Increasing Shareholder Threshold for Sec Registration

Floor Speech

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Mr. HIMES. Mr. Speaker, I yield myself such time as I may consume.

If we've learned one thing in the last 5 years, it is that the body of financial regulation which keeps us, as a people, safe must not be static, must not be dead, but, rather, a living thing that evolves and changes, not just to make sure that innovations and new products and new businesses don't get us into the kinds of troubles that we've experienced in the last 5 years, but also to make sure that the financial services industry remains entrepreneurial, that people who want to start small banks, small asset managers, small businesses of any kind have an opportunity to get started, to raise capital and to do well.

The securities laws that were established in 1933 and 1934 need to evolve and adapt to reflect the conditions in today's market. This is why I've introduced H.R. 1965. This bill would allow banks and bank holding companies to remain private to a point at which they believe it is in their interest to go public, undertake the fairly lengthy and complicated process of public registration at a moment when it makes sense for them to go into the public markets.

The original securities laws stipulated that banks would have to register with the SEC when they had more than 500 shareholders. Our small banks, our community banks experience difficulties because as original investors move on or pass on and leave shares to their beneficiaries, very rapidly banks reach that 500 shareholder number and are required to undertake the very complicated, up-front processes, but also the ongoing reporting requirements associated with public registration.

H.R. 1965 would very simply raise that threshold from 500 shareholders to 2,000 shareholders, again allowing these small banks to pick the optimal moment at which they go public, to allow them to continue to raise money in the private markets from private investors until such point that it makes sense for them to register and go public.

Now, it might be asked, is this prudent? And the answer to that question, of course, is that the banks and the bank holding companies are very heavily regulated by their prudential regulators. From the moment they are chartered, they are overseen by State and Federal entities that are designed to keep them from any sort of fraud from imprudent activities, and so this is an industry that is already heavily regulated, even for these companies who remain private.

I'd like to note that this bill provides relief to small banks by recognizing that unique characteristic, that they are regulated, and that they should continue to have access to the capital sources that got them started until they choose to go public.

I will note that this bill passed with broad bipartisan support in both subcommittee and committee, and I'd like to close my statement by thanking Chairman Bachus and Ranking Member Frank, as well as subcommittee Chair Garrett and Ranking Member Waters, for their hard work and cooperation in putting this bill together.

With that, I yield 4 minutes to the minority whip, Mr. Hoyer of Maryland.

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