Main Street Growth Act

II 116TH CONGRESS 1ST SESSION S. 2306 To amend the Securities Exchange Act of 1934 to allow for the registration of venture exchanges, and for other purposes. IN THE SENATE OF THE UNITED STATES JULY 29, 2019 Mr. KENNEDY introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs A BILL To amend the Securities Exchange Act of 1934 to allow for the registration of venture exchanges, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Main Street Growth 4 Act’’. 5 SEC. 2. VENTURE EXCHANGES. 6 (a) SECURITIES EXCHANGE ACT OF 1934.—Section 7 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f) 8 is amended by adding at the end the following: 9 ‘‘(m) VENTURE EXCHANGE.— 10 VerDate Sep 11 2014 04:19 Aug 07, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S2306.IS S2306 kjohnson on DSK79L0C42 with BILLS 2 •S 2306 IS ‘‘(1) DEFINITIONS.—In this subsection: 1 ‘‘(A) EARLY-STAGE, GROWTH COMPANY.— 2 ‘‘(i) IN GENERAL.—The term ‘early- 3 stage, growth company’ means an issuer— 4 ‘‘(I) that has not made any reg- 5 istered initial public offering of any 6 securities of the issuer; and 7 ‘‘(II) with a public float of not 8 more than the value of public float re- 9 quired to qualify as a large acceler- 10 ated filer under section 240.12b–2 of 11 title 17, Code of Federal Regulations, 12 or any successor regulation. 13 ‘‘(ii) TREATMENT WHEN PUBLIC 14 FLOAT EXCEEDS THRESHOLD.—An issuer 15 shall not cease to be an early-stage, growth 16 company by reason of the public float of 17 the issuer exceeding the threshold specified 18 in clause (i)(II) until the later of— 19 ‘‘(I) the end of the period of 24 20 consecutive months during which the 21 public float of the issuer exceeds 22 $2,000,000,000 (as such amount is 23 indexed for inflation every 5 years by 24 the Commission to reflect the change 25 VerDate Sep 11 2014 04:19 Aug 07, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S2306.IS S2306 kjohnson on DSK79L0C42 with BILLS 3 •S 2306 IS in the Consumer Price Index for All 1 Urban Consumers published by the 2 Bureau of Labor Statistics, setting 3 the threshold to the nearest 4 $1,000,000); and 5 ‘‘(II) the end of the 1-year period 6 following the end of the 24-month pe- 7 riod described in subclause (I), if the 8 issuer requests the 1-year extension 9 from a venture exchange and the ven- 10 ture exchange elects to provide that 11 extension. 12 ‘‘(B) PUBLIC FLOAT.—With respect to an 13 issuer, the term ‘public float’ means the aggre- 14 gate worldwide market value of the voting and 15 non-voting common equity of the issuer held by 16 non-affiliates. 17 ‘‘(C) VENTURE SECURITY.— 18 ‘‘(i) IN GENERAL.—The term ‘venture 19 security’ means— 20 ‘‘(I) a security of an early-stage, 21 growth company that is exempt from 22 registration pursuant to section 3(b) 23 of the Securities Act of 1933 (15 24 U.S.C. 77c(b)); 25 VerDate Sep 11 2014 04:19 Aug 07, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S2306.IS S2306 kjohnson on DSK79L0C42 with BILLS 4 •S 2306 IS ‘‘(II) a security of an emerging 1 growth company; or 2 ‘‘(III) a security registered under 3 section 12(b) and listed on a venture 4 exchange (or, prior to listing on a ven- 5 ture exchange, listed on a national se- 6 curities exchange) where— 7 ‘‘(aa) the issuer of the secu- 8 rity has a public float that is not 9 more than the value of public 10 float required to qualify as a 11 large accelerated filer under sec- 12 tion 240.12b–2 of title 17, Code 13 of Federal Regulations, or any 14 successor regulation; or 15 ‘‘(bb) the average daily 16 trade volume is not more than 17 75,000 shares during a contin- 18 uous 60-day period. 19 ‘‘(ii) TREATMENT WHEN PUBLIC 20 FLOAT EXCEEDS THRESHOLD.—A security 21 shall not cease to be a venture security by 22 reason of the public float of the issuer of 23 the security exceeding the threshold speci- 24 VerDate Sep 11 2014 04:19 Aug 07, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S2306.IS S2306 kjohnson on DSK79L0C42 with BILLS 5 •S 2306 IS fied in clause (i)(III)(aa) until the later 1 of— 2 ‘‘(I) the end of the period of 24 3 consecutive months beginning on the 4 date on which— 5 ‘‘(aa) the public float of the 6 issuer exceeds $2,000,000,000; 7 and 8 ‘‘(bb) the average daily 9 trade volume of the security is 10 not less than 100,000 shares 11 during a continuous 60-day pe- 12 riod; and 13 ‘‘(II) the end of the 1-year period 14 following the end of the 24-month pe- 15 riod described in subclause (I), if the 16 issuer of the security requests the 1- 17 year extension from a venture ex- 18 change and the venture exchange 19 elects to provide that extension. 20 ‘‘(2) REGISTRATION.— 21 ‘‘(A) IN GENERAL.—A person may register 22 (and a national securities exchange may reg- 23 ister a listing tier of the exchange) as a na- 24 tional securities exchange solely for the purpose 25 VerDate Sep 11 2014 04:19 Aug 07, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S2306.IS S2306 kjohnson on DSK79L0C42 with BILLS 6 •S 2306 IS of trading venture securities by filing an appli- 1 cation with the Commission pursuant to sub- 2 section (a) and the rules and regulations there- 3 under. 4 ‘‘(B) PUBLICATION OF NOTICE.—The 5 Commission shall, upon the filing of an applica- 6 tion under subparagraph (A), publish notice of 7 the filing and afford interested persons an op- 8 portunity to submit written data, views, and ar- 9 guments concerning the application. 10 ‘‘(C) APPROVAL OR DENIAL.— 11 ‘‘(i) IN GENERAL.—Not later than 90 12 days after the date on which a notice is 13 published under subparagraph (B), or 14 within such longer period as to which the 15 applicant consents, the Commission shall— 16 ‘‘(I) by order grant the registra- 17 tion; or 18 ‘‘(II) institute a denial pro- 19 ceeding under clause (ii) to determine 20 whether registration should be denied. 21 ‘‘(ii) DENIAL PROCEEDING.— 22 ‘‘(I) IN GENERAL.—A proceeding 23 under clause (i)(II) shall— 24 VerDate Sep 11 2014 04:19 Aug 07, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S2306.IS S2306 kjohnson on DSK79L0C42 with BILLS 7 •S 2306 IS ‘‘(aa) include notice of the 1 grounds for denial under consid- 2 eration and opportunity for hear- 3 ing; and 4 ‘‘(bb) be concluded not later 5 than 180 days after the date on 6 which the notice is published 7 under subparagraph (B). 8 ‘‘(II) ORDER.—At the conclusion 9 of a proceeding under clause (i)(II), 10 the Commission shall by order grant 11 or deny the registration. 12 ‘‘(III) EXTENSION.—The Com- 13 mission may extend the time for con- 14 clusion of a proceeding under clause 15 (i)(II) for a period of not more than 16 90 days if the Commission— 17 ‘‘(aa) finds good cause for 18 the extension; and 19 ‘‘(bb) publishes the reasons 20 for the finding described in item 21 (aa) or for such longer period as 22 to which the applicant consents. 23 ‘‘(iii) CRITERIA FOR APPROVAL OR 24 DENIAL.—The Commission shall— 25 VerDate Sep 11 2014 04:19 Aug 07, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S2306.IS S2306 kjohnson on DSK79L0C42 with BILLS 8 •S 2306 IS ‘‘(I) grant a registration under 1 this paragraph if the Commission 2 finds that the requirements of this 3 Act and the rules and regulations 4 thereunder with respect to the appli- 5 cant are satisfied; and 6 ‘‘(II) deny a registration under 7 this paragraph if the Commission does 8 not make the finding described in sub- 9 clause (I). 10 ‘‘(3) POWERS AND RESTRICTIONS.—In addition 11 to the powers and restrictions otherwise applicable 12 to a national securities exchange, a venture ex- 13 change— 14 ‘‘(A) may only constitute, maintain, or pro- 15 vide a market place or facilities for bringing to- 16 gether purchasers and sellers of venture securi- 17 ties; 18 ‘‘(B) may not extend unlisted trading 19 privileges to any venture security; 20 ‘‘(C) may only, if the venture exchange is 21 a listing tier of another national securities ex- 22 change, allow trading in securities that are reg- 23 istered under section 12(b) on a national securi- 24 VerDate Sep 11 2014 04:19 Aug 07, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S2306.IS S2306 kjohnson on DSK79L0C42 with BILLS 9 •S 2306 IS ties exchange other than a venture exchange; 1 and 2 ‘‘(D) may, subject to the rule filing process 3 under section 19(b)— 4 ‘‘(i) determine the increment to be 5 used for quoting and trading venture secu- 6 rities on the exchange; and 7 ‘‘(ii) choose to carry out periodic auc- 8 tions for the sale of a venture security in- 9 stead of providing continuous trading of 10 the venture security. 11 ‘‘(4) TREATMENT OF CERTAIN EXEMPTED SE- 12 CURITIES.—A security that is exempt from registra- 13 tion pursuant to section 3(b) of the Securities Act 14 of 1933 (15 U.S.C. 77c(b)) shall be exempt from 15 section 12(a) of this Act to the extent the security 16 is traded on a venture exchange, if the issuer of the 17 security is in compliance with— 18 ‘‘(A) all disclosure obligations of such sec- 19 tion 3(b) and the regulations issued under such 20 section; and 21 ‘‘(B) ongoing disclosure obligations of the 22 applicable venture exchange that are similar to 23 those provided by an issuer under tier 2, as de- 24 scribed in sections 230.251 through 230.263 of 25 VerDate Sep 11 2014 04:19 Aug 07, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S2306.IS S2306 kjohnson on DSK79L0C42 with BILLS 10 •S 2306 IS title 17, Code of Federal Regulations, or any 1 successor regulation. 2 ‘‘(5) VENTURE SECURITIES TRADED ON VEN- 3 TURE EXCHANGES MAY NOT TRADE ON NON-VEN- 4 TURE EXCHANGES.—A venture security may not be 5 traded on a national securities exchange that is not 6 a venture exchange during any period in which the 7 venture security is being traded on a venture ex- 8 change. 9 ‘‘(6) COMMISSION AUTHORITY TO LIMIT CER- 10 TAIN TRADING.—The Commission may limit trans- 11 actions in venture securities that are not effected on 12 a national securities exchange as appropriate to pro- 13 mote efficiency, competition, capital formation, and 14 to protect investors. 15 ‘‘(7) DISCLOSURES TO INVESTORS.—The Com- 16 mission shall issue regulations to ensure that per- 17 sons selling or purchasing venture securities on a 18 venture exchange are provided disclosures sufficient 19 to understand— 20 ‘‘(A) the characteristics unique to venture 21 securities; and 22 ‘‘(B) in the case of a venture exchange 23 that is a listing tier of another national securi- 24 ties exchange, that the venture exchange is dis- 25 VerDate Sep 11 2014 04:19 Aug 07, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S2306.IS S2306 kjohnson on DSK79L0C42 with BILLS 11 •S 2306 IS tinct from the other national securities ex- 1 change. 2 ‘‘(8) RULE OF CONSTRUCTION.—Nothing in 3 this subsection may be construed as requiring trans- 4 actions in venture securities to be effected on a na- 5 tional securities exchange.’’. 6 (b) SECURITIES ACT OF 1933.—Section 18 of the Se- 7 curities Act of 1933 (15 U.S.C. 77r) is amended— 8 (1) by redesignating subsection (d) as sub- 9 section (e); and 10 (2) by inserting after subsection (c) the fol- 11 lowing: 12 ‘‘(d) TREATMENT OF SECURITIES LISTED ON A VEN- 13 TURE EXCHANGE.—Notwithstanding subsection (b), a se- 14 curity is not a covered security pursuant to subsection 15 (b)(1)(A) if the security is only listed, or authorized for 16 listing, on a venture exchange, as defined in section 6(m) 17 of the Securities Exchange Act of 1934 (15 U.S.C. 18 78f(m)).’’. 19 (c) SENSE OF CONGRESS.—It is the sense of the Con- 20 gress that the Securities and Exchange Commission 21 should— 22 (1) when necessary or appropriate in the public 23 interest and consistent with the protection of inves- 24 tors, make use of the general exemptive authority of 25 VerDate Sep 11 2014 04:19 Aug 07, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S2306.IS S2306 kjohnson on DSK79L0C42 with BILLS 12 •S 2306 IS the Commission under section 36 of the Securities 1 Exchange Act of 1934 (15 U.S.C. 78mm) with re- 2 spect to the provisions added by the amendments 3 made by this section; and 4 (2) if the Commission determines appropriate, 5 create an Office of Venture Exchanges within the 6 Division of Trading and Markets of the Commission. 7 (d) RULE OF CONSTRUCTION.—Nothing in this sec- 8 tion or the amendments made by this section shall be con- 9 strued to impair or limit the construction of the anti-fraud 10 provisions of the securities laws, as defined in section 3(a) 11 of the Securities Exchange Act of 1934 (15 U.S.C. 12 78c(a)), or the authority of the Securities and Exchange 13 Commission under those provisions. 14 (e) EFFECTIVE DATE FOR TIERS OF EXISTING NA- 15 TIONAL SECURITIES EXCHANGES.—In the case of a secu- 16 rities exchange that is registered as a national securities 17 exchange under section 6 of the Securities Exchange Act 18 of 1934 (15 U.S.C. 78f) on the date of enactment of this 19 Act, any election for a listing tier of that exchange to be 20 treated as a venture exchange under subsection (m) of 21 such section shall not take effect before the date that is 22 180 days after such date of enactment. 23 Æ VerDate Sep 11 2014 04:19 Aug 07, 2019 Jkt 089200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6301 E:\BILLS\S2306.IS S2306 kjohnson on DSK79L0C42 with BILLS