Financial Statement Reporting Requirements for Emerging Growth Companies

Floor Speech

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Mrs. WAGNER. Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 2608) to amend the Federal securities laws to specify the periods for which financial statements are required to be provided by an emerging growth company, and for other purposes, as amended.

The Clerk read the title of the bill.

The text of the bill is as follows: H.R. 2608

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. FINANCIAL STATEMENT REPORTING REQUIREMENTS FOR EMERGING GROWTH COMPANIES.

(a) Securities Act of 1933.--Section 7(a)(2) of the Securities Act of 1933 (15 U.S.C. 77g(a)(2)) is amended--

(1) in subparagraph (A), by striking ``and'' at the end;

(2) by redesignating subparagraph (B) as subparagraph (C); and

(3) by inserting after subparagraph (A) the following:

``(B) need not present acquired company financial statements or information otherwise required under section 210.3-05 or section 210.8-04 of title 17, Code of Federal Regulations, or any successor thereto, for any period prior to the earliest audited period of the emerging growth company presented in connection with its initial public offering and, thereafter, in no event shall an issuer that was an emerging growth company but is no longer an emerging growth company be required to present financial statements of the issuer (or acquired company financial statements or information otherwise required under section 210.3-05 or section 210.8-04 of title 17, Code of Federal Regulations, or any successor thereto) for any period prior to the earliest audited period of the emerging growth company presented in connection with its initial public offering; and''.

(b) Securities Exchange Act of 1934.--Section 12(b)(1)(K) of the Securities Exchange Act of 1934 (15 U.S.C. 78l(b)(1)(K)) is amended by striking ``firm;'' and inserting ``firm, provided that the application of an emerging growth company need not present acquired company financial statements or information otherwise required under section 210.3-05 or section 210.8-04 of title 17, Code of Federal Regulations, or any successor thereto, for any period prior to the earliest audited period of the emerging growth company presented in connection with its application and, thereafter, in no event shall an issuer that was an emerging growth company but is no longer an emerging growth company be required to present financial statements of the issuer (or acquired company financial statements or information otherwise required under section 210.3-05 or section 210.8-04 of title 17, Code of Federal Regulations, or any successor thereto) for any period prior to the earliest audited period of the emerging growth company presented in connection with any application under subsection (b) of this section;''.

Mr. Speaker, I rise in support of H.R. 2608, a bill to specify the periods for which financial statements are required by an emerging growth company.

I thank my colleague, our esteemed chairman of the Financial Services Committee, Mr. McHenry, for his leadership on this important piece of bipartisan legislation which will ensure the continued success of the IPO on-ramp enacted in the bipartisan JOBS Act of 2012.

To address the steady decline of small company IPOs, title I of the JOBS Act of 2012 established a new class of public companies, or issuers, known as emerging growth companies.

These companies are given an on-ramp of up to 5 years to comply with certain regulatory requirements prior to, throughout, and immediately after the company's IPO.

Under the JOBS Act, one particularly helpful accommodation provided to EGCs is the requirement to provide 2 years of audited financial statements instead of 3 years in its IPO registration statement.

Under certain circumstances, however, an EGC, or a company that went public as an EGC, must provide financial statements for earlier periods. This has occurred occasionally, for example, in the case of acquired company financial statements and for follow-on offerings involving an emerging growth company that lost its EGC status during IPO registration.

H.R. 2608 resolves this misinterpretation by establishing that an emerging growth company, as well as any issuer that went public issuing EGC disclosure obligations, only needs to provide 2 years of audited financial statements.

Mr. Speaker, by ensuring that EGCs can consistently rely on the JOBS Act's scaled disclosure obligations by eliminating this irregularity, H.R. 2608 will enhance the utility and the benefits of EGC accommodations.

For this reason, I urge my colleagues to support H.R. 2608, and I reserve the balance of my time.
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Mrs. WAGNER. Mr. Speaker, I strongly urge my colleagues to support H.R. 2608, and I yield back the balance of my time.

Ms. JACKSON LEE. Mr. Speaker, I rise today to speak on H.R. 2608, a bill to amend the Federal securities laws to specify the periods for which financial statements are required to be provided by an emerging growth company, and for other purposes.

H.R. 2608 would change the reporting period for financial statements submitted to the Securities and Exchange Commission (SEC) by an emerging growth company (EGC) or former EGC when it acquires another company.

The bill would ensure that EGCs and former EGCs submit financial statements for their target companies that cover a reporting period that does not exceed the earliest audited period for the EGC or former EGC, as presented in connection with an initial public offering.

Under current law, when reporting to the SEC, acquiring companies (including EGCs) must submit up to two years of financial statements for their target companies.

H.R. 2608 is a measure that will limit the financial information an emerging growth company must submit to the Securities and Exchange Commission.

Specifically, an emerging growth company is not required to present a financial statement for any period prior to the earliest audited period of the emerging growth company in connection with its initial public offering, such as a statement for an acquired company.

This bill is being amended to clarify and specify language in the original text.

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