Supporting America's Innovators Act of 2016
Floor Speech
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Mr. GARRETT. Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 4854) to amend the Investment Company Act of 1940 to expand the investor limitation for qualifying venture capital funds under an exemption from the definition of an investment company, as amended.
The Clerk read the title of the bill.
The text of the bill is as follows: H.R. 4854
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE.
This Act may be cited as the ``Supporting America's Innovators Act of 2016''. SEC. 2. INVESTOR LIMITATION FOR QUALIFYING VENTURE CAPITAL FUNDS.
Section 3(c)(1) of the Investment Company Act of 1940 (15 U.S.C. 80a-3(c)(1)) is amended--
(1) by inserting after ``one hundred persons'' the following: ``(or, with respect to a qualifying venture capital fund, 250 persons)''; and
(2) by adding at the end the following:
``(C) The term `qualifying venture capital fund' means any venture capital fund (as defined pursuant to section 203(l)(1) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-3(l)(1)) with no more than $10,000,000 in invested capital, as such dollar amount is annually adjusted by the Commission to reflect the change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics of the Department of Labor.''.
Mr. Speaker, I rise in support of H.R. 4854, Supporting America's Innovators Act of 2016; and I want to thank the sponsor of the legislation, the gentleman from North Carolina (Mr. McHenry).
Mr. Speaker, it is no secret that 7 years after our last recession apparently ended, our economy continues to trudge along at historically weak rates of growth and job creation.
Three points: The most recent jobs report showed that only 38,000 jobs were created during the month of May. That was the worst report since 2010;
New business startups in the country are near a 20-year low;
And, finally, American families and small businesses are finding it extremely difficult to obtain credit in order to expand their businesses or purchase a home.
More than ever, Mr. Speaker, Americans are looking at us, their elected Representatives in Congress, to help get our economy back on track and create opportunities for people that have struggled for too long.
Fortunately, over the last 5 years, the Financial Services Committee has stepped up to the plate and passed a number of bipartisan pieces of legislation. Most notably, in 2012, Congress passed the JOBS Act, which is one of the few bright spots. In April, the Capital Markets and GSE Subcommittee held a hearing to examine the positive impacts that the JOBS Act has had, and to consider further ways that we can work across the aisle to promote job growth. But for just about every measure the JOBS Act has been a resounding success, there is more that Congress can be doing.
So today, Mr. Speaker, the House will consider a couple of measures that will build upon the success of the JOBS Act. The first is this one. This measure is Supporting America's Innovation Act of 2016.
What will the bill do?
First, it would fix what is known as the 99 investor problem. That is, under current securities law, once a venture capital fund gains more than 99 investors, it would have to become registered with the SEC under the Investment Company Act of 1940.
Just in case there is any confusion, registering with the SEC isn't free. It creates a number of costs and regulatory burdens on small venture funds that hinder the ability to deploy vital capital for startup businesses.
What is more, the current investor cap was put in place way back in 1940, at a time when nobody had ever heard of Silicon Valley, and venture capital did not play anywhere near the role it does today.
So while the JOBS Act raised the registration threshold for private companies from 500 to 2,000 investors, it did not concurrently raise the threshold for investors acting as a coordinated group.
As Kevin Laws, COO of AngelList, told our subcommittee back in April:
With online fundraising and general solicitation becoming more common because of the JOBS Act, companies are bumping up against the limit more frequently. The limit of 99 investors now acts as a brake on the amount of capital that they can raise.
So, Mr. Speaker, in conclusion, the solution envisioned under this legislation is simple. It simply bumps the number from 100 to 250, and it clarifies that registration would not be triggered until the fund crossed a threshold of $10 million invested in a particular company.
This legislation is simple. It is straightforward. It would allow venture capital funds to continue to play the important role they do in our economy without any of the burden having to deal with any unnecessary regulation.
So, once again, I thank the sponsor of the underlying bill, and I urge my colleagues to support it.
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Mr. GARRETT. Mr. Speaker, at this time, I yield such time as he may consume to the gentleman from North Carolina (Mr. McHenry), the sponsor of the legislation.
Again, I thank the gentleman, and I thank the bipartisan nature of what we are doing here on the floor this evening with this legislation and the two pieces of legislation that follow. It shows the American public that this House, when we work together across the aisle and focus our attention on these important economic issues, can get things done.
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Mr. GARRETT. Mr. Speaker, on that I demand the yeas and nays.
The yeas and nays were ordered.
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