Small Entity Update Act

Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 2792) to require the Securities and Exchange Commission to carry out a study and rulemaking on the definition of the term ``small entity'' for purposes of the securities laws, and for other purposes, as amended.

Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days in which to revise and extend their remarks and include extraneous material on this bill.

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

Mr. Speaker, I rise today in support of my bill, H.R. 2792, the Small Entity Update Act.

Mr. Speaker, the slated bills that we are considering today are the culmination of four hearings that the Capital Markets Subcommittee, which I have the honor and privilege of chairing, has held this year, where we heard from over a dozen witnesses, including founders of private and public companies, investors, former SEC Commissioners, security law practitioners, and even one of the authors of the IPO- related provisions of the JOBS Act.

All of these bills play a vital role in expanding investment opportunities for all Americans, improving access to capital for small businesses, and strengthening our public markets.

Mr. Speaker, 11 years ago, the Jumpstart Our Business Startups Act, or JOBS Act of 2012, was enacted into law by a divided Congress with the intention of increasing access to capital for small businesses and entrepreneurs in the United States. The purpose of the JOBS Act was to provide greater opportunities for small business owners and entrepreneurs to grow their companies and create jobs in their communities.

Despite the successes of the JOBS Act, there are still significant regulatory barriers that impede the growth of small businesses and hinder the competitiveness of job growth in the United States.

Small businesses, Mr. Speaker, make up 99 percent of all enterprises, employ almost half of the United States' workforce, and are disproportionately affected by these barriers. These companies represent the engine of our economy and are far too often subject to one-size-fits-all regulation. The lack of access to capital makes it challenging for small business owners to grow and expand their companies, which can limit job creation and economic growth.

That is why I introduced the Small Entity Update Act. This bipartisan bill would direct the SEC to conduct a study, followed by a rulemaking that is consistent with the results of such study every 5 years. This study would focus on defining the term ``small entity'' under the Regulatory Flexibility Act.

Regulations often impose disproportionate burdens on startups, small businesses, and other small entities. Small entities simply can't afford the number of lawyers and regulatory experts that large multinational firms can to comply with every regulation while still being able to afford the cost of doing business.

The government cannot and should not treat a small startup in my hometown of Ballwin, Missouri, with seven employees as it would a Fortune 500 company. The reality is that the size of companies and the underlying makeup of market forces behind them change over time, which is why my bill requires the SEC to reevaluate their small business definition every 5 years. What makes sense for companies today in terms of regulatory compliance may not in 5 years.

My bill addresses longstanding concerns that numerous SEC rules do not appropriately balance the SEC's mandates to protect investors and facilitate capital formation. Studying and revising these definitions will result in a better understanding of regulatory costs on small entities and ensure that the SEC modernizes its criteria for defining them.

In order for our economy to thrive, Mr. Speaker, Congress and regulators must ensure that any policies enacted keep in mind any impacts they would have on our millions of small businesses.

H.R. 2792 will lead to a more targeted regulatory framework for these entities and help make the American Dream a reality for all entrepreneurs.

Mr. Speaker, I thank Mr. Himes, Mr. Torres, Mr. Scott, and Mr. Casten for their bipartisan support of this

impactful legislation, and I urge all my colleagues to vote for this bill.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I have no further requests for time.

Mr. Speaker, I urge my colleagues to support H.R. 2792, and I yield back the balance of my time.

Mr. Speaker, on that I demand the yeas and nays.

Mr. Speaker, I rise today in support of H.R. 2792, the Small Entity Update Act.

H.R. 2792 would require the Securities and Exchange Commission to carry out a study and rulemaking on the definition of the term ``small entity'' for purposes of the securities laws, and other purposes.

Agencies are required to consider the impact of their rules on small entities under the Regulatory Flexibility Act.

Under the bill, the SEC must provide specific and detailed recommendations to Congress on how the SEC can revise the definition of small entity to (1) align with specified statutory goals, including reducing unnecessary burdens on small entities; and (2) to expand the number of entities covered.

Currently, the term ``small entity'' includes any definition established by the SEC of the term ``small business'', ``small organization'', or ``small governmental jurisdiction'', with respect to the activities of the Commission.

This bill would direct the SEC to modernize the criteria it uses to define a ``small entity'' to reflect the growth of the U.S. economy and the evolution of the capital markets since the last time the small entity definition was addressed.

H.R. 2792 requests the study occur no later than one year after the date of enactment of this Act, and once every 5 years after.

The Congressional Budget Office (CBO) estimates implementation of this bill would cost about $2 million over the 2023-2028 period.

However, since the SEC is authorized to collect fees each year to offset its annual appropriation, CBO expects that the net effect on discretionary spending over the 2023-2028 period would be negligible, assuming appropriation actions consistent with that authority.

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

Mr. Speaker, I rise in support of H.R. 2792, the Small Entity Update Act, sponsored by the gentlewoman from Missouri.

This bill directs the SEC to carry out a study and rulemaking, if appropriate, on its definitions of ``small entities'' under the Regulatory Flexibility Act to ensure that the SEC accounts for impacts on businesses when pursuing rulemakings.

The Regulatory Flexibility Act provides small entities with an expanded opportunity to participate in the development of certain regulations. Through the study contemplated under the bill, ``small entities'' under SEC's jurisdiction would gain a louder voice when it comes to the development of SEC regulations that directly apply to them.

I am pleased that Mrs. Wagner was willing to accept changes to this bill I pressed for that would ensure that the SEC remains in exclusive control of the study, and whatever the outcome of the study, SEC's actions would be consistent with its overall mission.

Mr. Speaker, I thank Mrs. Wagner for working with us on this bill. I also thank Mrs. Wagner for working with Mr. Casten to include his suggestion related to an inflation adjustment for this bill.

Mr. Speaker, I urge my colleagues to vote ``yes'' on this bill, and I yield back the balance of my time.

Mr. Speaker, on May 30, 2023, I was unable to be present for the recorded votes on Roll Call No. 238, 239, and 240. Had I been present, I would have voted: YES on H.R. 2792, Small Entity Update Act, as amended; YES on H.R. 2795, Enhancing Multi-Class Share Disclosures Act, as amended; and YES on H.R. 2796, Promoting Opportunities for Non-Traditional Capital Formation Act, as amended.

Mr. Speaker, I unfortunately was unable to be present for the votes today due to commitments in my Congressional District. Had I been present, I would have voted ``yea'' on rollcall No. 238, ``yea'' on rollcall No. 239, and ``yea'' on rollcall No. 240.