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From Securities Regulation Daily, December 1, 2015

Legislators reach deal on highway bill, securities tweaks included

By Mark S. Nelson, J.D.

Conferees from the House and Senate have reached agreement on a longer term highway funding bill that also puts a spotlight on tweaks to capital formation, swaps, and banking laws sought by members who seek to ease Dodd-Frank Act limits and to further enhance innovations debuted in the Jumpstart Our Business Startups (JOBS) Act. The conference report must still be approved by each chamber, but the House already has plans to take up the measure this week before current transport funding expires.

A statement by leaders of the Conference Committee emphasized the importance of the legislation. “A safe, efficient surface transportation network is fundamentally necessary to our quality of life and our economy, and this conference report provides long-term certainty for states and local governments, and good reforms and improvements to the programs that sustain our roads, bridges, transit, and passenger rail system.”

The core of the Fixing America’s Surface Transportation (FAST) Act contains a five-year, fully-paid plan to broadly deal with U.S. roads and bridges, public transportation, car and truck safety, and railroads. A summary offers a quick tour of the transport-specific provisions. The legislation also re-authorizes the Export-Import Bank, one of the Act’s most fiercely contested provisions.

But tucked away near the end of the measure are 20 securities and banking provisions covering a range of topics. The conferee’s Joint Explanatory Statementnoted that the Senate concurred in the fifteen bills added last month to the House version of the transport bill by Rep. Jeb Hensarling (R-Tex), Chairman of the House Financial Services Committee. Yet the final agreement adds five new securities and banking provisions.

JOBS Act revisions. Division G of the FAST Act sets out the several financial services provisions. Under Title LXXI, Securities Act Section 6(e)(1) would be amended to shorten the period during which an emerging growth company must publicly file its confidential registration statement submission and all amendments before a road show from 21 to 15 days. This provision also would clarify that an EGC may keep its status until the earlier of its initial public offering or one year after it ceases to be an EGC.

Another provision would amend JOBS Act Section 102 to provide for simplified EGC disclosures. Specifically, the SEC would be directed to update Forms S-1 and F-1 to let EGCs omit some historical financial data typically required by Regulation S-X.

Swaps. Of the several brand new provisions added to the FAST Act, one deals with a source of frustration regarding swaps and security-based swaps. Title LXXXVI would amend both the Commodity Exchange Act and the Exchange Act to clarify that before the CFTC or a swap or security-based swap data repository can share certain swaps data with foreign regulators, there must be a written agreement in place that requires the sharing entities to abide by any related confidentiality requirements. This title repeals a Dodd-Frank Act provision that required indemnification agreements.

Other securities provisions. Under Title LXXII of Division G, the SEC must adopt regulations to allow issuers to use summary pages on Form 10-K, if the filing includes cross-references (e.g., electronic links) to related information in the Form 10-K. The SEC is also directed to rework Regulation S-K to cull outmoded provisions, and to conduct a study of Regulation S-K in consultation with the Investment Advisory Committee and the Advisory Committee on Small and Emerging Companies before reporting the agency’s findings to Congress.

Title LXXIV would update the Investment Advisers Act to clarify the role of advisers to small business investment companies and also the role of venture capital funds. Title LXXVI would amend Securities Act Section 4 to close a gap in current laws in order to allow the private resale of securities held by private companies’ employees.

Moreover, Title LXXXIV would require the SEC to revise Form S-1 to allow smaller reporting companies to partake of forward incorporation by reference. Title LXXXV would amend Exchange Act Section 12(g) to raise the registration threshold for savings and loan holding companies.

Banks. Division G of the FAST Act also contains a number of provisions for banks, including Title LXXV, which would amend the Gramm-Leach-Bliley Act to ease annual disclosure notice requirements. Under Title LXXVII, changes to the Low Income Housing Preservation and Resident Homeownership Act of 1990 would permit the owners of some government-subsidized multifamily developments to tap income from these developments.

Title LXXXII would update the Federal Home Loan Bank Act to allow privately insured credit unions to become members of a federal home loan bank. Under Title LXXXIII, the Federal Deposit Insurance Act would be revised to increase the threshold amounts applicable to the 18-month on-site exam cycle.

Lastly, the Helping Expand Lending Practices in Rural Communities Act of 2015, a new add-on contained in Title LXXXIX, would require the CFPB to create an application process by which a person can ask to have an area designated as a rural area. This title would update an existing Dodd-Frank Act provision.

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