A group of bi-partisan U.S. Senators announced a plan to aid small- and medium-sized firms to access capital through public markets to help them expand in order to create more jobs in the market. The plan is sponsored by Senators Charles Schumer (D-N.Y.), Pat Toomey (R-Pa.), Mark Warner (D-Va.), and Mike Crapo (R-Idaho).

The bill, dubbed as the Reopening American Capital Markets to Emerging Growth Companies Act of 2011, would reduce hurdles of an initial public offering (IPO) by phasing in many of the costliest obligations over time while maintaining key investor protections.

“During difficult economic times, it is critical that we give growing innovators the breathing room they need to access public markets. The vast majority of job creation occurs after companies go public, so it makes sense to make the IPO process easier for emerging firms,” said Schumer in the press release.

According to their plan, a new category of securities issuers—emerging growth companies—would be created. The category would allow companies with less than $1 billion in annual revenues at the time of registration with the Securities and Exchange Commission and with less than $700 million in publicly traded shares after the IPO some wiggle room from full compliance with some of the regulations.

The transitional “on-ramp” status as defined by the bill would last for up to five years, or until a company hit $1 billion in annual revenue or $700 million in publicly traded shares. The regulation's exemptions proposed by the bill include:

·         Section 404(b) of Sarbanes-Oxley: In line with the President's Jobs Council, the bill proposed that companies with less than $1 billion market capitalization be exempted from the requirement to pay an outside auditor to attest to its internal controls and procedures. Instead, the chief executive officers and chief financial officers would be required to personally certify controls are adequate and they would be held personally liable for any mis-statements.

·         Limited Look-Back for Audited Financials: Emerging growth companies to provide audited financial statements for the two years before registration instead of the three years as required under existing rules. Full compliance would be phased in each year so a full five years of audited financials are required after three years

·         Limited Exemptions From Executive Compensation Votes and Disclosures: Exempt emerging growth companies from the requirement to hold stockholder vote on executive compensation arrangements, including golden parachutes. Since say-on-pay and related votes are required every three years, the rule will exempt the special group from a maximum of two of such votes.

·         Improve the Availability and Flow of Information for Investors: The proposal would update restrictions on communications to account for advances in modes of communication and the information available to investors. The bill would close the information gap for smaller companies and permit emerging growth companies to “test the waters” prior to filing a registration statement.