Last Wednesday, the House Rules Committee posted the text of H.R. 2799, the Expanding Access to Capital Act of 2024. The action by the Rules Committee marks the first step in a parliamentary process that will see the House debate and vote on arguably the most significant amendments to federal securities laws in the dozen years since Congress passed the JOBS Act of 2012. Amendments to the bill were due yesterday, and the Rules Committee is likely to meet on March 4 or March 5 to finalize the terms of the bill’s consideration by the House as early as March 7. LXR Group has closely monitored developments surrounding H.R. 2799 since the bill was introduced in 2023.
The timing of the House vote on H.R. 2799 is auspicious, as it is likely to come just one week before President Biden is expected to address Congress and the nation in his annual State of the Union address, which is scheduled for March 12th. We believe that House Republicans are hoping to reprise their successful 2012 bid to win support from the White House for capital formation legislation. While H.R. 2799 was advanced by the House Financial Services Committee (HFSC) along party lines, that was nearly a year ago, and any indication of support from the White House could dramatically scramble the politics of the legislation. The mercurial nature of the politics attached to legislation like H.R. 2799 owed partly to the highly technical nature of the securities laws and the highly specialized, niche nature of the stakeholders that care about them. These factors largely insulate members of Congress from political consequences, regardless of which way they vote on such bills.
Further, we understand that HFSC Chair Patrick McHenry (R-NC) is likely to try to add a number of provisions to H.R. 2799 that enjoy bipartisan support when the bill is considered on the House Floor with the goal of enticing at least some Democrats to vote for it on final passage.
As of right now, twenty amendments to H.R. 2799 have been filed with the House Rules Committee. They include:
- Annuity Sales to 403(b) Plans. A bipartisan amendment that would amend the Investment Company Act to allow 403(b) plans to invest in collective investment trusts (CITs) and insurance contracts that currently may be invested in by comparable retirement plans, such as 401(k)s. Identical legislation was approved 35-12 by the HFSC in 2023. Under current law, 403(b) plans are generally limited to investing in annuities or mutual funds through custodial accounts (except for retirement income accounts for church employees). In contrast, 401(k) plans have few investment restrictions. The amendment is a top priority of the Insured Retirement Institute (IRI) and other organizations representing industries that issue and sell annuities. This amendment is sponsored by Rep. Frank Lucas (R-OH), Rep. Josh Gottheimer (D-NJ), and Rep. Bill Foster (D-IL).
- Default Electronic Delivery of Securities Disclosures. A bipartisan amendment that would direct the SEC to adopt rules, within 1 year, to allow a broker-dealers and other “covered entities” to satisfy their obligations deliver regulatory documents required under the federal securities laws to investors using electronic delivery. The amendment is a top priority of the Securities Industry and Financial Markets Association (SIFMA) and other financial industry trade associations, but is opposed by important consumer focused advocacy organizations, including AARP and Consumer Federation of America. LXR Group analyzed the substance and legislative outlook for the bill in a blog post last year, after it passed the HFSC on a voice vote, and over opposition from HFSC Ranking Member Maxine Waters. The amendment is sponsored by Reps. Bill Huizenga (R-MI), Wiley Nickel (D-NC), Bryan Steil (R-WI) and Jake Auchincloss (D-MA).
- Disclosure of investment in women and minority owned businesses. A Democratic amendment to the Investment Company Act to require any investment adviser, private fund, or an investment company that is subject to the bill to disclose their investments annually and publicly into women-owned, minority-owned, veteran-owned, rural-domiciled, and other businesses. The amendment is sponsored by Rep. Maxine Waters (D-MA), the top-ranking Democrat on the HFSC.
As things presently stand, we think it will be difficult for McHenry and other proponents of securities deregulation to pull a rabbit out of the hat in the name of “capital formation”, as they memorably succeeded in doing in April 2012. However, the outlook for H.R. 2799 could change on a dime, and as February becomes March, stakeholders who care about the securities laws should keep a close eye on the House Floor and the President’s upcoming State of the Union address. We will be watching closely.
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