The Small Cap Liquidity Reform Act (SCLRA) of 2014 (H. R. 3448) would amend the Securities
Exchange Act of 1934 to establish a pilot liquidity program for equity
securities of emerging growth companies (EGCs) with total annual gross
revenues of less than $750 million, under which those securities shall
be quoted using either: (1) a minimum increment of $0.05 or $0.10, or
(2) the increment at which the securities would be quoted without regard
to such minimum increments. This bill passed the House of Representatives overwhelmingly in February 2014.
Specifically, the SCLRA would:
Repeals the requirement for an SEC
study examining the transition to trading and quoting securities in one
penny increments, known as decimalization.
Directs the Securities
and Exchange Commission (SEC) to determine, in the case of an EGC whose
securities are quoted at a minimum increment of either $0.05 or $0.10,
the increment at which such securities are traded.
securities quoted at a minimum increment of $0.05 or $0.10 to be traded
at either such minimum increment or at one permitted by SEC regulations.
an EGC to opt out or change such minimum increment upon notifying the
SEC 90 days after enactment of this Act. Limits any EGC to a single
change of minimum increment (thus prohibiting any increases in the
Requires the SEC, upon notification of an EGC election,
to inform each trading venue where the EGC securities are quoted or
Requires that securities of issuers that cease to be EGCs
be quoted at the increment at which such securities would be quoted
without regard to the minimum increments established under this Act.
Prescribes pricing and trading procedures governing securities trading below $1.00.
Directs the SEC to require an EGC under this Act to submit additional reports and disclosures.
an issuer from liability for losses caused solely by the quoting or
trading of its securities at a minimum increment of $0.05 or $0.10,
another SEC-authorized increment, or by both such quoting and trading.
the SEC to report biannually to Congress on: (1) the quoting and
trading of securities in increments permitted by this Act, and (2) the
extent to which such quoting and trading increases liquidity and active
trading by incentivizing capital commitment, research coverage, and
Authorizes the SEC to: (1) make adjustments
to the pilot program to ensure that it can provide statistically
meaningful or reliable results, and (2) conduct any other study or pilot
program to evaluate quoting or trading in various minimum increments.
MichBio supports enactment of H.R. 3448, the Small Cap Liquidity Reform Act as it will increase the liquidity and capital availability needed for emerging bioscience companies.