The Senate is slowly beginning to work its way toward legislation to encourage more small businesses to go public and reform securities markets.
The effort faces all the challenges that any other bills do at this stage of the 115th Congress. Members of both parties are looking to the midterm elections and legislating is slowing down, and it’s just as likely as not that Congress won’t be able to push anything through.
But it has one advantage: Jeb Hensarling, the conservative chairman of the House Financial Services Committee, secured a commitment from Senate Majority Leader Mitch McConnell for a vote on a legislative package. That deal was struck in order to facilitate the passage of a banking regulatory relief bill in the House.
Now, the focus is on whether proponents can get support from enough Senate Democrats to pass something. Hensarling has called for a JOBS Act 3.0, to follow up on the 2012 legislation signed by President Obama that eased securities laws for small businesses, most notably by allowing for the possibility of crowdfunding.
More centrist Democrats on the Senate Banking Committee paved the way for the banking regulatory relief bill earlier this year, and would be key in another such effort this time around.
Heidi Heitkamp, running for reelection in North Dakota, said that “we’re more than willing to sit down and talk about where that is.”
Red-state Democrats, however, already faced intense criticism from the Left, and particularly Sen. Elizabeth Warren of Massachusetts, in joining with Republicans to get the banking bill to President Trump’s desk. They may not want to recreate that experience.
And it appears they would have to part ways, again, with the top Democrat on the Banking Committee, the populist Sherrod Brown of Ohio.
“We continue to consider bills that unwind many important safeguards,” Brown said at a hearing on several bills Tuesday. “Slowly but surely, we will find that adding more exemptions and carve-outs has not had its desired result of more IPOs, but it has had its predictable result of denying investors key protections and eroding trust in the markets.”
Many of the measures would modestly ease securities laws, for instance by allowing companies to exhibit for potential investors at “Demo Days” without triggering requirements related to securities offerings.
In fact, business groups and Republicans have set a goal of encouraging more small businesses to go public by lessening the regulatory burdens that apply to public companies. According to the Chamber of Commerce, the number of public companies dropped in each yea between 1996-2016, setting aside one year after the passage of the original JOBS Act.
Yet, the GOP and financial sector lobbyists might be tempted to try to push the envelope and see if other measures, including ones not directly related to capital markets, could make it into the bill.
For instance, some House members hope to advance legislation that would revamp the Volcker Rule, the Dodd-Frank regulation prohibiting big banks from speculating with deposits insured by the federal government.
Republicans, eager for more regulatory relief, are willing to negotiate for more in the months ahead. “There’s plenty of time,” said Sen. Richard Shelby, R-Ala.
