Increasing Shareholder Threshold for SEC Registartion

Floor Speech

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Mr. HOYER. I thank the gentleman for yielding, and I congratulate him for his leadership on this effort.

I thank my friend, Chairman Bachus, for his facilitating the passage of this legislation.

Community banks, Mr. Speaker, are the life blood of our local economies. They are locally owned and operated. They know their local businesses and residents intimately, and lend to them, not just because it's a sound business decision, but also because it benefits the greater community.

With the credit and lending crisis we have experienced over the past couple of years, the small banks that operate in our local communities face numerous challenges just to stay afloat. These are the banks we need to see lending to small businesses and homeowners, but they are hamstrung in their attempt to raise capital by outdated SEC registration requirements. This one is over half a century old.

Under the nearly 50-year-old 500 investor exemption rule, banks have to register with the SEC if they have more than 500 shareholders. The gentleman from Connecticut (Mr. Himes), whose bill this is, explained why that is difficult and why it changes as people who have stock die and leave their stock to more people and to heirs. Banks that have exceeded this low threshold must provide extensive and costly financial disclosure under our Federal securities laws.

Now, over the years, we have upped the threshold in terms of dollars that the bank assets have, but we have not affected the number of shareholders. To reverse this registration, they are then forced to lower their number of shareholders by buying back stock which, all too often, means losing local shareholders who keep these banks connected with their local communities.

The rationale behind SEC registration rules generally is to provide effective and timely disclosure to protect investors, which of course all of us support. However, as Maryland's Banking Supervisor Mark Kaufman notes, the current rule adds to banks' cost with little associated benefits, especially considering that, unlike most private companies, banks file public disclosure already on a quarterly basis and do so on a more timely basis than public companies, as the gentleman from Connecticut pointed out in his remarks.

The American Bankers Association, the Independent Community Bankers of America, State groups like the Maryland Bankers Association and small banks throughout Maryland and the Nation support raising this threshold to 2,000, which is what this bipartisan legislation would do. This will lift a significant regulatory burden on our community banks without any offsetting price in regulatory oversight and make it easier for them to raise capital so they can continue to lend and support job growth in our communities.

I strongly urge my colleagues on both sides of the aisle to support H.R. 1965.

I note that my friend from Arkansas (Mr. Womack) is also on the floor. I want to thank him for his leadership in this effort as well.

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