H.R.3323 - Helping Startups Continue To Grow Act (119th Congress)
Summary
H.R.3323, the "Helping Startups Continue To Grow Act," aims to update the definition of an emerging growth company (EGC) by increasing the revenue threshold from $1 billion to $3 billion. It also modifies the criteria for EGC status, extending the period under consideration from five to ten years and removing a specific disqualification clause. The bill amends both the Securities Act of 1933 and the Securities Exchange Act of 1934 to reflect these changes.
The intended effect is to allow more companies to qualify as EGCs for a longer duration, providing them with continued access to certain regulatory benefits and exemptions. This is designed to support their growth and development.
The bill also includes a technical correction to the Securities Exchange Act of 1934, redesignating a paragraph number and correcting a cross-reference in the Securities Act of 1933.
Expected Effects
This bill will broaden the scope of companies considered as emerging growth companies. This will allow them to benefit from exemptions from certain regulatory requirements for a longer period. This could lead to increased investment and growth for these companies.
Potential Benefits
- Increased Investment: More companies qualifying as EGCs may attract greater investment due to reduced regulatory burdens.
- Continued Growth: Extending the EGC status period allows companies to benefit from exemptions for a longer time, fostering sustained growth.
- Reduced Compliance Costs: EGCs benefit from reduced compliance costs, freeing up resources for innovation and expansion.
- Attractiveness to IPOs: The updated definition could make it more attractive for companies to go public, boosting capital markets.
- Simplification of Regulations: The technical corrections streamline regulatory language, reducing ambiguity.
Most Benefited Areas:
Potential Disadvantages
- Reduced Investor Protection: Relaxing regulations for a broader range of companies could increase risks for investors.
- Potential for Abuse: The higher revenue threshold might allow larger companies to exploit EGC benefits.
- Market Distortion: Preferential treatment for EGCs could create an uneven playing field for other businesses.
- Complexity: While aiming to simplify, the amendments might introduce new complexities in interpretation and application.
- Unintended Consequences: Changes to EGC definitions could have unforeseen impacts on market dynamics and investor behavior.
Constitutional Alignment
The bill appears to align with the constitutional power of Congress to regulate commerce, as outlined in Article I, Section 8, Clause 3 (the Commerce Clause). This clause grants Congress the authority to regulate interstate commerce, which includes the regulation of securities and financial markets. The bill's provisions relating to emerging growth companies fall under this regulatory purview. There are no apparent infringements on individual rights or liberties protected by the Bill of Rights.
Furthermore, the bill does not appear to violate the principle of separation of powers, as it is a legislative action within the scope of Congress's authority. The executive branch would be responsible for implementing and enforcing the provisions of the amended securities laws.
Overall, the bill seems to be within the constitutional bounds of congressional authority to regulate commerce and does not raise significant constitutional concerns.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).