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ASA Urges FSC to Stop Pushing Partisan Bills & Focus on Bipartisan Capital Formation Legislation

WASHINGTON – The American Securities Association (ASA) today sent a letter opposing three bills the Financial Services Committee is expected to markup, and urged the Committee to instead focus on bipartisan small business capital formation legislation.

“The ASA encourages the Committee to focus on bipartisan legislation that will encourage small business capital formation instead of controversial partisan bills that have little to no chance of being signed into law,” ASA CEO Chris Iacovella wrote in the letter. “We also do not believe the mere existence of a bill in Congress provides any type of ‘authorization’ for the SEC to act upon the specific language of that bill. Congress must work across party lines to advance legislation that can win the backing of both parties and a wide spectrum of market participants.”

ASA opposes the following bills:

H.R. 2620 the “Investor Choice Act of 2021”

The ASA strongly opposes this bill that would severely harm investors by banning the use of arbitration agreements in customer agreements. Curiously, the supporting documents for this legislation cite an article in the American Prospect which asserts that “30% of arbitration awards against brokers went unpaid in 2020.” However, that assertion does not exist in the article – nor does it exist anywhere else. As FINRA explains: “In FINRA arbitration, the majority of customer cases—approximately 69 percent—result in settlements reached by the parties settlements reached by the parties; typically, approximately 18 percent of cases proceed to award, and two percent result in unpaid awards.”

While the insertion of this quote may have been an oversight, it does raise serious questions about the motivation for this bill. Sound policy making must be based on and supported by verified data. The biggest beneficiary of class action litigation is a politically conflicted special interest group—the trial bar, which benefits while leaving investors waiting years for are solution. H.R. 2620 would be a giant gift to this special interest group while providing absolutely no corresponding benefits to investors.

H.R. 5910, the “Holding SPACs Accountable Act of 2021”

While ASA previously provided the Committee with a number of specific recommendations to improve regulations for SPAC offerings, we strongly oppose this legislation because it would severely diminish the amount of disclosure SPACs provide to the market and it would deprive investors of decision-useful information. SPACs and their underwriters remain subject to prohibitions against false or misleading statements which is a critical investor protection and a core tenet of our securities laws. Accordingly, we urge members of the Committee to vote against this bill.

H.R. 5913, the “Protecting Investors from Excessive SPACs Fees Act of 2021”

Earlier this year, ASA recommended several reforms that would provide necessary transparency to investors while still allowing the SPAC market to function efficiently. H.R. 5913, by contrast, takes a heavy-handed approach by prohibiting a SPAC from being offered to non-accredited investors. This means that hedge funds on Wall Street could make money while hardworking Americans could not. Finally, this legislation is unnecessary as the SEC already has sufficient tools to crack down against bad actors in SPACs as they do in every other area it oversees.

To read ASA's full letter to the Committee, click here.


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