Senate Republicans on April 4, 2022, rolled out draft legislation to further ease regulatory requirements for entrepreneurs, retail investors, public companies, broker-dealers, and others to mark the 10th anniversary of the JOBS Act. pl112-106
The “JOBS Act 4.0” package contains a wish list of long-standing Republican securities law reforms, some of which lawmakers have filed as standalone bills in recent weeks.
“The JOBS Act helped to revitalize interest in the public markets and spur economic growth, but it is clear significant work remains to be done to give retail investors access to higher returns and ensure American markets remain the deepest and most liquid in the world,” said Sen. Pat Toomey of Pennsylvania, the ranking Republican on the Senate Banking Committee. “The discussion draft we’re releasing today incorporates ideas from entrepreneurs, retail investors, and others, and includes numerous provisions with strong bipartisan support.”
Toomey added that he looks forward to “continue working with both Republican and Democrat colleagues on a final product that accelerates economic growth and spurs new job creation across the U.S.”
The bill is another example of lawmakers using the bipartisan branding of the JOBS Act of 2012 to push additional market deregulation. Toomey’s comments underscore that the bill in its current form is a non-starter without Democratic buy-in, which would almost certainly require major changes.
The bill itself contains more than two dozens measures, including:
- Small Business Audit Correction Act: The bill would amend the Sarbanes-Oxley Act of 2002 to exempt privately held brokers and dealers who do not handle client funds from hiring a PCAOB-registered audit firm as part of their annual reporting requirements. Proponents of carving out the exemption for small broker-dealers say Congress went too far in its efforts to prevent another Bernie Madoff-style scandal and inappropriately subjected small firms to audit requirements designed for large public companies.
- Reporting Requirements Reduction Act of 2022: The measure would amend the Securities Exchange Act of 1934 to allow that any public company required to file quarterly reports “may elect to instead file the report on a semi-annual basis.” Republican lawmakers have for years sought to advance bills weakening quarterly reporting requirements, arguing the filings are needlessly burdensome and encourage short-term thinking by corporate management.
- Restoring Shareholder Transparency Act: The bill would amend the Exchange Act to make a series of company-friendly changes to the proxy system, including by adding new requirements on proxy advisory firms and freeing companies from the SEC’s shareholder proposal regime under Rule 14a-8 unless they agree to be subject to the requirements.
- Developing and Empowering our Aspiring Leaders Act of 2022: The bill would allow venture capital (VC) funds to make secondary investments and investments in other VC funds without triggering registration requirements under the Investment Advisers Act of 1940
- Gig Worker Equity Compensation Act: The bill would broaden the exemption for private company equity compensation in Rule 701 under the Securities Act of 1933 to include gig workers, such as delivery drivers.
- Equal Opportunity for all Investors Act: The bill would allow investors in Rule 506(c) offerings under Regulation D to self-certify their accreditation status. The measure would also allow anyone to invest up to 10 percent of their income in Reg D securities, and broaden the definition of an accredited investor to include investors who pass an examination set up by the SEC.
- Dodd-Frank Material Disclosure Improvement Act: The bill would repeal pay ratio and pay-versus-performance disclosure mandates under the Dodd-Frank Act, as well as and certain other disclosure provisions of the 2010 law. PL111-203
This article originally appeared in the April 6, 2022 edition of Accounting & Compliance Alert, available on Checkpoint.
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