Senate Republicans Advocate for Legislation to Assist Small Businesses and Retail Investors

• Republicans in the Senate presented a proposal to stimulate commercial activity through customized regulation and providing retail investors with opportunities to invest in emerging enterprises.
• Sen. Pat Toomey, R-Pa., stated that while the JOBS Act rekindled interest in the public markets and stimulated economic growth, there is still much to be done.
• The Securities and Exchange Commission would be required to study access to private capital in rural areas under a bipartisan bill proposed in the draft.
• Another provision that could face opposition from Democrats would make it harder for stakeholders to present proposals at a company's shareholder meetings.

On Monday, Senate Republicans presented a plan to speed up the growth of new businesses by supporting young companies to go public, safeguarding retail investors, and adjusting regulations for smaller enterprises.

An early effort by Sen. Pat Toomey, R-Pa., to gather input from both Republicans and Democrats on nearly 30 bills aimed at assisting businesses in accessing capital in both public and private markets is embodied in a discussion draft.

The JOBS Act of 2012, which marks its 10th anniversary on Tuesday, inspired the proposal named after it by Senator Toomey, the ranking member on the Senate Banking Committee. The acronym for this law stands for Jump-start Our Business Start-ups.

The new JOBS Act 4.0 draft was requested by Toomey over a year ago to increase access to capital and boost gross domestic product growth and job creation, according to his office.

Toomey stated that the JOBS Act helped rekindle interest in public markets and stimulate economic growth, but there is still much work to be done to provide retail investors with higher returns and maintain the world's deepest and most liquid markets.

The senator stated that the new plan incorporates suggestions from entrepreneurs, retail investors, and others, and has provisions that are supported by both parties. Out of the 29 bills in the discussion draft, 24 have already been presented on Capitol Hill.

The passage of legislation in a Senate split 50-50 by party is uncertain, even though some of the bills have bipartisan support and would require it to become law with Democrats controlling the White House and both chambers of Congress.

An agreement between Republican Senator John Kennedy of Louisiana and Democratic Senator Tina Smith of Minnesota proposes that the Securities and Exchange Commission investigate private capital access in rural regions across the country.

A study of middle-market initial public offering underwriting costs would be prompted by another section, supported by Democratic Sens. Mark Warner of Virginia and Kyrsten Sinema of Arizona, with the aim of encouraging more midsized firms to go public.

The Equal Opportunity for all Investors Act, which aims to modify SEC's Regulation D rules, is expected to be successful, according to GOP staff.

The legislation, if enacted, would broaden the SEC's definition of an "accredited investor," enabling investors with more limited financial resources to invest in promising private companies.

Under current law, companies selling securities to the public must either register with the SEC and submit regular financial reports or qualify for a legal exemption. The most common exemption, Regulation D, permits firms to sell shares to accredited investors who earn over $200,000 annually or have a net worth of at least $1 million.

Some parts of Toomey's plan may face challenges in a Democratic-controlled Congress.

Sen. Thom Tillis, R-N.C., has proposed that public companies be given the option to file financial reports quarterly or semiannually, in order to reduce short-term thinking and unnecessary regulatory filings.

In 2018, former President Donald Trump suggested a move to shift investor focus to long-term trends after speaking with business leaders about obstacles to corporate growth. While some executives have praised the initiative, many stakeholders view quarterly reports as a vital component of corporate transparency.

Republican Sens. Bill Hagerty, Cynthia Lummis, Steve Daines, and Tillis propose to make it harder for stakeholders to submit proposals at a company's shareholders meetings.

The Restoring Shareholder Transparency Act requires a shareholder to control at least 1% of a company's securities to propose a plan, in an effort to reduce "frivolous" submissions.

It is likely that Democrats will be skeptical of those plans. The White House and progressives aim to address corporate abuses, such as excessive executive compensation and record-setting equity buybacks.

Republican aides who spoke with CNBC stated that while some components of the draft may face long odds in the current Congress, they anticipate bipartisan support for portions of the legislation that do not have a Democratic sponsor.

The purpose of the discussion draft is to gather feedback on which proposals are feasible, as one aide noted.

One aide stated Friday afternoon that they believe there is worth in finding bipartisan legislation that can pass this Congress.

The aide added, "I believe the second thing is providing a roadmap for what Republicans stand for in terms of capital formation."