Senator Hutchison Lauds House Passage of JOBS Act

Statement

Today, U.S. Senator Kay Bailey Hutchison (R-TX) released the following statement applauding passage of House Majority Leader Eric Cantor's (R-VA-07) capital formation legislative package, the JOBS Act:

"I'm pleased that House Majority Leader Cantor and the House of Representatives have provided new momentum for capital formation measures that would help small businesses and investors. Included in the Majority Leader's package is my bill, S. 1941, which would help community banks more effectively raise funds by increasing the number of shareholders permitted to invest from 500 to 2,000. My legislation has wide bipartisan support and has been endorsed in concept by the Administration. It's time for Majority Leader Reid to allow my bill - and other job creating bills that have been endorsed by the White House - to be voted on by the Senate."

ADDITIONAL INFORMATION:
* S. 1941 would update the threshold that triggers mandatory SEC registration by public companies to 2,000 shareholders, increase the deregistration threshold to 1,200 shareholders, and make permanent the $10 million threshold.

* Currently, the Securities Exchange Act requires a company with $10 million in assets and 500 shareholders to register its securities with the SEC and comply with the SEC's significant registration and reporting requirements, including costs tied to Sarbanes-Oxley.

* While the asset size measure has been increased twice to the current $10 million level since being enacted in 1964, the shareholder gauge of a public company, the only measurement of significance for banks, has never been updated. S. 1941 would update the shareholder threshold for registration, providing much needed regulatory relief for community banks.

* S. 1941 would also remove an impediment of community banks to meet higher capital requirements that loom from the Dodd-Frank Act and the Basel III accords. The outdated shareholder threshold level hampers the ability of small banks from raising capital from investors in their community, because these banks fear skyrocketing regulatory compliance costs that would result from tripping over the threshold number.

* In reducing regulatory expenses, S. 1941 would also enhance the ability of community banks to increase lending. According to industry estimates, S. 1941 could translate into close to $800 million in lending to creditworthy American families and small businesses.

* Banks with 2,000 shareholders or less are local businesses with local shareholders. These institutions had median revenue of $8.5 million and a median 180 full-time employees as of the first quarter of 2011. The small benefit that these companies receive from being public is nonetheless compounded by the disproportionately high costs of regulatory compliance placed on these smaller companies.

* The ever increasing regulatory costs are exerting significant pressure on banks to reduce the number of shareholders in order either to avoid registration requirements or to de-register. However, companies that wish to de-register must either have less than $10 million in assets or less than 300 record shareholders, and for banks who wish to deregister, this means reducing their shareholder base below 300 record shareholders.

* Reducing the number of record shareholders can be costly-and in this time of industry turmoil and credit contraction-unwise. As much as community banks would like to get out from under the heavy weight of SEC registration, they often have no desire to reduce the number of shareholders, especially if that means disenfranchising the localized ownership that makes these banks members of the community.

* Increasing the shareholder threshold number will significantly reduce the unwarranted regulatory hardship suffered by these small community banks and allow them to continue being lenders in their communities and job incubators on Main Street America.

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