About Venture Exchanges & The Main Street Growth Act

Press

Emmer Reintroduces Landmark Legislation to Promote Main Street Capital Formation

Kennedy introduces bill to help small businesses access capital markets

*A companion bill was introduced in the Senate. This is a common strategy used to expedite legislation, as it allows both chambers to work on the bill simultaneously, though each must pass its own version for the bill to proceed.

Main Street Growth Act Gains Momentum with Additional Bipartisan Support

Legislation to Create a New Type of Stock Exchange for Small Businesses is Introduced with Help from Dream Exchange

Main Street Growth Act is the Small But Mighty Finance Bill that Will Create a New Type of Stock Exchange

Benefits

The Main Street Growth Act aims to have a positive impact for: 1) small businesses / emerging growth companies, 2) entrepreneurs, 3) capital markets and capital formation, 4) secondary trading and liquidity, 5) initial public offerings (IPOs), 6) investment opportunities for retail investors, and 7) jobs.

Small Businesses / Emerging Growth Companies: The bill intends to provide these entities with better access to capital markets through the establishment of venture exchanges. Venture Exchanges will foster an active and liquid secondary trading environment for small and emerging growth companies to access the next-level of capital that they need to grow.

Entrepreneurs: Entrepreneurs, often facing challenges in raising capital through traditional methods in their early stages, would benefit from easier access to capital by listing on venture exchanges and reduced regulatory hurdles compared to listing on a higher tiered exchange such as the NASDAQ or NYSE.

Capital Markets and Capital Formation: By introducing venture exchanges, the bill aims to diversify and invigorate capital markets, potentially leading to more robust capital formation, especially in sectors where small and emerging companies operate. Capital markets must meet the needs for all types of companies.

Secondary Trading and Liquidity: The bill seeks to enhance liquidity for the equity of small and emerging growth companies by creating a dedicated marketplace. This could make these companies more attractive to investors, as liquidity is a key concern in investments especially after coming from the private markets where liquidity is difficult.

Initial Public Offerings (IPOs): The act aims to simplify the process of going public for small companies, potentially leading to an increase in IPOs. IPO activity has tailed off significantly compared to its peak from 1996 - 2010.

Investment Opportunities for Retail Investors: By opening up a new market segment, the bill aims to provide retail investors with the opportunity to invest in more early-stage, high-growth, exciting companies. This builds on the success of the JOBS Act in unlocking investment opportunities that were previously only available to accredited investors.

Jobs: By facilitating the growth of small businesses and startups, the bill stands to lead to the creation of new jobs, contributing to economic growth and opportunities for careers to thrive.

Details

A General Overview of the Sections of The Proposed "Main Street Growth Act" Bill:

Short Title (Section 1): Names the bill as the “Main Street Growth Act”.

Venture Exchanges (Section 2)

Sec. 2(a):

Registration (Sec. 2(a)): Details the process for registering as a venture exchange, including application procedures and criteria for approval or denial by the Securities and Exchange Commission (SEC).

Powers and Restrictions (Sec. 2(a)(2)): Defines the powers and restrictions specific to venture exchanges, such as the types of securities they can trade and limitations on trading privileges.

Treatment of Certain Exempted Securities (Sec. 2(a)(3)): Specifies exemptions for securities traded on venture exchanges, focusing on compliance with disclosure obligations.

Prohibition of Trading on Non-Venture Exchanges (Sec. 2(a)(4)): States that venture securities cannot be traded on non-venture exchanges during certain periods.

Commission Authority and Investor Disclosures (Sec. 2(a)(6) & (7)): Grants the SEC authority to regulate certain trades and mandates disclosures to investors regarding the unique aspects of venture securities.

Definitions (Sec. 2(a)(8)): Provides definitions for key terms such as “early-stage, growth company,” “public float,” and “venture security.”

Sec. 2(b):

Amendment to Securities Act of 1933 (Sec. 2(b)): Updates Section 18 of the Securities Act of 1933 concerning the treatment of securities listed on a venture exchange.

Sec. 2(c):

Sense of Congress (Sec. 2(c)): Expresses Congress’s view that the SEC should use its authority to facilitate the provisions of this bill, and considers the creation of an Office of Venture Exchanges.

Sec. 2(d):

Rule of Construction (Sec. 2(d)): Clarifies that the bill does not affect the interpretation of anti-fraud provisions in securities laws or the SEC's authority under those provisions.

Sec. 2(e):

Effective Date for Tiers of Existing National Securities Exchanges (Sec. 2(e)): Establishes when a securities exchange registered as a national securities exchange can elect for a listing tier to be treated as a venture exchange.

The bill aims to create a regulatory framework for venture exchanges, focusing on registration requirements, operational parameters, and investor protections, while also amending related sections of existing securities law.

Note that this Act facilitates the trading of securities of smaller, emerging companies and especially eases the path for those companies that have used Reg A+.

Read the Entire Bill