Politics in Action: H.R. 2357, H.R. 5424 and H.R. 5063

 STATEMENT OF ADMINISTRATION POLICY

H.R. 2357 - Accelerating Access to Capital Act of 2016

(Rep. Wagner, R-MO)

The Administration strongly opposes H.R. 2357, the Accelerating Access to Capital Act.  The Rules Committee Print of H.R. 2357 contains the text of H.R. 2357 as reported (Title I), as well as texts of H.R. 4850, the Micro Offering Safe Harbor Act, as reported (Title II), and H.R. 4852, the Private Placement Improvement Act, as reported (Title III).  Markets function most efficiently when they are transparent, well-regulated, and trusted by investors and issuers alike.  These bills would reduce transparency and inhibit effective regulatory oversight of our capital markets by the Securities and Exchange Commission (SEC).  These bills would undermine not only the health and integrity of our markets, but the very capital formation process they claim to promote.

H.R. 2357 (Title I) would weaken investor protections by reducing the quality or availability of information needed to make informed investment decisions.  By compelling the SEC to amend Form S-3, the bill would: (1) allow microcap companies traded on an exchange to issue an unlimited number of shares using shelf registration within a 12-month period; and (2) permit unlisted microcap companies, including those listed on the "pink sheets," with less than $75 million in common equity to sell up to 1/3 of the market value of their common equity using shelf registration in a 12-month period.  This bill would harm investors by reducing disclosure requirements and infringe on the SEC's ability to appropriately respond to market developments.  Such changes would increase the risks posed by accounting fraud, market manipulation, insider trading, and the sale of artificially-inflated stock. (Click here for the full statement.) 

H.R. 5424 - Investment Advisers Modernization Act of 2016

(Rep. Hurt, R-VA, and five cosponsors)

The Administration strongly opposes H.R. 5424.  Actions taken in the years since enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act are curbing excessive risk-taking, closing regulatory gaps, and making our financial system safer and more resilient.  For the first time, advisers to private funds with more than $150 million in assets are required to register with the Securities and Exchange Commission (SEC); comply with new recordkeeping, reporting, and audit requirements; and file systemic risk reports.  The President has been clear about his opposition to any legislation that would weaken or reduce oversight of the financial system. 

Specifically, H.R. 5424 would create a loophole providing a broad exemption from audit and exam requirements, leaving investors unable to verify that funds actually contain particular investments as claimed.  The bill would also make it more difficult for the SEC to police the market, particularly with respect to investments in uncertificated, private securities for which advisers would not be required to keep any record.  Further, H.R. 5424 would repeal important safeguards, including the requirements that advisers: notify clients of a change in ownership or control of the adviser, deliver a plain language narrative brochure to clients annually, and disclose certain information on large private equity funds to regulators. (Click here for more.) 

H.R. 5063 - Stop Settlement Slush Funds Act of 2016

(Rep. Goodlatte, R-VA, and 32 cosponsors)

The Administration strongly opposes House passage of H.R. 5063, the Stop Settlement Slush Funds Act of 2016, because the legislation is unnecessary and would harm the public interest.  H.R. 5063 would prohibit the Federal Government from entering into settlement agreements that include payments directed to appropriate third parties.  This legislation seeks to address a problem that does not exist – the Federal Government does not create or use "slush funds."  When the Federal Government settles a case with those who violate the law, it seeks to hold the defendants accountable and appropriately remedy the harms they have caused and to prevent the recurrence of those harms.

Because this legislation would interfere with the just and fair settlement of cases, if the President were presented with H.R. 5063, his senior advisors would recommend he veto the bill.  

Source: Executive Office of the President, Office of Management and Budget