Scott Garrett

Mr. GARRETT

Mr. GARRETT. Mr. Speaker, on that I demand the yeas and nays.

Mr. GARRETT. Mr. Speaker, I yield myself such time as I may consume. I rise again to support the legislation. It dawns on me also that, as I rise today, this may be the last time that I rise on the floor. So let me just say what an honor it has been to stand at this podium to bring forth legislation like this, as I have done over the last 14 years, and to end where I began, to do so in a bipartisan manner, that they tell me we should be able to pass through today in a pretty overwhelmingly bipartisan manner as well. The gentleman from Arizona ended his remarks with the statement: Every day is a new beginning. So I look at that as my days ahead. This legislation is a new beginning for capital formation and is a new beginning for bipartisanship in future legislation as well. I thank my colleagues from the other side of the aisle that I have had the honor and privilege to work with on this legislation and other legislation as well. I thank my colleagues from my side of the aisle that I have had similar opportunity to do so as well. We have gone through challenging times, from good economic times and bad--maybe more bad than good--but, through it all, I think we have done so with the American public's interest in mind. Behind me also are some of our members of our committee who I also wish to recognize for their work as well. They have left a profound impact on myself during the time that I have known them, and I thank them humbly for their being willing to put up with me and to deal with me throughout the years, but be able to work together for the benefit of the American public as well. I think that, together, we have done great things. I look forward to watching what other great things will be done in a bipartisan manner as well. I think my time may be just about out, but let me also just say this as well. I want to end where I began, which was thanking the chairman of this committee, Mr. Jeb Hensarling, for his leadership and, most importantly, for his friendship in the years I have known him in this capacity. I urge every Member to support the underlying legislation, and I yield back the balance of my time.

Mr. GARRETT. Mr. Speaker, I yield such time as he may consume to the gentleman from Arizona (Mr. Schweikert).

Mr. GARRETT. Mr. Speaker, I yield myself such time as I may consume. Mr. Speaker, I rise today in support of H.R. 6427, the Creating Financial Prosperity for Businesses and Investors Act. It is a compilation of legislative initiatives that the Financial Services Committee has worked on in a very constructive and bipartisan manner during the 114th Congress. For 6 years, our committee, and, in particular, the Subcommittee on Capital Markets and Government Sponsored Enterprises, has sought to break through the bipartisan gridlock in Washington and to ensure that the SEC, or the Securities and Exchange Commission, fulfills an important part of its mission to facilitate capital formation. For example, the JOBS Act of 2012, much of which originated in our committee, has already been a measurable success, as hundreds of companies have used its provisions to file for an initial public offering, and other businesses have been able to raise well over $50 billion worth of capital through private channels. Altogether, this translates to more growth, more innovation, and, most importantly, more jobs here for Americans who have been struggling in an economy that is producing only 1-2 percent growth, at best. We didn't stop at the JOBS Act, and both Republicans and Democrats on our committee came together and continued to generate good ideas that modernize our Nation's security laws for the benefit of the small- and medium-sized enterprises, which often pay a disproportionate share of the costs that come along with regulation. For example, during this Congress, our subcommittee has put forward nearly 40 bills to do just that, the vast majority of which gained, again, bipartisan support in both committee and here on the House floor. A year ago this month, a number of these measures were signed into law at the White House by the President. Today, we bring together a package of another six bills on the House floor with the hopes that we, once again, can improve the environment in which entrepreneurs and small businesses can operate. The provisions under H.R. 6427 include the following: First, a bill from Mr. Carney and Mr. Duffy that would create an Office of the Advocate for Small Business Capital Formation at the SEC. For too long, Mr. Speaker, the SEC has operated in a bureaucratic silo and ignored the needs of small and growing businesses and entrepreneurs. So we have Mr. Duffy's bill, which gives small businesses a permanent voice at the SEC, and it passed out of committee unanimously by a vote of 56-0. It also passed in the House overwhelmingly. Secondly, Mr. Speaker, is a bill from Mr. Poliquin that would require the SEC to respond to recommendations made at its annual government small business forum, ensuring that the SEC no longer simply ignores the ideas generated by small businesses at this event. This bill, again, passed our committee by a vote of 55-1 and passed the House by a vote of 390-1 earlier this year. It also includes two bills from Mr. McHenry, who is on the floor and will be speaking later, one which would fix some of the more unworkable provisions of the crowd funding title of the JOBS Act, and a second bill that would modernize the threshold for when venture capital funds would have to register with the SEC. Again, there was huge bipartisan support, both passing out of committee 57-2 and garnering near- unanimous support here on the House floor. There are two more. Another title includes a bill from Dave Schweikert that would reform the definition of an accredited investor for certain securities offerings so that it is not just the wealthy or the well-connected who are able to invest in these companies. This bill passed the House earlier, again, with near-unanimous support. Finally, we have a bill from our Democratic colleague, Ms. Velazquez, that would make a technical correction to an outdated law that exempts investment companies from having to register in U.S. territories. In conclusion, Mr. Speaker, H.R. 6427 contains innovation and much- needed legislation to help get our economy off the slow growth track that it has been on for too long, and it continues the good bipartisanship that our committee is known for. I want to take this moment to thank all my colleagues over the years for their hard work and willingness to work with us in a bipartisan manner to move legislation like this. In particular, I thank our chairman, Jeb Hensarling, for his tremendous leadership of our full Financial Services Committee and for all the work that he has done to improve our capital markets in this country and to create a financial system that works for the benefit of all Americans. Mr. Speaker, I reserve the balance of my time.

Mr. GARRETT. Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days in which to revise and extend their remarks and include extraneous materials on this bill.

Mr. GARRETT. Mr. Speaker, I yield such time as he may consume to the gentleman from North Carolina (Mr. McHenry). I appreciate all of his hard work for the JOBS Act and all the rest of his work as vice chair of the committee and the time together that we had.

Mr. GARRETT. Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 6427) to improve the operation of United States capital markets, and for other purposes.

Mr. GARRETT

Mr. GARRETT. Mr. Speaker, as a member of the Congressional Armenian Caucus, I rise today to recognize Armenia's twenty-fifth Independence Day on September 21st. Both the United States and Armenia share the belief that remembering our countries' heritages is critical to paving the path to tomorrow. In the first genocide of the 20th century, nearly 1.5 million Armenians perished at the hands of the Ottoman Empire. And, for much of the Twentieth Century, Armenia was under the brutal rule of the Soviet Union. Although history has presented the Armenian people with many challenges, they have always found a way to triumph in the face of daunting adversity. The United States has consistently stood with Armenia over the last twenty-five years as the Armenian people have shown how a former Republic of the Soviet Union could transition into a thriving democratic nation-state. As we have seen around the world, new democracies will have their struggles. However, I am confident that the resiliency and strength of the Armenian people will allow them to overcome any obstacles challenging their country's bright future. I would again like to congratulate the people of Armenia on their twenty-fifth Independence Day. This anniversary is a time to remember the sacrifices of the past and to look ahead to a future.

Mr. GARRETT

Mr. GARRETT. I thank the chairman. Mr. Chairman, I rise in support of H.R. 2357, the Accelerating Access to Capital Act of 2015. I also want to thank Mrs. Wagner, Mr. Emmer, and all of my colleagues on the Financial Services Committee who have continued to support legislation that will allow our economy to grow and to expand opportunities for all Americans across this country. Mr. Chairman, as I spend time with my constituents in the Fifth District, the message I hear from them is largely the same one I have been hearing for the last 8 years. People are concerned about jobs. They are concerned about their economic security and retirements. Perhaps, most importantly, they are concerned about whether their kids--their children--are going to have the same kinds of opportunities that they have enjoyed. You see, there is no more ambiguity remaining about the economic legacy of the Obama administration. Last month's news that the economy grew at an abysmal 1.1 percent during the second quarter merely confirms what we already knew: we are mired in the weakest economic recovery since World War II. Some economists now think we are heading into another recession. It appears that all of the promises that came with the passage of Dodd-Frank, ObamaCare, the $800 billion stimulus package, and the thousands of regulations in the last 8 years were just that: promises. Fortunately, for the last 5 years, the Financial Services Committee has been an oasis in a desert of bad ideas. Our committee has been at the forefront of putting forth job-creating, bipartisan legislation-- most notably, the JOBS Act of 2012, as well as a number of other important measures that were signed into law in 2015. Here we have H.R. 2357. It is a compilation of bills, if you will, that have passed our committee and would help empower entrepreneurs and small businesses, not bureaucrats and Washington insiders. First, we have Mrs. Wagner's bill, which would expand the number of companies that could take advantage of the short form registration. Allowing more companies to use the form would significantly reduce paperwork and man-hours. As she has indicated, last year, it would have saved 70,000 man-hours and over $84 million in compliance costs. Allowing expanded use has been a frequent recommendation of something called the SEC's Government-Businesses Forum on Small Business Capital Formation; but it is not surprising that the SEC has ignored those ideas year, after year, after year. H.R. 2357 also includes Mr. Emmer's ideas, under the Securities Act of 1933, to allow the so-called micro offerings. What this means in layman's terms is that a business would be allowed to stand up before a local Chamber of Commerce or Kiwanis Club and solicit an investment without running afoul of all of the securities laws. This really is an innovative idea, and it requires Congress to step in and facilitate it. Finally, you have mine. You have the Private Placement Improvement Act, which I authored. This is part of the package, and it would prohibit the SEC from implementing onerous, new regulations or requirements on companies that raise capital--how?--through private channels that they proposed back in 2013. As several experts have testified before our committee, the mere existence of these amendments by the SEC is preventing more job creation. Taken together, finally, Mr. Chairman, all of these bills continue the good work of the Financial Services Committee, under our chairman, Jeb Hensarling, over the last 5 years, to bring our capital markets into the 21st century and create opportunities for American businesses and their families.

Mr. GARRETT

Mr. GARRETT. Mr. Chair, the harm that has occurred is from the Dodd- Frank legislation, and the harm that has occurred by the FSOC designations is twofold. One, the large one, is the fact that it has given a regulator the ability to put financial institutions and non-financial institutions and their problems on the backs of the American taxpayers, meaning that you and I and everybody who is listening to us may someday have to reach into their pockets and bail out, once again, Wall Street for its bad decisions. That should end now. Two, the even larger issue, is the failure of Dodd-Frank. In the legislation here, we are trying to fix the fact that it has had a debilitating effect on the overall economy. It has created disincentives in the marketplace, which is bad for the economy, and it is why we are having such a slow growth in the GDP, which translates into less job growth, fewer jobs for the American public, and fewer jobs for your neighbor and my neighbor as well. We need this legislation to fix it. Mr. Chair, I yield back the balance of my time.

Mr. GARRETT. Mr. Chair, I rise to prevent government regulators from expanding the corrupt doctrine of ``too big to fail'' into even greater parts of our economy. Under Dodd-Frank, the Financial Stability Oversight Council, FSOC, has the power now to designate companies as systemically important financial institutions, SIFIs. I have heard it said that the SIFI status does not necessarily mean ``too big to fail,'' but that is a ridiculous claim that is on par with the reassurances that there was no implicit guarantee with Fannie and Freddie. In the real world, the Federal Government will never allow a SIFI to fail. The SIFI designation is nothing less than the government's stamp of approval and the enshrining of taxpayer bailouts. Simply put, a SIFI designation is the guarantee that the taxpayers will, once again, be on the hook for the bailouts of Wall Street. First, megabanks were designated as ``too big to fail.'' Now FSOC is claiming that nonbank firms, such as insurance companies and asset managers, should also be designated as SIFIs. FSOC's words and actions belie its true purpose, which is to grow its regulation of the economy so that every sector of the financial industry is propped up on the backs of taxpayers. I am offering this amendment to prevent the Secretary of the Treasury and the Chairman of the SEC, who are both voting members of FSOC, from designating any additional nonbank companies as SIFIs. When companies become SIFIs, they cease to operate in the free market. Instead, they operate under a new system--a system that protects entities by sparing them from the costs and the consequences that other regular companies face in a competitive market. So, over time, the combination of this protected status and the Fed's risk-averse regulation will zap the energy and competitiveness of this company. Simply put, the government will corrupt the private sector, which, in turn, will corrupt the government. ``Too big to fail'' must not take root in the nonbank financial sector. These companies serve as an important counterbalance to the megabanks. You see, Dodd-Frank was built on a foundation of sand--a foundation that mistakenly views the financial crisis as having been caused exclusively by the greed of large financial institutions and that intrusive government regulation would have prevented the crisis by keeping them from making risky investments. So it should come as no surprise that, instead of solving the problem, Dodd-Frank gave ``too big to fail'' the force of the law. FSOC is not working as intended because it is unworkable. Finally, even with its absolute and unaccountable powers, its faulty premise dooms FSOC to failure. We must prevent FSOC from continuing to dig a deeper hole in free market capitalism and get Wall Street off the backs and out of the pockets of the American taxpayers. Mr. Chair, I yield to the gentleman from Florida (Mr. Crenshaw).

Mr. GARRETT. Mr. Chair, I have an amendment at the desk.

Mr. GARRETT. Once again, the chairman said it more succinctly than I. I urge all Members to support the legislation. Mr. Chair, I reserve the balance of my time.

Mr. GARRETT. Mr. Chairman, the gentleman said it more succinctly than I did in the last 4 minutes, and I thank him.

Mr. GARRETT. I yield to the gentleman from Florida.

Mr. GARRETT. Mr. Chairman, I rise today on an amendment that would prohibit special interests from having their agendas advanced by Washington bureaucrats, and to refocus the Securities and Exchange Commission on its important threefold policy mission: to protect investors; maintain fair, orderly, and efficient markets; and to facilitate capital formation. Strong and efficient communication between the boards and management of public companies and their shareholders is foundational to healthy capital markets and to maintaining the ability of companies to innovate and to create jobs for everyone. Fortunately, recent studies have shown that communication between the investors and the companies has actually improved over recent years, and shareholders are now increasingly able to effectuate change without all of the drastic measures, such as launching a proxy fight. In fact, according to a 2015 report from Ernst & Young, the number of companies disclosing engagement on government topics rose from a mere 6 percent of the S&P 500 companies all the way up to 50 percent in 2015. In many ways, this is a private market at work as investors demand that boards and management be more responsive to their request for how to improve the company and their long-term performance. A number of regulatory hurdles still need to be overcome to improve the U.S. proxy system, which remains one of the primary ways in which public companies communicate between the two. Back in 2010, the SEC put forth a number of ideas, the so-called ``Proxy Plumbing'' concept release, which explored various ways to improve the transparency, if you will, of corporate government systems here in the United States. Importantly, the Proxy Plumbing concept release also discussed at length the importance of getting retail investors more involved in the process. For a variety of reasons, retail investors have for years been disenfranchised by the current proxy system, and they rarely exercise the rights of shareholders to engage in improving the way that the companies work. Unfortunately, for nearly 6 years, the SEC has, and maybe not surprisingly, allowed this Proxy Plumbing concept release to languish and has chosen not to act on it, even on some of the most basic and noncontroversial parts of it. But then last year, out of the blue, SEC Chair Mary Jo White had directed the SEC staff to develop a rulemaking for what is known as ``universal proxy ballots.'' You ask: What are universal proxy ballots? Good question. Put simply, while they sound quite benign, actually, universal proxy ballots are a means for special interest groups to easily then nominate their preferred candidates to a company's board, and that would fundamentally change things. It would fundamentally change the way in which public company directors are elected here in the U.S. This is an initiative that has been pushed for years by insiders and special interests. It has also been pushed by a number of activist pension funds, many of which have been horribly managed themselves and now find themselves with unfunded liabilities that threaten the retirement security of the public sector workers over which they were responsible. The adoption of the universal proxy rule would only increase the likelihood of high profile proxy fights at public companies, which would then serve to distract the employees and management of these companies from carrying out their core mission. More importantly, it would make the vast majority of public company shareholders, including the smaller retail investor, pay the price for the costs associated with these big fights. Finally, it is unfair to those investors who do not wish to carry the water for these special interests. Aside from these specific policy concerns, there are also issues of how the SEC has been prioritizing its finite resources. The SEC recently missed the rulemaking deadline for yet again another congressional mandate to simplify and modernize our current corporate disclosure regime. This is an initiative that has bipartisan support and would help boost confidence by making quarterly and annual reports more effective for the small investor by reducing some of the unnecessary and the not material disclosures within them. Unfortunately, once again, the SEC chose to ignore what Congress mandated and, instead, prioritized rulemakings over such things as that universal proxy I mentioned, which, again, would benefit simply a minority of insider special interests over the vast majority of public company shareholders. This rulemaking should be nowhere on the SEC's agenda. My amendment would simply disallow the SEC from using its finite resources. I urge all of my colleagues' support.

Mr. GARRETT. Mr. Chairman, I have an amendment at the desk.

Mr. GARRETT. Mr. Chair, how much time do I have remaining?

Mr. GARRETT

Mr. GARRETT. Mr. Speaker, at this time, I yield such time as he may consume to the gentleman from North Carolina (Mr. McHenry), the sponsor of the legislation.

Mr. GARRETT. Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 4854) to amend the Investment Company Act of 1940 to expand the investor limitation for qualifying venture capital funds under an exemption from the definition of an investment company, as amended.

Mr. GARRETT. Mr. Speaker, I ask unanimous consent that all Members have 5 legislative days in which to revise and extend their remarks and include extraneous material on this bill.

Mr. GARRETT. Mr. Speaker, I yield myself such time as I may consume. Mr. Speaker, I rise in support of H.R. 4854, Supporting America's Innovators Act of 2016; and I want to thank the sponsor of the legislation, the gentleman from North Carolina (Mr. McHenry). Mr. Speaker, it is no secret that 7 years after our last recession apparently ended, our economy continues to trudge along at historically weak rates of growth and job creation. Three points: The most recent jobs report showed that only 38,000 jobs were created during the month of May. That was the worst report since 2010; New business startups in the country are near a 20-year low; And, finally, American families and small businesses are finding it extremely difficult to obtain credit in order to expand their businesses or purchase a home. More than ever, Mr. Speaker, Americans are looking at us, their elected Representatives in Congress, to help get our economy back on track and create opportunities for people that have struggled for too long. Fortunately, over the last 5 years, the Financial Services Committee has stepped up to the plate and passed a number of bipartisan pieces of legislation. Most notably, in 2012, Congress passed the JOBS Act, which is one of the few bright spots. In April, the Capital Markets and GSE Subcommittee held a hearing to examine the positive impacts that the JOBS Act has had, and to consider further ways that we can work across the aisle to promote job growth. But for just about every measure the JOBS Act has been a resounding success, there is more that Congress can be doing. So today, Mr. Speaker, the House will consider a couple of measures that will build upon the success of the JOBS Act. The first is this one. This measure is Supporting America's Innovation Act of 2016. What will the bill do? First, it would fix what is known as the 99 investor problem. That is, under current securities law, once a venture capital fund gains more than 99 investors, it would have to become registered with the SEC under the Investment Company Act of 1940. Just in case there is any confusion, registering with the SEC isn't free. It creates a number of costs and regulatory burdens on small venture funds that hinder the ability to deploy vital capital for startup businesses. What is more, the current investor cap was put in place way back in 1940, at a time when nobody had ever heard of Silicon Valley, and venture capital did not play anywhere near the role it does today. So while the JOBS Act raised the registration threshold for private companies from 500 to 2,000 investors, it did not concurrently raise the threshold for investors acting as a coordinated group. As Kevin Laws, COO of AngelList, told our subcommittee back in April: With online fundraising and general solicitation becoming more common because of the JOBS Act, companies are bumping up against the limit more frequently. The limit of 99 investors now acts as a brake on the amount of capital that they can raise. So, Mr. Speaker, in conclusion, the solution envisioned under this legislation is simple. It simply bumps the number from 100 to 250, and it clarifies that registration would not be triggered until the fund crossed a threshold of $10 million invested in a particular company. This legislation is simple. It is straightforward. It would allow venture capital funds to continue to play the important role they do in our economy without any of the burden having to deal with any unnecessary regulation. So, once again, I thank the sponsor of the underlying bill, and I urge my colleagues to support it. Mr. Speaker, I reserve the balance of my time.

Mr. GARRETT. Mr. Speaker, I yield such time as he may consume to the gentleman from North Carolina (Mr. McHenry).

Mr. GARRETT. Mr. Speaker, I yield myself such time as I may consume. Again, I thank the gentleman, and I thank the bipartisan nature of what we are doing here on the floor this evening with this legislation and the two pieces of legislation that follow. It shows the American public that this House, when we work together across the aisle and focus our attention on these important economic issues, can get things done. Mr. Speaker, I yield back the balance of my time.

Mr. GARRETT. Mr. Speaker, on that I demand the yeas and nays.