The Congressional Record is a unique source of public documentation. It started in 1873, documenting nearly all the major and minor policies being discussed and debated.
“INCREASED CAPITAL ACCESS FOR GROWING BUSINESS ACT” mentioning the Federal Reserve System was published in the House of Representatives section on pages H2423-H2424 on April 28, 2004.
The publication is reproduced in full below:
INCREASED CAPITAL ACCESS FOR GROWING BUSINESS ACT
Mrs. KELLY. Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 3170) to amend the Investment Company Act of 1940 to provide incentives for small business investment, and for other purposes.
The Clerk read as follows:
H.R. 3170
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Increased Capital Access for Growing Business Act''.
SEC. 2. AMENDMENTS TO THE INVESTMENT COMPANY ACT OF 1940.
(a) Definition of Eligible Portfolio Company.--Section 2(a)(46)(C) of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(46)(C)) is amended--
(1) by striking clause (i) and inserting the following:
``(i) it does not have any class of equity securities listed for trading on a national securities exchange or traded through the facilities of a national securities association as described in Section 15A of the Securities Exchange Act of 1934;'';
(2) by striking ``or'' at the end of clause (iii);
(3) by redesignating clause (iv) as clause (v); and
(4) by inserting after clause (iii) the following new clause:
``(iv) the aggregate value of its outstanding publicly traded equity securities is not more than $250,000,000, except that the Commission may adjust such amounts by rule, regulation, or order to reflect changes in one or more generally accepted indices or other indicators for small business, consistent with the public interest, the protection of investors, and the purposes fairly intended by the policy and provisions of this title; or''.
(b) Assets of Business Development Companies.--Section 55(a)(1) of the Investment Company Act of 1940 (15 U.S.C. 80a-55(a)(1)) is amended--
(1) in subparagraph (B), by striking ``securities with respect to which a member of a national securities exchange, broker, or dealer may extend or maintain credit to or for a customer pursuant to rules or regulations adopted by the Board of Governors of the Federal Reserve System under Section 7 of the Securities Exchange Act of 1934'' and inserting the following: ``equity securities listed for trading on a national securities exchange or traded through the facilities of a national securities association as described in Section 15A of the Securities Exchange Act of 1934''; and
(2) by striking ``or'' at the end of subparagraph (A), by inserting ``or'' after the semicolon at the end of subparagraph (B), and by inserting after subparagraph (B) the following new subparagraph:
``(C) from the issuer of such securities, which issuer is described in section 2(a)(46)(A) and (B) but is not an eligible portfolio company because the aggregate value of its outstanding publicly traded equity securities is more than
$250,000,000 but not more than $500,000,000, if such securities represent not more than 10 per centum of the total assets of the business development company invested in securities described in paragraphs (1) through (6) of this section;''.
The SPEAKER pro tempore. Pursuant to the rule, the gentlewoman from New York (Mrs. Kelly) and the gentlewoman from New York (Ms. Velazquez) each will control 20 minutes.
The Chair recognizes the gentlewoman from New York (Mrs. Kelly).
General Leave
Mrs. KELLY. Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days within which to revise and extend their remarks and include extraneous material on H.R. 3170.
The SPEAKER pro tempore. Is there objection to the request of the gentlewoman from New York?
There was no objection.
Mrs. KELLY. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I thank the Speaker very much for allowing me to bring this important legislation to the floor for consideration today. I also thank the gentlewoman from New York (Ms. Velazquez) for working with me on this important issue that will help small businesses.
Small businesses are the backbone of our economy and Congress must ensure that they have every opportunity to succeed. It is crucial that small businesses have efficient access to capital in order to create jobs and ensure a strong and growing economy.
Today, the legislation before us, the Increased Capital Access For Growing Business Act, will ensure that small businesses have better access to capital by modernizing outdated security laws.
In 1980, Congress created Business Development Companies to encourage investments in small, developing and financially troubled businesses, known as ``eligible portfolio companies.''
BDCs are publicly traded investment companies that invest in both public and private companies and generate an injection of capital for businesses. BDCs have provided significant benefits to the economy, including the opportunity for the public to invest in small, developing companies while also supplying much needed financing.
The legislation we are considering today makes important changes to the securities laws that ensure the viability of BDCs and expands the businesses these entities are able to assist.
In 1980, BDCs were able to invest in approximately 66 percent of the 12,000 publicly held operating companies. Since that time, however, the Federal Reserve has amended its margin rules on several occasions, resulting in a clear decrease in the number of eligible portfolio companies.
In order to correct these unintended consequences, the legislation amends the definition of an eligible portfolio company to enable the BDCs to have a greater flexibility in selecting appropriate investments.
To accomplish this goal, the legislation permits BDCs to provide capital to a larger number of companies by increasing the size of companies that BDCs can invest in to reflect changes in the market since the creation of the act. The legislation also includes specific authority for the Securities and Exchange Commission to modify dollar thresholds in the future.
This would enable the SEC to review these thresholds on a regular basis and consider changes that are in the interest of the companies trying to access capital and shareholders of BDCs.
Small and developing businesses should be able to devote their energies towards their customers growing their business, not worrying about access to capital.
As BDCs are able to provide financing to additional small and medium sized businesses, the economy will experience greater growth and job creation.
I also would like to commend the chairman of the Committee on Financial Services, the gentleman from Ohio (Mr. Oxley), and the ranking member, the gentleman from Massachusetts (Mr. Frank), for recognizing the importance and urgency of this legislation and agreeing to move it quickly.
This is a no-cost, common sense piece of legislation that will help small businesses and increase capital formation; and that is good, healthy economic structure for all. I urge my colleagues to join me in support of this important legislation for investors and small businesses.
Mr. Speaker, I reserve the balance of my time.
Ms. VELAZQUEZ. Mr. Speaker, I yield myself such time as I may consume.
(Ms. VELAZQUEZ asked and was given permission to revise and extend her remarks.)
Ms. VELAZQUEZ. Mr. Speaker, I rise in support of H.R. 3170, the Increased Capital Access For Growing Businesses Act; and I want to commend my good friend and colleague, the gentlewoman from New York
(Mrs. Kelly), for moving this matter so expeditiously. I also want to thank the gentleman from Ohio (Mr. Oxley) and the gentleman from Massachusetts (Mr. Frank), the ranking member, for their support in expediting the consideration of this measure.
With this legislation we have an opportunity to help more small companies access capital so that they can expand and grow their businesses. Business Development Companies are unique investment companies authorized by the 1980 Amendments to the Investment Company Act. They are publicly traded companies that invest primarily in small companies.
Since 1980, BDCs have proven to be a valuable source of funding for growing companies that do not have access to traditional sources of financing like bank lending or access to the public securities markets. At the same time, BDCs provide the investing public with an opportunity to invest in private equity, an opportunity traditionally limited to wealthy investors.
In 1980, when BDCs were first authorized by Congress, about two-
thirds of all publicly held companies were eligible for BDC investment. While the securities and financial services industries evolved during the 1990s, Congress did not act to keep the BDC statute current. As a result, the number of public companies in which BDCs could invest in has been reduced drastically, effectively eliminating the option of BDC investment for many companies.
It is important to understand that just because a firm has gone public does not mean that it can access the financing necessary for growing and expanding. In the late 1990s, for instance, many companies went public that may not have been able to do so under current market conditions. As a result, after the market bubble burst, many of these companies found themselves unable to access traditional financing sources. These smaller, illiquid company stocks could have greatly benefited from financing offered by BDCs. Instead, the current statute severely restricts such investments by BDCs.
The current standard for eligibility, whether or not a company has outstanding marginable securities, has proven unworkable, as it is tied to a standard that is no longer relevant.
H.R. 3170 attempts to provide more certainty and update the law concerning permissible investments by BDCs. It creates a more workable standard to enable BDCs to provide financing to companies as originally intended by the 1980 amendments. This legislation attempts to provide a more objective standard, based on a market capitalization test, to modernize the definition of eligible portfolio companies.
H.R. 3170 modernizes U.S. securities laws to reflect changes in the marketplace. Small and growing companies are often widely regarded as engines of economic growth and job creation. Allowing BDCs to invest in more companies in need of capital will provide more opportunities, more jobs, and contribute to the economic expansion.
I urge my colleagues to support this legislation critical for small businesses and the U.S. economy.
Mr. Speaker, I have no further requests for time, and I yield back the balance of my time.
Mrs. KELLY. Mr. Speaker, I have no further requests for time, and I yield back the balance of my time.
The SPEAKER pro tempore. The question is on the motion offered by the gentlewoman from New York (Mrs. Kelly) that the House suspend the rules and pass the bill, H.R. 3170.
The question was taken; and (two-thirds having voted in favor thereof) the rules were suspended and the bill was passed.
A motion to reconsider was laid on the table.
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