WASHINGTON, D.C. – Congressman Robert Hurt (R-Virginia) today delivered the following opening statement during the House Committee on Financial Services' Capital Markets and Government Sponsored Enterprises Subcommittee hearing entitled, "Legislation to Further Reduce Impediments to Capital Formation":
"Mr. Chairman, thank you for holding today's hearing on reducing barriers to capital formation. I am glad that this subcommittee is moving forward with additional proposals to increase access to capital for our small businesses and startups.
"Our hearings over the summer have shown that while the JOBS Act has been successful, more still needs to be done to ensure that we remove or refine costly regulations – especially those disproportionately affecting smaller public companies and those who are considering accessing capital in the public markets.
"While a single regulation's effect may appear insignificant, the combined costs of our regulatory climate produce exponential consequences. For that reason, I appreciate the subcommittee taking a holistic approach to examining our capital markets' regulatory structure and its impact on innovative companies.
"One such requirement is related to the use of eXtensible Business Reporting Language – or XBRL – which was mandated by the SEC in 2009 and designed to lower the cost of capital for smaller companies and provide more efficient access to information for investors. While the SEC's rule is well-intended, this requirement has become another example of a regulation where the costs currently outweigh potential benefits. Smaller companies expend tens of thousands of dollars or more complying with the regulation yet there is evidence that less than 10 percent of investors actually use XBRL, further diminishing its potential benefits.
"That is why I am interested in legislation to provide relief from the burdens of XBRL. The discussion draft will provide an exemption for emerging companies from complying with this regulation. It is important to note that nothing in the draft precludes companies from utilizing XBRL for their regulatory filings with the SEC. Rather it allows these companies to assess whether the costs incurred with compliance are outweighed by any potential benefits from utilizing this technology.
"I believe the draft offers a practical step forward with XBRL requirements in line with the intent of the JOBS Act – ensuring that our regulatory structure is not disproportionately burdening smaller companies and dis-incentivizing innovative start-ups from accessing the public markets.
"I look forward to the testimony of our distinguished witnesses and thank them for their appearance before the subcommittee today."