Bill Overview
Title: To amend the Federal securities laws to specify the periods for which financial statements are required to be provided by an emerging growth company, and for other purposes.
Description: This bill limits the financial information an emerging growth company must submit to the Securities and Exchange Commission.
Sponsors: Rep. McHenry, Patrick T. [R-NC-10]
Target Audience
Population: People involved with emerging growth companies worldwide
Estimated Size: 10000000
- The bill specifies periods for which financial statements are required for emerging growth companies.
- Emerging growth companies are defined under the JOBS Act as companies with total annual gross revenues of less than $1 billion during their most recently completed fiscal year, among other criteria.
- As of recent reports, there are thousands of emerging growth companies.
- Employees, investors, and stakeholders in these companies will be directly affected by changes in financial statement requirements.
Reasoning
- Emerging growth companies are a small percentage of the overall U.S. business sector, but they represent a significant portion of new business formation.
- The policy targets specific financial disclosure requirements, which may reduce operational burdens on emerging growth companies, indirectly affecting employees and stakeholders.
- The budget constraints suggest a limited scale of impact, focusing on direct stakeholders within the U.S. estimated to be in the tens of thousands rather than millions.
- We simulate interviews across a range of stakeholders including business owners, employees, and investors in emerging growth companies, as well as some not directly impacted to provide a comprehensive perspective.
Simulated Interviews
CEO of an emerging tech startup (San Francisco, CA)
Age: 45 | Gender: male
Wellbeing Before Policy: 8
Duration of Impact: 10.0 years
Commonness: 3/20
Statement of Opinion:
- The reduced financial disclosure requirements will help us allocate more resources to R&D.
- I expect it to ease investor concerns about our operational focus rather than just compliance.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 9 | 8 |
| Year 2 | 9 | 8 |
| Year 3 | 9 | 8 |
| Year 5 | 9 | 8 |
| Year 10 | 10 | 8 |
| Year 20 | 9 | 7 |
Software Engineer (Austin, TX)
Age: 30 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 5.0 years
Commonness: 5/20
Statement of Opinion:
- I hope this means the company can grow more quickly and offer more opportunities.
- I doubt it will have a direct immediate impact on my day-to-day work.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 7 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 6 | 5 |
Venture Capitalist (New York, NY)
Age: 40 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 10.0 years
Commonness: 2/20
Statement of Opinion:
- This policy change may increase my companies' focus on innovation rather than administrative overhead.
- I'm cautiously optimistic about how this will impact the investment landscape.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 8 | 7 |
| Year 10 | 9 | 8 |
| Year 20 | 9 | 8 |
Junior Investor (Chicago, IL)
Age: 25 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 10.0 years
Commonness: 4/20
Statement of Opinion:
- This could make emerging growth companies more attractive to investors.
- My role might expand if our firm takes on more clients as a result.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 7 | 6 |
| Year 5 | 7 | 6 |
| Year 10 | 8 | 7 |
| Year 20 | 8 | 7 |
Financial Analyst (Los Angeles, CA)
Age: 34 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 5.0 years
Commonness: 12/20
Statement of Opinion:
- Worried decreased transparency might complicate my analysis work.
- There may be less reliable data to inform investment decisions.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 4 | 5 |
| Year 2 | 4 | 5 |
| Year 3 | 5 | 5 |
| Year 5 | 5 | 6 |
| Year 10 | 6 | 6 |
| Year 20 | 6 | 6 |
Angel Investor (Seattle, WA)
Age: 60 | Gender: female
Wellbeing Before Policy: 8
Duration of Impact: 20.0 years
Commonness: 1/20
Statement of Opinion:
- I believe reducing bureaucratic hurdles can enable freedom and innovation for businesses.
- Possibly more startups will emerge, leading to more investment opportunities.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 9 | 8 |
| Year 5 | 9 | 8 |
| Year 10 | 9 | 8 |
| Year 20 | 10 | 8 |
Consultant (Miami, FL)
Age: 50 | Gender: other
Wellbeing Before Policy: 7
Duration of Impact: 10.0 years
Commonness: 15/20
Statement of Opinion:
- This might reduce work opportunities for me as less regulation could mean fewer clients.
- On the other hand, it might lead firms to seek guidance in new areas.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 7 |
| Year 2 | 6 | 7 |
| Year 3 | 6 | 7 |
| Year 5 | 7 | 7 |
| Year 10 | 8 | 7 |
| Year 20 | 8 | 7 |
Professor of Economics (Boston, MA)
Age: 55 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 0.0 years
Commonness: 10/20
Statement of Opinion:
- Potential for reduced transparency worries me, though it could promote business efficiency.
- Important that this policy doesn't compromise investor protection.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 6 | 6 |
| Year 10 | 6 | 6 |
| Year 20 | 6 | 6 |
Graphic Designer (Denver, CO)
Age: 28 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 0.0 years
Commonness: 18/20
Statement of Opinion:
- I don't think this will impact me directly at all.
- I'm curious though if it will affect how startups allocate their funding.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 7 | 7 |
| Year 10 | 7 | 7 |
| Year 20 | 7 | 7 |
Small Business Owner (Portland, OR)
Age: 38 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 0.0 years
Commonness: 20/20
Statement of Opinion:
- Curious if similar policies could be applied to small non-growth companies like mine.
- Supports policies that decrease bureaucratic overreach.
- Hopes this encourages investment in smaller businesses.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 6 | 6 |
| Year 10 | 6 | 6 |
| Year 20 | 6 | 6 |
Cost Estimates
Year 1: $3000000 (Low: $2000000, High: $5000000)
Year 2: $3000000 (Low: $2000000, High: $5000000)
Year 3: $3000000 (Low: $2000000, High: $5000000)
Year 5: $3000000 (Low: $2000000, High: $5000000)
Year 10: $3000000 (Low: $2000000, High: $5000000)
Year 100: $3000000 (Low: $2000000, High: $5000000)
Key Considerations
- Effectiveness in reducing compliance costs without compromising investor information availability.
- Impact on market stability and investor confidence due to decreased information flow.
- Potential for increased entrepreneurship as a consequence of simplifying regulatory requirements.