Encouraging Public Offerings Act of 2023

Floor Speech

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Mrs. WAGNER. Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 2793) to amend the Securities Act of 1933 to expand the ability to use testing the waters and confidential draft registration submissions, and for other purposes, as amended.

The Clerk read the title of the bill.

The text of the bill is as follows: H. R. 2793

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE.

This Act may be cited as the ``Encouraging Public Offerings Act of 2023''. SEC. 2. EXPANDING TESTING THE WATERS.

Section 5(d) of the Securities Act of 1933 (15 U.S.C. 77e(d)) is amended--

(1) by striking ``Notwithstanding'' and inserting the following:

``(1) In general.--Notwithstanding'';

(2) by striking ``an emerging growth company or any person authorized to act on behalf of an emerging growth company'' and inserting ``an issuer or any person authorized to act on behalf of an issuer''; and

(3) by adding at the end the following:

``(2) Additional requirements.--

``(A) In general.--The Commission may promulgate regulations, subject to public notice and comment, to impose such other terms, conditions, or requirements on the engaging in oral or written communications described under paragraph (1) by an issuer other than an emerging growth company as the Commission determines appropriate.

``(B) Report to congress.--Prior to any rulemaking described under subparagraph (A), the Commission shall submit to Congress a report containing a list of the findings supporting the basis of the rulemaking.''. SEC. 3. CONFIDENTIAL REVIEW OF DRAFT REGISTRATION STATEMENTS.

Section 6(e) of the Securities Act of 1933 (15 U.S.C. 77f(e)) is amended--

(1) in the heading, by striking ``Emerging Growth Companies'' and inserting ``Confidential Review of Draft Registration Statements'';

(2) by redesignating paragraph (2) as paragraph (4); and

(3) by striking paragraph (1) and inserting the following:

``(1) In general.--Any issuer may, with respect to an initial public offering, initial registration of a security of the issuer under section 12(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78l(b)), or follow-on offering, confidentially submit to the Commission a draft registration statement, for confidential nonpublic review by the staff of the Commission prior to public filing, provided that the initial confidential submission and all amendments thereto shall be publicly filed with the Commission not later than--

``(A) in the case of an initial public offering, 10 days before the effective date of such registration statement;

``(B) in the case of an initial registration of a security of the issuer under such section 12(b), 10 days before listing on an exchange; or

``(C) in the case of a follow-on offering, 48 hours before the effective date of such registration statement.

``(2) Follow-on offering defined.--In this subsection, the term `follow-on offering' means an offering by an issuer during the 12-month period beginning on the effective date of the initial public offering of the issuer or the initial registration of a security of the issuer under section 12(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78l(b)).

``(3) Additional requirements.--

``(A) In general.--The Commission may promulgate regulations, subject to public notice and comment, to impose such other terms, conditions, or requirements on the submission of draft registration statements described under this subsection by an issuer other than an emerging growth company as the Commission determines appropriate.

``(B) Report to congress.--Prior to any rulemaking described under subparagraph (A), the Commission shall submit to Congress a report containing a list of the findings supporting the basis of the rulemaking.''.

Mr. Speaker, I am proud to rise today in support of my bill, H.R. 2793, the Encouraging Public Offerings Act.

This bipartisan piece of legislation would encourage more companies to go public and expand provisions of the JOBS Act by codifying an existing SEC rule.

The SEC rule that this bill codifies allows for all companies to test the waters by communicating directly with certain potential investors before filing for an IPO.

Although small companies are known to drive technological innovation and job creation, they frequently face obstacles in obtaining funding in the capital markets.

These obstacles often are the result of the disproportionately larger burden that securities regulations--written for large public companies--place on small companies when they seek to go public.

Title I of the JOBS Act established a new category of issuers known as emerging growth companies or EGCs. To qualify as an EGC, a company must maintain a certain threshold of annual revenue.

The law provides that EGCs with a 5-year on-ramp to comply with certain regulatory requirements related to disclosure and reporting.

Additionally, title I allows for EGCs to test the waters by meeting with investors to explain their business structure before issuing an IPO.

Biotech companies, especially in the Second District of Missouri in particular, have been vocal about the benefits that testing the waters provides.

These meetings allow for additional time to explain to investors the complicated technologies and regulatory pathways and complex product offerings of the company to encourage greater participation in the IPO.

While the JOBS Act has made it easier for small companies to go public, the JOBS Act alone has not been enough to entirely overcome the capital formation obstacles that many companies face as they attempt to go public.

The Encouraging Public Offerings Act ensures that all companies, rather than just emerging growth companies, are allowed to test the waters.

This bill will make listing on exchanges more attractive, strengthening our financial markets and providing Main Street investors with more opportunities to grow their nest eggs.

Mr. Speaker, this process may sound complicated, but it is actually quite simple. Start-up companies are oftentimes doing innovative and complex activities.

They should be encouraged to sit down with potential investors and given the opportunity to explain why their business model is the right one for an investment plan without additional regulatory burdens.

The best analogy that I can give here, Mr. Speaker, is when you are trying to teach your children the value of a dollar and how to make a good, sound argument.

I remember telling my sons, who were trying to get my husband and I to pay for a new stereo, that they needed to present a plan to us for this potential investment.

They went back to their rooms, did their preparation, and then sat down with us and explained their argument for why they needed a stereo and why we should make that investment.

Mr. Speaker, start-up companies need that same opportunity to pitch their product to potential investors.

We need to incentivize start-ups to grow and expand, creating jobs for American workers and strengthening our economy. While we don't always fund the stereo purchases, we need to give them that chance.

I thank my good friend from New York (Mr. Meeks) for his longstanding support of this legislation, and I urge all my colleagues to support this bill.

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Mrs. WAGNER. Mr. Speaker, I strongly urge my colleagues to support H.R. 2793, and I yield back the balance of my time.

Ms. JACKSON LEE. Mr. Speaker, I rise today in support of H.R. 2793, the Encouraging Public Offerings Act of 2023.

This bill provides statutory authority for all issuers of securities to use certain offering procedures that are available to emerging growth companies.

Specifically, the bill allows under statute issuers of securities to communicate with potential investors to ascertain interest in a contemplated securities offering, either before or after the filing of a registration statement (i.e., test the waters).

Additionally, issuers are allowed under statute to submit a confidential draft registration statement to the Securities and Exchange Commission for review prior to public filing or within one year after the initial public offering or registration.

This bill strikes ``an emerging growth company or any person authorized to act on behalf of an emerging growth company'' and inserts ``an issuer or any person authorized to act on behalf of an issuer.''

This bill further adds the following additional requirements:

(A) In general--the Commission may promulgate regulations, subject to public notice and comment, to impose such other terms, conditions, or requirements on the engaging in oral or written communications described under paragraph (1) by an issuer other than an emerging growth company as the Commission determines appropriate.

(B) Report to Congress--Prior to any rulemaking described under subparagraph (A), the Commission shall submit to Congress a report containing a list of the findings supporting the basis of the rulemaking.

The Congressional Budget Office estimates that it would cost an insignificant amount for the agency to justify any further rulemakings to the Congress because the SEC already allows such practices under current policy.

The Congressional Budget Office expects that the net effect on discretionary spending over the 2023-2028 period would be negligible, assuming appropriation actions consistent with that authority, because the SEC is authorized to collect fees each year to offset its annual appropriation.

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Mrs. WAGNER. Mr. Speaker, on that I demand the yeas and nays.

The yeas and nays were ordered.

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