With a divided Congress many are predicting that the next two years will only bring more gridlock. At the Chamber, we think there are plenty of opportunities to advance pro-business legislation. One reason is because it has happened before in divided government. In 2012, a divided Congress came together to enact the Jumpstart Our Business Startups (JOBS) Act, landmark legislation that reduced the bureaucratic barriers to raising capital and helped spur business growth and innovation on an economywide scale. The 118th Congress has an opportunity to build off that success.
Understanding the U.S. Regulatory System
Different regulatory standards exist for public and private companies when it comes to raising the capital they need to grow. Generally speaking, public companies are subject to a heightened regulatory standard but have access to a larger potential investor base. Private companies are subject to comparatively less regulation but still face a web of rules on how they can raise capital, including prohibitions on whom they can solicit for investment.
Our laws and regulations should ensure that both models – public companies and private companies – are desirable options for companies to raise capital and provide fair opportunities for everyday Americans to share in their growth.
Understanding the JOBS Act
The JOBS Act, signed into law by President Obama, made it easier for businesses to raise money in the private markets and to become public companies. Private companies were able to access funding through new crowdfunding rules and through expanded offerings of private securities.
The results were astounding. In the five years preceding the JOBS Act, there were roughly 121 initial public offerings (IPOs) per year in the United States; from 2013-2021, after passage of the JOBS Act, the annual average of IPOs was 344 per year. But there’s still room to improve. The 118th Congress should take new actions to build on this proven and bipartisan approach to improving capital formation through the creation of new investment opportunities.
There is a strong bipartisan consensus on Capitol Hill around the importance of maintaining America’s strong capital markets. During the 117th Congress, members from both sides of the aisle introduced several common-sense bills to expand equitable access to private capital, incentivize companies to go public, and enhance investment opportunities for retail investors.
Business access to capital matters, even if you’re not a business
Improving access to capital for businesses provides everyday investors with new opportunities for financial return, expands employment opportunities, and generates economic investment in underserved communities. Capitalism functions best when there is an equality of opportunity to share in its rewards.
Increasing the number of public companies will benefit the millions of households in America who depend on investments to reach their financial goals, such as saving for retirement or their children’s education. When options in these markets are limited and companies are disincentivized from going public due to regulatory costs, not only are investors harmed but the economy as a whole is deprived of the new economic activity a business generates.
A good starting point
The U.S. Chamber of Commerce was a leader in advocating for the passage of the JOBS Act in 2012 and has continued to build consensus in Congress on new legislation. Last year, we provided input to the Senate Banking Committee on legislative proposals to foster economic growth and job creation through capital formation. We also released a report identifying policy proposals we believe will be especially beneficial to expanding access to capital for minority-owned businesses.
This month, we testified before the Senate Banking Committee on “Examining How Capital Markets Serve Diverse Entrepreneurs and Investors” in which we highlighted numerous legislative proposals to strengthen capital formation including:
- The Helping Startups to Continue to Grow Act – would allow emerging growth companies to continue operating under certain JOBS Act exemptions for an additional five years until they are ready to IPO.
- The Crowdfunding Amendments Act – would allow for the use of crowdfunding vehicles and exempt crowdfunding offering from certain SEC registration requirements.
- The Improving Crowdfunding Opportunities Act – would preempt state regulation of secondary transactions involving crowdfunding vehicles and clarifies legal liability for crowdfunding portals.
- The Public Company Registration Threshold Act – would increase the number of non-accredited shareholder a company may have before being required to register with the SEC.
The U.S. Chamber of Commerce will continue to engage with the 118th Congress to advance these and other bipartisan proposals to increase investment opportunities and equitable access to U.S. capital markets. Doing so will help ensure that America remains the premier location to invest and pursue new business ideas.
About the authors
Executive Vice President, Center for Capital Markets Competitiveness (CCMC), U.S. Chamber of Commerce, Executive Vice President, Center for Technology Engagement (C_TEC), U.S. Chamber of Commerce, Executive Vice President, Global Innovation Policy Center (GIPC), U.S. Chamber of Commerce, Senior Advisor to the President and CEO, U.S. Chamber of Commerce
Tom Quaadman develops and executes strategic policies to implement a global corporate financial reporting system, address ongoing attempts of minority shareholder abuse of the proxy system, communicate the benefits of efficient American capital markets, and promote an innovation economy and the long-term interests of all investors.