Accelerating Access to Capital Act of 2016

Floor Speech

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Ms. MAXINE WATERS of California. Mr. Chairman, I certainly appreciate Congresswoman Maloney holding down the fort while I was away today, and I appreciate the work that she has put in this committee on these issues. I am very pleased to be here with her today.

Mr. Chairman, I rise today in strong opposition to H.R. 2357, a toxic package of bills that would outright encourage fraud in our financial markets and put retail investors and small businesses at risk. Instead of addressing a host of critical issues facing the American people, including helping the people of Baton Rouge, for example, where there has been a loss of 160,000 homes, instead of helping to come together with this side of the aisle to deal with Zika, instead of helping to deal with the problem we have of water up in Flint, or dealing with the idea that we need to expand Social Security, here we are.

Those people in Baton Rouge, who have just suffered all these devastating losses following the historic flooding last month, are looking to us for help and support. Here we are under the leadership of our Republicans prioritizing a bill that would make it easier for companies to scam investors by escaping regulatory scrutiny.

In particular, H.R. 2357 would allow small companies that are not listed on a national stock exchange to publicly offer their stock as an accelerated filer, without first alerting the Securities and Exchange Commission or gaining its approval.

Currently, this accelerated filer status is reserved for larger companies that meet the standards of and are traded on a national stock exchange. They also are closely followed by analysts, giving investors more insight into their activities. Small companies traded off exchange simply don't have the same safeguards in place.

Providing this type of quick access to our securities markets without sufficient oversight and transparency would lead to accounting fraud, market manipulation, insider trading, and sales of unofficially inflated stock. Anyone who has seen the movie, ``The Wolf of Wall Street,'' can tell you just how bad this would be for our investors and their savings.

Next, the bill would recreate a private securities offering that would be exempt from Federal and State securities laws. The bill would carve out a scenario where a private company could sell stock to certain investors without providing them or the SEC with any information. This stock could then be distributed to the public at large without restriction and, again, without any information.

What is more troubling is that the SEC previously eliminated this exact type of offering exemption after concluding that it, in fact, facilitated fraud. Specifically, the exemption had been used frequently in fraudulent pump-and-dump schemes where these early investors aggressively promoted the stock to artificially inflate its price and then dump their shares on unsuspecting investors.

The provision also ignores the fact that the JOBS Act created similar, yet responsible, exemptions to facilitate small company offerings under the crowdfunding rules in regulation A. As a result, this bill would simply create a big loophole for companies to secretly conduct public offerings and swindle investors.

Lastly, the bill would stop the SEC dead in its tracks in advancing important investor protections in the trillion-dollar private securities market. In particular, it would block the Commission from requiring companies to file a short, simple notice of a sale to alert the SEC and State regulators to possible fraud.

It also would prevent the SEC from stopping private equity funds and hedge funds from using misleading advertising materials. This would essentially allow bad actors to run wild and sell stock to unknowing investors about their true intentions.

Mr. Chairman, it is clear that this bill represents reckless shortsightedness and woeful disregard for the history of fraud in the securities market by undoing much-needed disclosure requirements and investor protections. The administration has threatened to veto this bill saying it would ``undermine not only the health and integrity of our markets, but the very capital formation process they claim to promote.''

I therefore strongly urge my colleagues to join me, investor advocates, and State securities regulators in opposing H.R. 2357.

I close by raising the questions: Why is it, coming back from break, with all of these important issues facing the American public, do we move so quickly to protect Wall Street, to protect private equity, to protect hedge funds? Who are we looking out for in the Congress of the United States of America? Do we have to go back and remind people what happened in this country in 2008 when we put so many families and communities at risk because we didn't have the oversight, we didn't have the transparency, we didn't have the watchful eye of the cop on the block really doing the work we needed to protect our investors and our citizens? Why are we doing this? Why are we spending this time?

I am hopeful that my colleagues will join me and vote against this bill and send a message to our citizens and our constituencies that we are on the side of Main Street, not Wall Street.

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Ms. MAXINE WATERS of California. Mr. Chairman, I simply want a little colloquy with the gentlewoman from New York about what she just alluded to. I think she said something about we will be faced with legislation very soon that would roll back all of the work we have done with Dodd- Frank? Did I hear her say something like that?

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