Small Cap Liquidity Reform Act of 2014 - Amends the Securities Exchange Act of 1934 to establish a pilot liquidity program for equity securities of emerging growth companies (EGCs) with total annual gross revenues of less than $750 million, under which those securities shall be quoted using either: (1) a minimum increment of $0.05 or $0.10, or (2) the increment at which the securities would be quoted without regard to such minimum increments.
Repeals the requirement for an SEC study examining the transition to trading and quoting securities in one penny increments, known as decimalization.
Directs the Securities and Exchange Commission (SEC) to determine, in the case of an EGC whose securities are quoted at a minimum increment of either $0.05 or $0.10, the increment at which such securities are traded.
Requires EGC securities quoted at a minimum increment of $0.05 or $0.10 to be traded at either such minimum increment or at one permitted by SEC regulations.
Permits an EGC to opt out or change such minimum increment upon notifying the SEC 90 days after enactment of this Act. Limits any EGC to a single change of minimum increment (thus prohibiting any increases in the minimum).
Requires the SEC, upon notification of an EGC election, to inform each trading venue where the EGC securities are quoted or traded.
Requires that securities of issuers that cease to be EGCs be quoted at the increment at which such securities would be quoted without regard to the minimum increments established under this Act.
Prescribes pricing and trading procedures governing securities trading below $1.00.
Directs the SEC to require an EGC under this Act to submit additional reports and disclosures.
Shields an issuer from liability for losses caused solely by the quoting or trading of its securities at a minimum increment of $0.05 or $0.10, another SEC-authorized increment, or by both such quoting and trading.
Directs the SEC to report biannually to Congress on: (1) the quoting and trading of securities in increments permitted by this Act, and (2) the extent to which such quoting and trading increases liquidity and active trading by incentivizing capital commitment, research coverage, and brokerage support.
Authorizes the SEC to: (1) make adjustments to the pilot program to ensure that it can provide statistically meaningful or reliable results, and (2) conduct any other study or pilot program to evaluate quoting or trading in various minimum increments.
Sunsets the pilot program five years after enactment of this Act.
[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3448 Introduced in House (IH)]
113th CONGRESS
1st Session
H. R. 3448
To amend the Securities Exchange Act of 1934 to provide for an optional
pilot program allowing certain emerging growth companies to increase
the tick sizes of their stocks.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
November 12, 2013
Mr. Duffy (for himself and Mr. Carney) introduced the following bill;
which was referred to the Committee on Financial Services
_______________________________________________________________________
A BILL
To amend the Securities Exchange Act of 1934 to provide for an optional
pilot program allowing certain emerging growth companies to increase
the tick sizes of their stocks.
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 ``Small Cap Liquidity Reform Act of
2013''.
SEC. 2. LIQUIDITY PILOT PROGRAM FOR SECURITIES OF CERTAIN EMERGING
GROWTH COMPANIES.
(a) In General.--Section 11A(c)(6) of the Securities Exchange Act
of 1934 (15 U.S.C. 78k-1(c)(6)) is amended to read as follows:
``(6) Liquidity Pilot Program for Securities of Certain Emerging
Growth Companies.--
``(A) Quoting increment.--Beginning on the date that is 90
days after the date of the enactment of the Small Cap Liquidity
Reform Act of 2013, the securities of a covered emerging growth
company shall be quoted using--
``(i) a minimum increment of $0.05; or
``(ii) if, not later than 60 days after such date
of enactment, the board of directors of the company so
elects in the manner described in subparagraph (D)--
``(I) a minimum increment of $0.10; or
``(II) the increment at which such
securities would be quoted without regard to
the minimum increments established under this
paragraph.
``(B) Trading increment.--The securities of a covered
emerging growth company that are quoted at a minimum increment
of $0.05 or $0.10 under this paragraph shall be traded at--
``(i) such minimum increment; or
``(ii) such other increment as permitted by the
Commission by regulation, as the Commission considers
appropriate.
``(C) Future right to opt out or change minimum
increment.--
``(i) In general.--At any time beginning on the
date that is 90 days after the date of the enactment of
the Small Cap Liquidity Reform Act of 2013, the board
of directors of a covered emerging growth company the
securities of which are quoted at a minimum increment
of $0.05 or $0.10 under this paragraph may elect in the
manner described in subparagraph (D)--
``(I) for the securities of such company to
be quoted at the increment at which such
securities would be quoted without regard to
the minimum increments established under this
paragraph; or
``(II) to change the minimum increment at
which the securities of such company are quoted
from $0.05 to $0.10 or from $0.10 to $0.05.
``(ii) When election effective.--An election under
this subparagraph shall take effect on the date that is
30 days after such election is made.
``(iii) Single election to change minimum
increment.--A covered emerging growth company may not
make more than one election under clause (i)(II).
``(D) Manner of election.--
``(i) In general.--An election is made in the
manner described in this subparagraph by informing the
Commission and each exchange on which the securities of
the covered emerging growth company are quoted or
traded.
``(ii) Consultation.--In making an election under
subparagraph (A)(ii), the board of directors shall
first consult with the primary listing market and major
shareholders of the covered emerging growth company and
with any brokers and dealers that the board of
directors considers relevant to the quality of the
market for the securities of the company.
``(E) Issuers ceasing to be covered emerging growth
companies.--
``(i) In general.--If an issuer the securities of
which are quoted at a minimum increment of $0.05 or
$0.10 under this paragraph ceases to be a covered
emerging growth company, the securities of such issuer
shall be quoted at the increment at which such
securities would be quoted without regard to the
minimum increments established under this paragraph.
``(ii) Exceptions.--The Commission may by
regulation, as the Commission considers appropriate,
specify any circumstances under which an issuer shall
continue to be considered a covered emerging growth
company for purposes of this paragraph after the issuer
ceases to meet the requirements of subparagraph
(L)(ii).
``(F) Securities trading below $1.--
``(i) Initial price.--
``(I) At effective date.--If the trading
price of the securities of a covered emerging
growth company is below $1 at the close of the
last trading day before the date that is 90
days after the date of the enactment of the
Small Cap Liquidity Reform Act of 2013, the
securities of such company shall be quoted
using the increment at which such securities
would be quoted without regard to the minimum
increments established under this paragraph.
``(II) At ipo.--If a covered emerging
growth company makes an initial public offering
after the day described in subclause (I) and
the first share of the securities of such
company is offered to the public at a price
below $1, the securities of such company shall
be quoted using the increment at which such
securities would be quoted without regard to
the minimum increments established under this
paragraph.
``(ii) Average trading price.--If the average
trading price of the securities of a covered emerging
growth company falls below $1 for any 90-day period
beginning on or after the day before the date of the
enactment of the Small Cap Liquidity Reform Act of
2013, the securities of such company shall, after the
end of such period, be quoted using the increment at
which such securities would be quoted without regard to
the minimum increments established under this
paragraph.
``(G) Fraud or manipulation.--If the Commission determines
that a covered emerging growth company has violated any
provision of the securities laws prohibiting fraudulent,
manipulative, or deceptive acts or practices, the securities of
such company shall, after the date of the determination, be
quoted using the increment at which such securities would be
quoted without regard to the minimum increments established
under this paragraph.
``(H) Ineligibility for increased minimum increment
permanent.--The securities of an issuer may not be quoted at a
minimum increment of $0.05 or $0.10 under this paragraph at any
time after--
``(i) such issuer makes an election under
subparagraph (A)(ii)(II);
``(ii) such issuer makes an election under
subparagraph (C)(i)(I), except during the period before
such election takes effect; or
``(iii) the securities of such issuer are required
by this paragraph to be quoted using the increment at
which such securities would be quoted without regard to
the minimum increments established under this
paragraph.
``(I) Additional reports and disclosures.--The Commission
shall require a covered emerging growth company the securities
of which are quoted at a minimum increment of $0.05 or $0.10
under this paragraph to make such reports and disclosures as
the Commission considers necessary or appropriate in the public
interest or for the protection of investors.
``(J) Limitation of liability.--An issuer (or any officer,
director, manager, or other agent of such issuer) shall not be
liable to any person under any law or regulation of the United
States, any constitution, law, or regulation of any State or
political subdivision thereof, or any contract or other legally
enforceable agreement (including any arbitration agreement) for
any losses caused solely by the quoting of the securities of
such issuer at a minimum increment of $0.05 or $0.10, by the
trading of such securities at such minimum increment or such
other increment as permitted by the Commission under
subparagraph (B)(ii), or by both such quoting and trading, as
provided in this paragraph.
``(K) Report to congress.--Not later than 6 months after
the date of the enactment of the Small Cap Liquidity Reform Act
of 2013, and every 6 months thereafter, the Commission, in
coordination with each exchange on which the securities of
covered emerging growth companies are quoted or traded, shall
submit to Congress a report on the quoting and trading of
securities in increments permitted by this paragraph and the
extent to which such quoting and trading are increasing
liquidity and active trading by incentivizing capital
commitment, research coverage, and brokerage support, together
with any legislative recommendations the Commission may have.
``(L) Definitions.--In this paragraph:
``(i) Board of directors.--The term `board of
directors' means a board of directors or any person or
persons performing similar functions.
``(ii) Covered emerging growth company.--The term
`covered emerging growth company' means an emerging
growth company, as defined in the first paragraph (80)
of section 3(a), except that--
``(I) such paragraph shall be applied by
substituting `$750,000,000' for
`$1,000,000,000' each place it appears; and
``(II) subparagraphs (B), (C), and (D) of
such paragraph do not apply.''.
(b) Sunset.--Effective on the date that is 5 years after the date
of the enactment of this Act, section 11A(c)(6) of the Securities
Exchange Act of 1934 (15 U.S.C. 78k-1(c)(6)) is repealed.
<all>
Hearings Held by the Subcommittee on Capital Markets and Government Sponsored Enterprises Prior to Introduction and Referral.
Introduced in House
Introduced in House
Referred to the House Committee on Financial Services.
Committee Consideration and Mark-up Session Held.
Ordered to be Reported (Amended) by the Yeas and Nays: 57 - 0.
Reported (Amended) by the Committee on Financial Services. H. Rept. 113-342.
Reported (Amended) by the Committee on Financial Services. H. Rept. 113-342.
Placed on the Union Calendar, Calendar No. 252.
Mr. Garrett moved to suspend the rules and pass the bill, as amended.
Considered under suspension of the rules. (consideration: CR H1746-1748)
DEBATE - The House proceeded with forty minutes of debate on H.R. 3448.
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At the conclusion of debate, the Yeas and Nays were demanded and ordered. Pursuant to the provisions of clause 8, rule XX, the Chair announced that further proceedings on the motion would be postponed.
Considered as unfinished business. (consideration: CR H1758)
Passed/agreed to in House: On motion to suspend the rules and pass the bill, as amended Agreed to by the Yeas and Nays: (2/3 required): 412 - 4 (Roll no. 62).(text: CR H1746-1747)
Roll Call #62 (House)On motion to suspend the rules and pass the bill, as amended Agreed to by the Yeas and Nays: (2/3 required): 412 - 4 (Roll no. 62). (text: CR H1746-1747)
Roll Call #62 (House)Received in the Senate and Read twice and referred to the Committee on Banking, Housing, and Urban Affairs.