Bill Overview
Title: To amend the Securities Exchange Act of 1934 to specify certain registration statement contents for emerging growth companies, to permit issuers to file draft registration statements with the Securities and Exchange Commission for confidential review, and for other purposes.
Description: This bill revises requirements related to registration statements submitted to the Securities and Exchange Commission (SEC). First, the bill requires an emerging growth company to submit profit and loss statements from the previous 2 years, rather than the previous 3 years as under current law. In addition, the bill allows an issuer of securities to submit a draft registration statement to the SEC for confidential review prior to a public filing.
Sponsors: Rep. McHenry, Patrick T. [R-NC-10]
Target Audience
Population: Individuals associated with emerging growth companies and public investors
Estimated Size: 35000000
- Emerging growth companies will be directly impacted as the bill alters their reporting requirements with the SEC, requiring fewer years of financial data which eases their reporting burden.
- Public investors might be indirectly affected as they will have access to less historical financial data on emerging growth companies.
- Startup companies and companies seeking to go public will likely benefit from being able to submit registration statements confidentially, as this gives them greater privacy and flexibility in the IPO planning process.
- Financial analysts and market researchers tracking emerging growth companies will see a reduction in publicly available data.
- Regulatory bodies such as the SEC will experience changes in their procedures regarding registration statement processing.
Reasoning
- Emerging growth companies will have reduced compliance costs with less historical data required. However, this policy might limit public investors' ability to make informed decisions due to less historical financial data availability.
- The budget constraint limits the scale of outreach and support for these companies, emphasizing an efficient application of the policy that potentially focuses on administrative reforms rather than direct financial support.
- The total cost implication might suggest limited direct funding available for additional training or systems implementation for impacted companies and the SEC.
- Public confidence in markets might be modestly affected by reduced transparency, but savings for emerging growth companies could enhance their growth potential, balancing these effects.
Simulated Interviews
CFO of an emerging growth company (Seattle, WA)
Age: 42 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 3.0 years
Commonness: 5/20
Statement of Opinion:
- This policy will reduce our reporting workload, allowing us to allocate funds elsewhere, potentially enhancing our growth and future profitability.
- Confidential submissions provide us security and flexibility in planning.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 8 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 8 | 7 |
| Year 10 | 9 | 7 |
| Year 20 | 8 | 6 |
Retail investor (Austin, TX)
Age: 35 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 5.0 years
Commonness: 10/20
Statement of Opinion:
- This policy might limit my ability to fully evaluate the potential of emerging growth companies, which is concerning.
- Less data may mean more risk when investing.
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 | 5 | 6 |
| Year 10 | 4 | 6 |
| Year 20 | 5 | 6 |
Financial analyst (New York, NY)
Age: 58 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 5.0 years
Commonness: 3/20
Statement of Opinion:
- The reduction in financial data could lead to less accurate modeling and analysis.
- Important insights might be lost, affecting recommendations.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 7 |
| Year 2 | 5 | 7 |
| Year 3 | 5 | 7 |
| Year 5 | 5 | 6 |
| Year 10 | 5 | 6 |
| Year 20 | 4 | 5 |
Venture Capitalist (San Francisco, CA)
Age: 50 | Gender: female
Wellbeing Before Policy: 8
Duration of Impact: 10.0 years
Commonness: 4/20
Statement of Opinion:
- I see the policy as beneficial, as it may lead to more timely IPO processes and reduced financial disclosure costs for startups.
- Confidentiality in the early stages builds a better environment for startups to thrive.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 9 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 9 | 8 |
| Year 5 | 9 | 8 |
| Year 10 | 10 | 8 |
| Year 20 | 9 | 8 |
Entrepreneur (Chicago, IL)
Age: 39 | Gender: other
Wellbeing Before Policy: 6
Duration of Impact: 7.0 years
Commonness: 5/20
Statement of Opinion:
- The policy potentially eases the route to going public, which is exciting.
- Financial load lightens, but the lesser data might contrast investor interest.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 8 | 6 |
| Year 5 | 9 | 6 |
| Year 10 | 8 | 7 |
| Year 20 | 7 | 6 |
Software engineer (Portland, OR)
Age: 30 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 5.0 years
Commonness: 6/20
Statement of Opinion:
- The policy alleviates some administrative pressure on our finance team, allowing us to focus on product development.
- Long-term, it might enable our company to go public quicker.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 8 | 6 |
| Year 5 | 8 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 6 | 5 |
Public policy researcher (Boston, MA)
Age: 45 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 10.0 years
Commonness: 2/20
Statement of Opinion:
- While the policy reduces burdens for emerging companies, it might challenge data transparency for the public.
- I need to study its broader impacts on investor decision-making.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 5 | 5 |
| Year 5 | 5 | 5 |
| Year 10 | 5 | 5 |
| Year 20 | 5 | 5 |
Retired financial advisor (Phoenix, AZ)
Age: 60 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 3.0 years
Commonness: 4/20
Statement of Opinion:
- Less data on finances of emerging companies feels like more risk, but my experience helps me manage it.
- The policy might make these companies more inclined to go public sooner.
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 | 6 | 7 |
| Year 10 | 5 | 6 |
| Year 20 | 5 | 5 |
Tech startup founder (Los Angeles, CA)
Age: 33 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 2.0 years
Commonness: 3/20
Statement of Opinion:
- The policy potentially makes the IPO process less daunting and costly.
- It might also attract more investors due to the reduced time to enter the public market.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 9 | 7 |
| Year 3 | 9 | 7 |
| Year 5 | 8 | 7 |
| Year 10 | 7 | 6 |
| Year 20 | 7 | 6 |
SEC Regulation Specialist (Denver, CO)
Age: 47 | Gender: other
Wellbeing Before Policy: 6
Duration of Impact: 5.0 years
Commonness: 4/20
Statement of Opinion:
- This policy aligns with reducing unnecessary regulatory burdens, but there's always a tradeoff with transparency.
- The confidential submission process could streamline workflow within the SEC.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 6 | 6 |
| Year 10 | 6 | 6 |
| Year 20 | 5 | 5 |
Cost Estimates
Year 1: $750000 (Low: $500000, High: $1000000)
Year 2: $500000 (Low: $400000, High: $800000)
Year 3: $500000 (Low: $400000, High: $800000)
Year 5: $500000 (Low: $400000, High: $800000)
Year 10: $0 (Low: $0, High: $0)
Year 100: $0 (Low: $0, High: $0)
Key Considerations
- The bill is likely to benefit emerging growth companies by reducing the financial reporting requirements and allowing for more confidential interactions with the SEC.
- Public investors might have reduced access to historical financial data for emerging growth companies, which could affect investment decisions.
- The SEC may need to adjust its internal review procedures to handle confidential submissions effectively.