April 6, 2022

Senate Republicans Propose Deregulatory Measures to Promote Economic Growth

Steven Lofchie Commentary by Steven Lofchie

Republican members of the U.S. Senate Banking Committee released a discussion draft of proposed legislation "to help accelerate economic growth and spur new business formation."

The proposed legislation, titled the "Jumpstart Our Business Startups ("JOBS") Act 4.0 of 2022," is intended to:

  • encourage companies to be publicly traded, particularly in earlier growth stages;
  • reduce costs associated with seeking capital by curtailing regulations for small businesses;
  • allow retail investors greater access to private transactions; and
  • make a variety of changes in the administration of financial regulations, the majority of which are intended to reduce burdens on regulated entities.

Among other provisions, the new JOBS Act would require:

  • the SEC, in consultation with FINRA, to conduct a study of the costs to small- and medium-size companies of going public;
  • an extension of the period during which an issuer may benefit from its status as an "emerging growth company";
  • issuer reporting requirements to move from a quarterly to a semi annual basis;
  • no special deference to be paid to proxy proposals that are said to concern matters of "significant social policy";
  • a provision to be made for the establishment of "venture exchanges" that allow for the trading of "early-stage, growth companies";
  • an exemption from Securities Act registration to allow for offerings of less than $500,000 a year;
  • exemptions or reductions in the regulation for "private placement brokers," "finders" and "merger and acquisition brokers"; and
  • the expansion of the definition of "accredited investor."

In a statement supporting the passage of the Act, SIFMA noted that the bipartisan JOBS Act of 2012 "helped promote job creation and economic growth by making it easier for companies to access capital while at the same time promoting transparency for investors," and urged legislators to "tailor securities regulations to facilitate better access to the U.S. capital markets."

Comments on the draft legislation will be accepted by Banking Committee Republicans through June 3, 2022.

Commentary

To be realistic, this proposal is unlikely to go forward in the current political climate. But it is still a worthwhile exercise to put forward ideas for reducing regulatory burdens that can be subject to public comment and feedback. This is particularly the case for deregulation that is focused on small businesses that do not have the scale to withstand heavy regulatory costs.

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