Developing and Empowering our Aspiring Leaders Act of 2022

Madam Speaker, I yield myself such time as I may consume.

I rise, as well, in support of H.R. 4227, the Developing and Empowering our Aspiring Leaders Act, or DEAL Act. I commend my colleague from Indiana (Mr. Hollingsworth) and my colleagues from across the aisle for collaborating on H.R. 4227.

By investing in companies that help drive economic growth and job creation, venture capital funds play an important role in the success and overall health of the American economy. In fact, earlier this year, it was reported that employment from U.S.-backed VC companies grew 960 percent from 1990 to 2020. That is eight times the employment growth at non-venture-capital-backed companies.

Jobs created by VC-backed enterprises are widely distributed across the U.S.

In 2020, despite COVID-19 pandemic conditions, more than 10,800 companies across the United States received venture capital funding. Additionally, in 2020, venture capital investment in the United States totaled $164 billion.

However, the registered investment adviser rules, promulgated by the Securities and Exchange Commission under the Dodd-Frank Act, inadvertently discouraged some venture capital firms from continuing to invest in companies through what are called secondary investments.

Though advisers from venture capital funds were exempt statutorily from registration as a registered investment adviser, the Dodd-Frank Act required the SEC to define what qualified as a venture capital fund.

As written, the SEC's rules state that VC funds can only have 20 percent of their capital commitments in nonqualifying investments.

Specifically, the SEC definition for qualifying investments for venture capital funds prohibits secondary acquisitions from being considered as qualifying investments, which means that the secondary acquisitions fall into that 20 percent nonqualifying bucket.

Therefore, Madam Speaker, small, private companies that need additional capital to grow and grow big enough to then go public cannot turn to the venture capital industry for secondary acquisition because such funds are concerned that they might well exceed the 20 percent limit and then trigger that the VC fund has to register as an RIA.

Mr. Hollingsworth's bill, H.R. 4227, remedies this problem by requiring the SEC to revise the definition of a qualifying investment to include secondary acquisitions for purposes of the RIA exemption.

This bill is a commonsense piece of legislation to ensure that our venture capital funds can continue to provide capital to small business across our land.

Madam Speaker, I thank my friend, Mr. Hollingsworth, for his work on this legislation, and I urge a ``yes'' vote on Mr. Hollingsworth's bill, H.R. 4227.

Madam Speaker, I yield back the balance of my time.

Madam Speaker, I move to suspend the rules and pass the bill (H.R. 4227) to require the Securities and Exchange Commission to revise the definition of a qualifying investment, for purposes of the exemption from registration for venture capital fund advisers under the Investment Advisers Act of 1940, to include an equity security issued by a qualifying portfolio company and to include an investment in another venture capital fund, and for other purposes, as amended.

Madam Speaker, I ask unanimous consent that all Members may have 5 legislative days within which to revise and extend their remarks on this legislation and to insert extraneous material thereon.

Madam Speaker, I yield myself such time as I may consume.

I support H.R. 4227, the Developing and Empowering Our Aspiring Leaders Act of 2021, introduced by Mr. Hollingsworth. This bill would authorize the Securities and Exchange Commission, or SEC, to revise its rules on venture capital investment regulations to allow investments acquired through secondary transactions or investments in other venture capital funds to be considered as qualifying investments for venture capital funds.

Importantly, the SEC would only be required to revise its rules if it finds that the revision would facilitate capital formation without reducing investor protections.

I want to ensure startups and small businesses have access to capital, but as this bill stipulates, access to capital should not come at the expense of investor protections. This bill strikes the right balance, and I so urge my colleagues to support this bill.

Madam Speaker, I reserve the balance of my time.

Madam Speaker, I yield myself such time as I may consume.

I support H.R. 4227 and urge its passage as it correctly balances the need to provide access to capital for startups and other businesses with the need to protect investors. I note that a similar version of this bill previously passed this Chamber by a wide bipartisan vote.

Madam Speaker, I yield back the balance of my time.