Ricketts, Cortez Masto Introduce the ELEVATE Act to Unlock Capital for Small Companies

WASHINGTON, D.C. - Today, U.S. Senators Pete Ricketts (R-NE) and Catherine Cortez Masto (D-NV) introduced the Encouraging Local Emerging Ventures and Economic Growth (ELEVATE) Act. The ELEVATE Act would reduce bureaucratic red tape for small and mid-sized businesses seeking to raise capital investment through Initial Public Offering (IPO).

"Nebraska businesses are the economic center of communities across the state," said Senator Ricketts. "Red tape and regulations force smaller companies to compete on an unlevel playing field. When we make it easier for small enterprises to unlock available capital, they thrive and drive our local economies forward."

"The federal government should be making it easier for emerging businesses to grow and innovate, not harder," said Senator Cortez Masto. "By improving coordination and cutting red tape, our ELEVATE Act will lead to greater innovation across Nevada, Nebraska, and the rest of the United States."

Under current law, companies must submit 3 years of financial statements to the Securities and Exchange commission pre-Initial Public Offering (IPO), even when a company wants to spin off from an existing business. Obtaining an extra year's worth of financial data is costly and often prevents smaller firms from accessing capital markets.

The ELEVATE act would allow businesses to submit two years of audited financial statements to spin off a part of their existing business as an Emerging Growth Company (EGC) - aligning financial disclosure requirements for all EGCs. By lessening these undue requirements, smaller companies will have more available capital to expand their operations.

Companion legislation was introduced in the House by Representatives Zach Nunn (R-IA-03) and Janelle Bynum (D-OR-5). The bill has passed the House unanimously.

Bill text can be found here.

BACKGROUND

In 2012, Congress passed the Jumpstart Our Business Startups (JOBS) Act to promote job creation and economic growth by making it easier to raise capital and encourage more Initial Public Offerings (IPOs). The JOBS Act created a new class of issuer called an Emerging Growth Company (EGC), allowing more small- to medium-sized companies to facilitate capital raising with fewer regulatory burdens. Current law allows EGCs to provide two years of audited financial statements to the Securities and Exchange Commission (SEC) when filing for an IPO. Alternatively, EGCs must provide three years of audited financial statements when they want to spin off a part of their business from the parent company.