U.S. Senators draft bill to boost employee private stock ownership

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By Sarah N. Lynch | WASHINGTON

WASHINGTON A bipartisan pair of lawmakers on the
U.S. Senate Banking Committee are planning to introduce a bill
that aims to entice private corporations to give their employees
larger equity stakes in their companies and promote longer-term
investing.

The draft bill, titled the “Encouraging Employee Ownership
Act,” is being rolled out by Virginia Democrat Mark Warner and
Pennsylvania Republican Pat Toomey and will be made public as
soon as Thursday, according to a spokeswoman for Warner’s
office.

The measure comes at the same time that the U.S. Securities
and Exchange Commission is expected to shift its regulatory
gears to focus more intently on ways to boost capital formation
more broadly.

Critics have said the SEC has in the past neglected this
mission, as the number of initial public offerings have fallen
while the number of regulatory requirements placed on companies
has increased.

Wall Street deal-making attorney Jay Clayton, who was
nominated by President Donald Trump to serve as chairman of the
SEC, is expected to make capital formation a centerpiece of his
tenure.

He is still awaiting his confirmation hearing before the
Senate Banking Committee, and a date has not yet been announced.

The bill that Warner and Toomey plan to unveil, which has
been endorsed by the private supermarket chain Wegmans, would
amend an SEC rule that governs how private companies give stock
options and other equity awards to their employees.

The rule exempts private companies from being required to
register their securities with the SEC – a lengthy and expensive
undertaking. However, in order to qualify for the exemption,
companies must meet certain conditions.

Under the rule, if a company collectively grants more than
$5 million in stock awards to its employees during a one-year
period, then certain disclosure requirements are triggered –
including the need to produce financial statements that are
prepared in accordance with U.S. accounting rules.

The $5 million trigger was set in 1988, and has not been
updated or pegged to inflation, Warner’s spokeswoman said.

Under the proposed legislation, the threshold would be
increased to $10 million before triggering disclosure
obligations.

Additionally, the amount would be automatically indexed to
inflation every five years.

The bill comes at a time when Congress is expected to take
up legislation to loosen rules believed to stifle economic
growth. This committee is expected to play a crucial role in
helping craft such legislation.



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