U.S. Senators Katie Britt, Tim Scott, Colleagues Introduce Capital Markets Reform Legislation
WASHINGTON, D.C., September 24, 2024 – U.S. Senator Katie Britt (R-Ala.) and Senate Banking Committee Ranking Member Tim Scott (R-S.C.) with several of their Republican colleagues today introduced comprehensive legislation to revitalize the small businesses within our communities and expand access to our capital markets for all Americans.
Their Empowering Main Street in America Act would boost avenues for capital formation that create jobs and generate economic growth. The legislation includes two bills Senator Britt introduced: the Small Entity Update Act and the bipartisan Retirement Fairness for Charities and Educational Institutions Act.
Senators Mike Crapo (R-Idaho), Mike Rounds (R-S.D.), Thom Tillis (R-N.C.), John Kennedy (R-La.), Bill Hagerty (R-Tenn.), Cynthia Lummis (R-Wyo.), Kevin Cramer (R-N.D.), Steve Daines (R-Mont.), and Jerry Moran (R-Kans.) joined Senators Britt and Scott in introducing the Empowering Main Street in America Act.
“We must ensure the American Dream is accessible in every corner of our nation, and for many, access to capital is a gamechanger in making that a reality. I’m proud to join Senator Tim Scott in introducing the Empowering Main Street in America Act, legislation to strengthen our markets, facilitate capital formation, and expand opportunities for small businesses, entrepreneurs and hardworking Americans to save, invest, and succeed. This includes my Small Entity Update Act—which would ensure small entities are not unduly impacted by burdensome SEC regulations—and my Retirement Fairness for Charities and Educational Institutions Act—which would enhance retirement savings investment opportunities for nonprofit employees,” said Senator Britt.
“Our capital markets system is envy of the world and has helped many Americans build wealth and save for their futures. But unfortunately for individuals in communities like the one I grew up in, investing in a local venture or raising capital to grow a business seems out of reach. We need to change that – and this comprehensive legislation will create economic opportunity and provide more Americans with the resources necessary to achieve financial security for their families and realize their version of the American Dream, while ensuring small business owners can access capital to grow and innovate,” said Ranking Member Scott.
BACKGROUND:
The Empowering Main Street in America Act is designed to empower, support, and foster economic growth by providing streamlined access to funding through our capital markets system for small businesses and entrepreneurs, and enhance investment opportunities for all Americans.
The legislation would return the Securities and Exchange Commission (SEC) to its primary focus on ensuring the engines of the U.S. capital markets system are primed to fuel the next chapter of American exceptionalism, rather than putting up new and burdensome hurdles that limit investment opportunities and hinder innovation and competition.
Promoting Greater Capital Formation in U.S. Public and Private Markets:
Small businesses accounted for 66% of employment growth in the last 25 years, however most entrepreneurs report access to capital as the number one barrier to their company’s survival. The Empowering Main Street in America Act would address the unique challenges small businesses face and reverse an onerous regulatory regime that limits their ability to grow.
To help entrepreneurs, small businesses, and newly public companies more easily access the funding necessary to expand their operations and create jobs, the Empowering Main Street in America Act would streamline and modernize the rules governing capital raises for public and private markets. This begins with ensuring the current regulatory environment doesn’t disproportionately impact small businesses’ ability to raise funding to grow their businesses. An important part of this is ensuring small entities are not unduly impacted by burdensome SEC regulations, which is what Senator Britt’s legislation, the Small Entity Update Act, seeks to address.
Tailored regulatory relief is a key driver of economic growth and job creation, enabling businesses to use funding to invest in growth, rather than a burdensome one-size-fits-all regulatory regime.
Further, the Empowering Main Street in America Act seeks to improve access to capital in rural and non-metropolitan hubs and for a broader swath of entrepreneurs who continue to face challenges accessing capital. Specifically, expanding opportunities for rural residents, women, veterans, and minorities – at every stage of a company’s growth cycle.
Responsibly Expanding Investment Opportunities for Retail Investors:
The goal of our nation’s financial and capital markets is not only to help businesses grow, but also to help hardworking Americans secure their financial future.
The Empowering Main Street in America Act would increase opportunities for everyday investors to build wealth and help American businesses access new sources of capital by responsibly expanding the definition of who can qualify as an accredited investor.
This also includes a meaningful change Senator Britt called for in her Retirement Fairness for Charities and Educational Institutions Act, which would enhance investment options for 403(b) retirement plan participants. 403(b) plans are a type of retirement savings plan, similar to a 401(k), offered to employees of non-profit organizations, like public universities, hospitals, churches, and charities. Senator Britt’s legislation seeks to provide these non-profit employees access to the same retirement investment opportunities that private sector employees have, by allowing 403(b) plan holders to invest in collective investment trusts, a low-cost and reliable investment vehicle.
Fostering Investor Confidence in Market Integrity, Fairness, and Transparency:
Markets that operate fairly and safely benefit investors and businesses alike. However, deciphering complex financial statements, like a 10-K, has become so onerous it has pushed participants out of the market. To address this issue, Empowering Main Street in America Act focuses on improving the readability, clarity, and accessibility of important information to ensure everyday investors have the tools they need to make informed investment decisions.
Furthermore, Empowering Main Street in America Act would improve market confidence and transparency by requiring the Securities and Exchange Commission (SEC) to shed light on the costs associated with small and medium sized businesses going public, which will in turn encourage more middle market Initial Public Offerings (IPOs).
Holding Regulators Accountable Through Increased Oversight:
The Securities and Exchange Commission’s (SEC) mandate is to facilitate capital formation, protect investors, and maintain fair, orderly, and efficient markets. However, the agency has created an increasingly hostile regulatory environment for investors, and private and public companies alike. Increased regulatory oversight and transparency of the SEC ensures the agency upholds its three-part mission and is accountable to the investors they serve.
The Empowering Main Street in America Act would ensure more consistent transparency and accountability to Congress and the public by extending the oversight provisions authorized under the Dodd-Frank Act to mandate the SEC Chair to testify on a semi-annual basis and to statutorily require the SEC to perform thorough rulemaking cost-benefit analysis.
The full text of the bill can be found here.
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