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S.L.C.

112TH CONGRESS

Is'r

SESSION

s.
access

To increase American job creation and economic growth by improving to the public capital iuarkets for emerging growth companies.

IN THE SENATE OF THE UNITED srrArrES
Mr.
SCHlJMRR

troduced mittee on

(for himself, Mr. TOOMEY, MI'. WARNER, and Mr. CR.,\l'O) inthc following bill; which was read twice and referred to the Com--------------

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A BILL
To increase American job creation and eeonormc growth by improving access to the public capital markets for emerging' growth companies. 1 Be 1:t enacted by the Senate and HON,se of Represenia-

2 lives of the United States of'America in Congress assembled,

3
4

SECTION 1. SHORT TITLE.

This Act may be cited as the "Reopening

American

5 Capital Markets

to Emerging

Growth Companies Act of'

6 2011". 

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2 1 SEC. 2. DEFINITIONS. 2 (a) Sr~CUnITIES ACT OF 1933.-Seetion 2(a) of the

3 Securities Act of 1933 (15 U.S.C. 77h(a)) is amended by 4 adding at the end the following: 5 6 7 8 9 10 11 1.2 13 14 1.5 16 17 1.8 19 20 21 22 23 24 "(19) The term 'emerging growth company'

means an issuer that had total annual gross revenues of less than $1,000,000,000 during its most recently completed fiscal year .. An issuer that is an emerging g-rowth company as of the first day of that fiscal year shall continue to be deemed an emerging growth company until the earliest of"(A) the last clay of the fiscal year of the issuer during which it had total annual gross revenues of $1,000,000,000 or more;
"(B) the last day of the fiscal year of the

issuer following the fifth anniversary of the date of the first sale of common equity securities of the issuer pursuant to an effective registration statement under this title; and "( C) the date on which such issuer is

deemed to be a 'large accelerated filer', as defined in section 240.12b-2 of title 17 of the

Code of Federal Regulations, or any successor thereto.". 

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3 1 (b) SECURITIES EXCHANGE ACT OF 1934.-Seetion Exchange Act of 1934 (15 U.S.c.

2 3(a) of the Seeurities

3 78e(a)) is amended4 5 6 7 8 9 10
11

(1) by redesignating

paragraph

(77), as added and Se-

by section 941(a) of the Investor Protection

curities Reform Act of 2010 (Public Law 111-203, 124 Stat. 1890), as paragraph (79); and

(2) by adding at the end the following: "(80) The term 'emerging growth company'
gTOSS

means an issuer that had total annual nues of' less than $1,000,000,000 cently completed

reve-

during its most reis an

12 13 14 15
16

fiscal year. An issuer that

emerging growth company as of the first day of that fiscal year shall continue to he deemed an emerging growth company until the earliest of"(A) the last day of the fiscal year of the issuer during which it had total annual revenues of $1,000,000,000 or more,
gTOSS

17 18

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20 21 22 23 24

"(B) the last day of the fiscal year of the issuer following the fifth anniversary of the date

of the first sale of common equity securities of the issuer pursuant statement and under to an effective registration the Securities Act of 19a3j 

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2 3 4 5 6

"(C) the date on which such issuer
deemed to be a 'large accelerated fined in section 240.12b-2 Code of Federal thereto. " .
(c) OTHEI{ DEFINITIONS.-A."

is

filer', as de17 of the

of title

1'Wg1.l1ations,or any successor

used in this title, the

7 following- definitions shall apply: 8 9
10

(1) COlVIMISSION.-The

term

"Commission"

means the Securities and Exchange Commission.
(2)
INI'l'IAI.J PUBI~IC OFFEHING DATE.-The

11 12

term "initial public offering daten means the date of the first issuer sale of common equity securities of an state-

13 14

pursuant

to an effective registration

ment under the Securities Act of 1933.

15 SEC. 3. DISCLOSURE OBLIGATIONS.
16 (a) E1..'ECTrTIVE
COlVIPENRATTON.-

17

(1) EA'EMPTloN.-Section

14.A(e) of the Securi.. is

18
19 20 21 22 23 24 25

ties Exchange amended-

Act of 1934 (15 U.S.C. 78n-1(e»

(A) by inserting

"An emerging

growth

company shall be exempt from the requirements of subsections (a) and (b)." before "The Com-

mission may"; and (B) by striking '{any other issuer". "an issuer" and inserting 

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1 2

(2) Pnoxtss.c-Seeuon

14(i) of the Securities is amend-

Exchange Act of 1934 (15 U.S.C. 78n(i»

3
4
5

ed by inserting

", for any issuer

other

than an

emerging growth company," after "including".
(3)

COMPENSATION DISCLOSUREs.-Section of the Dodd-Frank Protection Wall Street Reform

6 7 8 9
10 11

953(b)(I)

and Consumer 111-203;
"J

Act of 2010 (Public Law

124 Stat.

1904) is amended by inserting

other than an emerging' growth company, as that Securities Ex-

term is defined in section 3(a) of'the

change Act of 1934," after "require each issuer". (b) FINANCIAlj DISCLOSURES.(1) SECURITIES ACT OF 19:38.-Section 7(a) of
IS

12
13

14 15

the Securities amended emerging

Act of 1933 (15 U.S.C.

77g(a»

by adding at the end the following: "An growth company need not present more

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17 18 19 20 21 22 23 24 25

than 2 years of audited financial statements in order for the registration statement of such emerging

growth company with respect to an initial public offering of its common equity securities to be effective, and in any other registration statement to be filed

with the Commission, an emerging growth company need not present financial data for any period prior to the earliest audited period presented in connection "with its initial public offering.". 

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1 (2) SECURITfES
EXCHANGE ACT OF 19:34.-See-

2 3 4 5 6
7

tion 13(a) of the Securities (15 U.S.C. 78m(a»

Exchange

Act of 1984

is amended

by adding at the statement,

end the following: "In any registration

periodic report, or other reports to be filed with the Commission, present an emerging growth company need not data for a.ny period prior to the in connection with

financial

8
9

earliest audited period presented its initial public offering.".

10

(c) NEW ACCOUNTING PRONOUNCEMENTS.-Section

11 19(h)(1)(A)

of the Securities

Act of 19:33 (15 U.S.C.

12 77s(b)(1)(A») is amended13 14 15 16 17 18 19 20 21 22 23
24 (1) in clause (iv), by striking' "and"

at the end;

and (2) by adding at the end the following: "(TI) has not established any account-

ing principles that would require an emerging growth company to comply with any new or revised financial accounting stand-

ard as of an effective date that is earlier than the effective date that applies to a

company that is not an issuer, as defined in section 2(a)(7) of the Sarbanes-Oxley

Act of 2002 (15 U,S.C. 7201(£1.)(7»; and". 

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7 1 (d)
O'l'HEH

DISCljOSURES.-An

emerging

growth of title 17

2 company may comply with section 229.303(a) 3 of the Code of Federal Regulations,

or any successor

4 thereto, by providing information

required by such section of the emerging pursuant to

5 with respect to the financial statements

6 growth company for each period presented

7 subsection (b). An emerging growth company may comply
8 with section 229.402

of title 17 of the Code of Federal by disclosing the value of

9 Regulations,

or any successor thereto,

10 same information 11 outstanding 12 non-affiliates

as any issuer with a market

voting and nonvoting common equity held by of less than $75,000,000.

13 SEC. 4. INTERNAL CONTROLS AUDIT. 14 Section 404(b) of the Sarbanes-Oxley Act of 2002

15 (15 U.S.C. 7262(b)) is amended by inserting ", other than

16 an issuer that is an emerging growth company (as defined
17 in section 3 of the Securities 18 before "shall attest to". 19 SEC. 5. AUDITING STANDARDS. 20 21 Section 103(a)(3) (15 U.S.C. 7213(a)(3)) of the Sarbanes-Oxley Act of 2002 Exchange Act of 1984),"

is amended by adding at the end

22 the following: 23 "(C)
rrHANSITION

PERIOD FOR EMERGING

24
25

GROWTH cnMPANffiS.-Any

rules of the Board or a

requiring

mandatory

audit firm rotation 

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8 1 2 3 4 supplement to the auditor's report in which the

auditor would be required to provide additional information statements about the audit and the financial of the issuer (auditor discussion and

5
6

analysis) shall not apply to an emerging gTO"wth company, as defined in section 3 of the Securities Exchange Act of 1934. Any additional rules adopted by the Board after the date of enactment of this subparagraph shall not apply to any emerging growth company, unless the Commission determines additional companies that the application to emerging of such growth in the

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8

9 10 11
12

requirements is necessary

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or appropriate

public interest,

after considering

the protection

of investors and whether the action will promote efficiency, competition, and capital formation.".
ABOUT EMERGING

16

17 SEC. 6. AVAILABILITY OF INFORMATION 18 19 20 the
GROWTH COMPANIES.

(a) PnOVISION OP RESEARCH.-Section Securities Act of 1933 (15 U.S.C.

2(a)(3) 77b(a)(3))

of
IS

21 amended by adding' at the end the following: "The publica22 tion or distribution by a broker or dealer of' a research

23 report about an emerging growth company that is the sub24 ject of a proposed public offering of the common equit.y 25 securities of such emerging growth company pursuant to 

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1 a registration

statement

that the issuer proposes to file,

2 or has filed, or that is effective shall be deemed for pur3 poses of paragraph (10) ofthis subsection and section 5(c)

4 not to constitute an offer for sale or offer to sell a security, 5 even if the broker or dealer is participating or will particiof' the re-

6 pate in the registered

offering of the securities

7 issuer. As used in this paragraph,

the term "research

8 port" means a written, electronic, or oral communication 9 that includes information, 10 with respect to securities opinions, or recommendations of an issuer or an analysis of

11 a security or an issuer, whether or not it provides informa12 tion reasonably 13 ment decision.". 14 (b) SECUIUTIES ANAT~YST COMMUNICATloNs.-SecExehange Act of 1934 (15 sufficient upon which to base an invest-

15 tion 15D of the Securities 16 U.S.C. 780-6) is amended17 18 19 20 21 22
01'

(1)

by redesignating

subsection

(e) as sub-

section (d); and (2) by inserting lowing: "(e) I.lIMITATION.-Notwithstanding subsection (a) after subsection (b) the fol-

any other provision of law, neither the Commission nor

23 any national securities association registered under section

24 15A may adopt or maintain any

1111e

or regulation in

COl1- 

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1 nection with an initial public offering of the common cq2 uity of' an emerging gTowth company3 4 5 6 7
8

"(1) restricting,

based on functional role, which

associated persons of a broker, dealer, or member of a national securities association, may arrange analyst for

communications

between a securities

and a

potentia] investor; or
"(2)

restricting

a securities

analyst

from par-

9
10 11 12 13 14

ticipating

in any communications

with the manage-

ment of an emerging growth company that is also attended by any other associated person of a broker, securities assoeia-

dealer, or member of a national tion whose functional ties analyst.".

role is other than as a securi-

15

(c) EXPANDING PERMISSIBljE COMMUNICATIONS.-

16 Seetion 5 of the Securities
17 U.S.C. 77e) is amendcd18 19 20 21 22
(1)

Exchange

Act of 1933 (15

by redesignating

subsection

(d) as sub-

section (e); and (2) by inserting lowing: "(d) J;IMITATION.-Notwithstanding any other proviafter subsection (c) the fol-

23 sion of' this section, an emerging growth eompany or any 24 person authorized to act on behalf of an cmerging growth 25 company may engag·c in oral or 'written communications 

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11 1 with potential 2 buyers investors that that are qualified arc accredited institutional investors, as

or institutions

3 such terms are respectively defined in section 230.144A 4 and section 230.501(a) 5 Regulations, of title 17 of the Code of Federal

or any successor thereto, to determine wheth-

6 er snch investors might have an interest in a contemplated
7 securities offering, either prior to or following the date of 8 filing of a registration statement with respect to such se-

9 eurities with the Commission, subject to the requirement 10 of subsection (b)(2).n. 11 (d) POST
OPFEHING

COMIVIUNICATloNS.-Neithe1' securities association

12 the Commission 13 registered

nor any national

under section 15A of the Securities Exchange

14 Act of IH84 may adopt or maintain any rule or regulation

15 prohibiting
16 securities

any broker,

dealer, or member of a national any

association from publishing or distributing or making a public appearance,

17 research report

with 1'e-

18 speet to the securities

of an emerging growth company,

19 either20 21 22 23 24 25 (1) within any prescribed period of time fol-

lowing the initial public offering date of the emergiug growth company; or (2) within any prescribed period of time prtor between the

to the expiration date of any agreement

broker, dealer, or member of a national securities as- 

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12 1 2 3 4 sociation and the emerging growth company or its that restricts or prohibits the sale of

shareholders securities

held by the emerging growth company or after the initial public offering date.

its shareholders

S SEC. 7. OTHER MATTERS. 6 Section 6 of the Securities Aet of 1933 (15 U.S.C.

7 77f) is amended by adding at the end the following:

8
9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

"(e)

EMERGING

GROW'l'H

COMPANIES.emerging growth com-

"(1) IN GENERAL.-Any

pany, prior to its initial public offering date, may confidentially submit to the Commission a draft regfor confidential nonpublic review

istration statement,

by the staff of the Commission prior to public filing, provided that the initial confidential all amendments the Commission thereto submission and

shall be publicly filed with

not later than 21 days before the

elate on which the issuer conducts a road show, as such term is defined in section 230.4:3:3(11)(4) of title

17 of the Code of Federal Regulations,
cesser thereto.

or any sue-

"(2) CONFIDENTIAIJITY.-Notwithstanding other provision of this title, the Commission

any shall proto

not be compelled to disclose any information vided to or obtained by the Commission pursuant

this subsection. For purposes of section 552 of title 

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1~1 1 2 3 4 5, United States Code, this subsection shall be sidered a statute
COl1-

described in subsection (b)(3)(B)

of such section 552. Information described in or obtained pursuant to this subsection shall be deemed

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6

to constitute confidential information for purposes of section 24(b)(2) of the Securities Exchange Act of

7

1934.".