
subsidies from 500 to 1,250 persons. The bill would thus allow 
eligible companies to remain private longer and avoid 
disclosure of important financial information to a greater 
number of potentially vulnerable investors.
    Importantly, one of the primary reasons Congress afforded a 
more flexible registration threshold for smaller banks in the 
JOBS Act was because banks engage in additional reporting in 
the form of publicly available call reports filed with the 
Federal Financial Institutions Examination Council (FFIEC). A 
call report is similar to a public company's quarterly filing 
(called a ``10-Q'') in that it provides a quarterly balance 
sheet, income statement, and narrative explaining elements of 
the financial statements to the public and regulators. While 
H.R. 6745 would direct the SEC to create a form that an 
eligible company must file to take advantage of the increased 
threshold, the new form need only be filed annually and include 
``a summary of the consolidated balance sheet and the 
consolidated income statement of the issuer.'' The bill leaves 
any other content to the discretion of the SEC. As such, the 
form contemplated by H.R. 6745 falls well short of the robust, 
audited filings made by public companies. It would also provide 
investors with significantly less information, on a less 
regular basis, than the public call reports that justified 
increased registration flexibility for smaller banks.
    Curiously, H.R. 6745 would direct the SEC to (1) 
retrospectively study whether the bill's changes were warranted 
and (2) recommend to Congress whether issuers in other 
industries could also benefit from delayed registration. The 
inclusion of these provisions suggests that H.R. 6745 is 
premature. While retrospective studies can provide a useful 
examination of changing market conditions, Congress should 
collect sufficient information to demonstrate that amendments 
to our federal securities laws are appropriately tailored and 
necessary to advance the interests of the public before 
enacting such amendments. Unfortunately, the record currently 
lacks support for the bill's central premise--that reducing 
disclosures and investor protections is a necessary and 
appropriate means of enhancing capital formation for rural 
telecommunication companies.
    Investor advocacy groups Americans for Financial Reform 
(``AFR'') and Public Citizen oppose H.R. 6745 because it would 
increase risks for investors and deter public company 
registration. In a letter to the Committee, AFR wrote that the 
bill, ``would tend to undermine the public equities markets in 
favor of private market fundraising with inadequate disclosure 
requirements and investor protections.''
    For the above reasons, we oppose H.R. 6745.

                                   Maxine Waters.
                                   Carolyn B. Maloney.
                                   Nydia M. Velazquez.
                                   Wm. Lacy Clay.
                                   Michael E. Capuano.

                                  [all]