Expanding Access to Capital Act of 2023

Received in the Senate and Read twice and referred to the Committee on Banking, Housing, and Urban Affairs.

Mar 11, 2024

The Expanding Access to Capital Act of 2023 modifies federal securities regulations across multiple areas. It expands the calculation method for determining significant acquisitions by publicly traded companies, extends emerging growth company status for certain issuers for two additional years and raises the revenue threshold for this classification, modifies auditor independence standards for newly public companies, allows all securities brokers to publish research reports on public offerings without registration restrictions, excludes certain institutional investors from security holder counts for registration purposes, lowers the market value threshold for well-known seasoned issuer status to enable faster public offerings, and revises regulatory requirements for private-placement brokers and finders.

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Expanding Access to Capital Act of 2023 This bill reduces various securities regulations for certain companies, brokers, and advisors. The bill also allows more investors to invest in specified types of ventures. DIVISION A--Strengthening Public Markets TITLE I--Remove Aberrations in the Market Cap Test for Target Company Financial Statements This title expands the information allowed to be included when calculating whether an acquisition or disposition of a subsidiary is significant for purposes of required financial disclosures by publicly traded companies. Currently, an acquisition or disposition is considered significant when the company's investment in the subsidiary is calculated to exceed 10% of the aggregate worldwide market value of the company's voting and non-voting common equity. Under the title, this market value may additionally include applicable trading value, conversion value, or exchange value of all of the company's outstanding classes of stock, including preferred stock and non-traded common shares that are convertible into or exchangeable for traded common shares. TITLE II--Helping Startups Continue To Grow Helping Startups Continue To Grow Act This title allows certain issuers of securities regulated as emerging growth companies to continue operating under such regulations, including those related to reduced disclosures and other exemptions, for an additional two years. It also raises the limit of total annual gross revenues under which issuers qualify as emerging growth companies to $1.5 billion. Finally, under the title, a company may continue to be considered an emerging growth company even after it becomes a large accelerated filer. TITLE III--SEC and PCAOB Auditor Requirements for Newly Public Companies This title modifies the auditor independence standards required by the Public Company Accounting Oversight Board (PCAOB) and the Securities and Exchange Commission (SEC). Specifically, an issuer that is a public company or has filed to become a public company must comply with certain auditor independence standards regarding audits that occurred in the fiscal year prior to the company going public. TITLE IV--EXPAND THE PROTECTION FOR RESEARCH REPORTS TO COVER ALL SECURITIES OF ALL ISSUERS This title allows a securities broker or dealer to publish or distribute a research report on a proposed public offering by any issuer without it being considered an offer to sell securities for purposes of registration requirements. Currently, only reports published or distributed regarding a proposed public offering by an emerging growth company fall under this exception. TITLE V--EXCLUDE QIBS AND IAAS FROM THE RECORD HOLDER COUNT FOR MANDATORY REGISTRATION This title excludes certain institutional investors and buyers as holders of a security. Specifically, these investors are not considered security holders under mandatory securities registration thresholds applicable to an issuer of securities. TITLE VI--EXPAND WKSI ELIGIBILITY This title reduces the required aggregate market value of voting and non-voting common equity shares for an issuer of securities to qualify as a well-known seasoned issuer. A well-known seasoned issuer is allowed to make expedited public offerings of securities through automatic shelf registrations. DIVISION B--HELPING SMALL BUSINESSES AND ENTREPRENEURS TITLE I--UNLOCKING CAPITAL FOR SMALL BUSINESSES Unlocking Capital for Small Businesses Act of 2023 This title revises the regulatory treatment of private-placement brokers (brokers who receive transaction-based compensation for the sale of securities to preselected individuals or institutions) and finders (private-placement brokers who do not exceed a specified amount of compensation, transaction value, or number of transactions in a year). Specifically, the title (1) requires the SEC to establish registration requirements for private-placement brokers that are no more stringent than those imposed on crowdfunding portals, (2) allows for mem