H. R. 3784 

One Hundred Fourteenth Congress 

of the 

United States of America 

AT THE SECOND SESSION 

Begun and held at the City of Washington on Monday, 

the fourth day of January, two thousand and sixteen 

An Act 

To amend the Securities Exchange Act of 1934 to establish an Office of the Advocate 

for Small Business Capital Formation and a Small Business Capital Formation 

Advisory Committee, and for other purposes. 

Be it enacted by the Senate and House of Representatives of 

the United States of America in Congress assembled, 

SECTION 1. SHORT TITLE. 

This Act may be cited as the ‘‘SEC Small Business Advocate 

Act of 2016’’. 

SEC. 2. ESTABLISHMENT OF OFFICE OF THE ADVOCATE FOR SMALL 

BUSINESS CAPITAL FORMATION AND SMALL BUSINESS CAPITAL FORMATION ADVISORY COMMITTEE. 

(a) OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL

FORMATION.—Section 4 of the Securities Exchange Act of 1934 

(15 U.S.C. 78d) is amended by adding at the end the following: 

‘‘(j) OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL

FORMATION.— 

‘‘(1) OFFICE ESTABLISHED.—There is established within the 

Commission the Office of the Advocate for Small Business 

Capital Formation (hereafter in this subsection referred to as 

the ‘Office’). 

‘‘(2) ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION.— 

‘‘(A) IN GENERAL.—The head of the Office shall be 

the Advocate for Small Business Capital Formation, who 

shall— 

‘‘(i) report directly to the Commission; and 

‘‘(ii) be appointed by the Commission, from among 

individuals having experience in advocating for the 

interests of small businesses and encouraging small 

business capital formation. 

‘‘(B) COMPENSATION.—The annual rate of pay for the 

Advocate for Small Business Capital Formation shall be 

equal to the highest rate of annual pay for other senior 

executives who report directly to the Commission. 

‘‘(C) NO CURRENT EMPLOYEE OF THE COMMISSION.— 

An individual may not be appointed as the Advocate for 

Small Business Capital Formation if the individual is currently employed by the Commission. 

‘‘(3) STAFF OF OFFICE.—The Advocate for Small Business 

Capital Formation, after consultation with the Commission, 

may retain or employ independent counsel, research staff, and 
H. R. 3784—2 

service staff, as the Advocate for Small Business Capital Formation determines to be necessary to carry out the functions 

of the Office. 

‘‘(4) FUNCTIONS OF THE ADVOCATE FOR SMALL BUSINESS

CAPITAL FORMATION.—The Advocate for Small Business Capital 

Formation shall— 

‘‘(A) assist small businesses and small business investors in resolving significant problems such businesses and 

investors may have with the Commission or with selfregulatory organizations; 

‘‘(B) identify areas in which small businesses and small 

business investors would benefit from changes in the regulations of the Commission or the rules of self-regulatory 

organizations; 

‘‘(C) identify problems that small businesses have with 

securing access to capital, including any unique challenges 

to minority-owned and women-owned small businesses; 

‘‘(D) analyze the potential impact on small businesses 

and small business investors of— 

‘‘(i) proposed regulations of the Commission that 

are likely to have a significant economic impact on 

small businesses and small business capital formation; 

and 

‘‘(ii) proposed rules that are likely to have a significant economic impact on small businesses and small 

business capital formation of self-regulatory organizations registered under this title; 

‘‘(E) conduct outreach to small businesses and small 

business investors, including through regional roundtables, 

in order to solicit views on relevant capital formation 

issues; 

‘‘(F) to the extent practicable, propose to the Commission changes in the regulations or orders of the Commission 

and to Congress any legislative, administrative, or personnel changes that may be appropriate to mitigate problems identified under this paragraph and to promote the 

interests of small businesses and small business investors; 

‘‘(G) consult with the Investor Advocate on proposed 

recommendations made under subparagraph (F); and 

‘‘(H) advise the Investor Advocate on issues related 

to small businesses and small business investors. 

‘‘(5) ACCESS TO DOCUMENTS.—The Commission shall ensure 

that the Advocate for Small Business Capital Formation has 

full access to the documents and information of the Commission 

and any self-regulatory organization, as necessary to carry out 

the functions of the Office. 

‘‘(6) ANNUAL REPORT ON ACTIVITIES.— ‘‘(A) IN GENERAL.—Not later than December 31 of each 

year after 2015, the Advocate for Small Business Capital 

Formation shall submit to the Committee on Banking, 

Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives a report on the activities of the Advocate for Small 

Business Capital Formation during the immediately preceding fiscal year. 

‘‘(B) CONTENTS.—Each report required under subparagraph (A) shall include— 
H. R. 3784—3 

‘‘(i) appropriate statistical information and full and 

substantive analysis; 

‘‘(ii) information on steps that the Advocate for 

Small Business Capital Formation has taken during 

the reporting period to improve small business services 

and the responsiveness of the Commission and selfregulatory organizations to small business and small 

business investor concerns; 

‘‘(iii) a summary of the most serious issues encountered by small businesses and small business investors, 

including any unique issues encountered by minorityowned and women-owned small businesses and their 

investors, during the reporting period; 

‘‘(iv) an inventory of the items summarized under 

clause (iii) (including items summarized under such 

clause for any prior reporting period on which no action 

has been taken or that have not been resolved to 

the satisfaction of the Advocate for Small Business 

Capital Formation as of the beginning of the reporting 

period covered by the report) that includes— 

‘‘(I) identification of any action taken by the 

Commission or the self-regulatory organization 

and the result of such action; 

‘‘(II) the length of time that each item has 

remained on such inventory; and 

‘‘(III) for items on which no action has been 

taken, the reasons for inaction, and an identification of any official who is responsible for such 

action; 

‘‘(v) recommendations for such changes to the regulations, guidance and orders of the Commission and 

such legislative actions as may be appropriate to 

resolve problems with the Commission and self-regulatory organizations encountered by small businesses 

and small business investors and to encourage small 

business capital formation; and 

‘‘(vi) any other information, as determined appropriate by the Advocate for Small Business Capital 

Formation. 

‘‘(C) CONFIDENTIALITY.—No report required by 

subparagraph (A) may contain confidential information. 

‘‘(D) INDEPENDENCE.—Each report required under 

subparagraph (A) shall be provided directly to the committees of Congress listed in such subparagraph without any 

prior review or comment from the Commission, any 

commissioner, any other officer or employee of the Commission, or the Office of Management and Budget. 

‘‘(7) REGULATIONS.—The Commission shall establish procedures requiring a formal response to all recommendations submitted to the Commission by the Advocate for Small Business 

Capital Formation, not later than 3 months after the date 

of such submission. 

‘‘(8) GOVERNMENT-BUSINESS FORUM ON SMALL BUSINESS

CAPITAL FORMATION.—The Advocate for Small Business Capital 

Formation shall be responsible for planning, organizing, and 

executing the annual Government-Business Forum on Small 

Business Capital Formation described in section 503 of the 
H. R. 3784—4 

Small Business Investment Incentive Act of 1980 (15 U.S.C. 

80c–1). 

‘‘(9) RULE OF CONSTRUCTION.—Nothing in this subsection 

may be construed as replacing or reducing the responsibilities 

of the Investor Advocate with respect to small business investors.’’. 

(b) SMALL BUSINESS CAPITAL FORMATION ADVISORY COMMITTEE.—Title I of the Securities Exchange Act of 1934 (15 U.S.C. 

78a et seq.) is amended by adding at the end the following: 

‘‘SEC. 40. SMALL BUSINESS CAPITAL FORMATION ADVISORY COMMITTEE. 

‘‘(a) ESTABLISHMENT AND PURPOSE.— 

‘‘(1) ESTABLISHMENT.—There is established within the 

Commission the Small Business Capital Formation Advisory 

Committee (hereafter in this section referred to as the ‘Committee’). 

‘‘(2) FUNCTIONS.— 

‘‘(A) IN GENERAL.—The Committee shall provide the 

Commission with advice on the Commission’s rules, regulations, and policies with regard to the Commission’s mission 

of protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation, as such 

rules, regulations, and policies relate to— 

‘‘(i) capital raising by emerging, privately held 

small businesses (‘emerging companies’) and publicly 

traded companies with less than $250,000,000 in public 

market capitalization (‘smaller public companies’) 

through securities offerings, including private and limited offerings and initial and other public offerings; 

‘‘(ii) trading in the securities of emerging companies and smaller public companies; and 

‘‘(iii) public reporting and corporate governance 

requirements of emerging companies and smaller 

public companies. 

‘‘(B) LIMITATION.—The Committee shall not provide 

any advice with respect to any policies, practices, actions, 

or decisions concerning the Commission’s enforcement program. 

‘‘(b) MEMBERSHIP.— 

‘‘(1) IN GENERAL.—The members of the Committee shall 

be— 

‘‘(A) the Advocate for Small Business Capital Formation; 

‘‘(B) not fewer than 10, and not more than 20, members 

appointed by the Commission, from among individuals— 

‘‘(i) who represent— 

‘‘(I) emerging companies engaging in private 

and limited securities offerings or considering initial public offerings (‘IPO’) (including the companies’ officers and directors); 

‘‘(II) the professional advisors of such companies (including attorneys, accountants, investment 

bankers, and financial advisors); and 

‘‘(III) the investors in such companies 

(including angel investors, venture capital funds, 

and family offices); 
H. R. 3784—5 

‘‘(ii) who are officers or directors of minority-owned 

small businesses or women-owned small businesses; 

‘‘(iii) who represent— 

‘‘(I) smaller public companies (including the 

companies’ officers and directors); 

‘‘(II) the professional advisors of such companies (including attorneys, auditors, underwriters, 

and financial advisors); and 

‘‘(III) the pre-IPO and post-IPO investors in 

such companies (both institutional, such as venture capital funds, and individual, such as angel 

investors); and 

‘‘(iv) who represent participants in the marketplace 

for the securities of emerging companies and smaller 

public companies, such as securities exchanges, alternative trading systems, analysts, information processors, and transfer agents; and 

‘‘(C) three non-voting members— 

‘‘(i) one of whom shall be appointed by the Investor 

Advocate; 

‘‘(ii) one of whom shall be appointed by the North 

American Securities Administrators Association; and 

‘‘(iii) one of whom shall be appointed by the 

Administrator of the Small Business Administration. 

‘‘(2) TERM.—Each member of the Committee appointed 

under subparagraph (B), (C)(ii), or (C)(iii) of paragraph (1) 

shall serve for a term of 4 years. 

‘‘(3) MEMBERS NOT COMMISSION EMPLOYEES.—Members 

appointed under subparagraph (B), (C)(ii), or (C)(iii) of paragraph (1) shall not be treated as employees or agents of the 

Commission solely because of membership on the Committee. 

‘‘(c) CHAIRMAN; VICE CHAIRMAN; SECRETARY; ASSISTANT SECRETARY.— 

‘‘(1) IN GENERAL.—The members of the Committee shall 

elect, from among the members of the Committee— 

‘‘(A) a chairman; 

‘‘(B) a vice chairman; 

‘‘(C) a secretary; and 

‘‘(D) an assistant secretary. 

‘‘(2) TERM.—Each member elected under paragraph (1) 

shall serve for a term of 3 years in the capacity for which 

the member was elected under paragraph (1). 

‘‘(d) MEETINGS.— 

‘‘(1) FREQUENCY OF MEETINGS.—The Committee shall 

meet— 

‘‘(A) not less frequently than four times annually, at 

the call of the chairman of the Committee; and 

‘‘(B) from time to time, at the call of the Commission. 

‘‘(2) NOTICE.—The chairman of the Committee shall give 

the members of the Committee written notice of each meeting, 

not later than 2 weeks before the date of the meeting. 

‘‘(e) COMPENSATION AND TRAVEL EXPENSES.—Each member of 

the Committee who is not a full-time employee of the United States 

shall— 

‘‘(1) be entitled to receive compensation at a rate not to 

exceed the daily equivalent of the annual rate of basic pay 

in effect for a position at level V of the Executive Schedule 
H. R. 3784—6 

under section 5316 of title 5, United States Code, for each 

day during which the member is engaged in the actual performance of the duties of the Committee; and 

‘‘(2) while away from the home or regular place of business 

of the member in the performance of services for the Committee, 

be allowed travel expenses, including per diem in lieu of subsistence, in the same manner as persons employed intermittently 

in the Government service are allowed expenses under section 

5703 of title 5, United States Code. 

‘‘(f) STAFF.—The Commission shall make available to the Committee such staff as the chairman of the Committee determines 

are necessary to carry out this section. 

‘‘(g) REVIEW BY COMMISSION.—The Commission shall— 

‘‘(1) review the findings and recommendations of the Committee; and 

‘‘(2) each time the Committee submits a finding or recommendation to the Commission, promptly issue a public statement— 

‘‘(A) assessing the finding or recommendation of the 

Committee; and 

‘‘(B) disclosing the action, if any, the Commission 

intends to take with respect to the finding or recommendation. 

‘‘(h) FEDERAL ADVISORY COMMITTEE ACT.—The Federal 

Advisory Committee Act (5 U.S.C. App.) shall not apply with respect 

to the Committee and its activities.’’. 

(c) ANNUAL GOVERNMENT-BUSINESS FORUM ON SMALL BUSINESS

CAPITAL FORMATION.—Section 503(a) of the Small Business Investment Incentive Act of 1980 (15 U.S.C. 80c–1(a)) is amended by 

inserting ‘‘(acting through the Office of the Advocate for Small 

Business Capital Formation and in consultation with the Small 

Business Capital Formation Advisory Committee)’’ after ‘‘Securities 

and Exchange Commission’’. 

Speaker of the House of Representatives. 

Vice President of the United States and

President of the Senate.