IIB 

114TH CONGRESS 

2D SESSION H. R. 3784 

IN THE SENATE OF THE UNITED STATES 

FEBRUARY 2, 2016 

Received; read twice and referred to the Committee on Banking, Housing, and 

Urban Affairs 

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. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 


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1 SECTION 1. SHORT TITLE. 

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

3 Advocate Act of 2016’’. 

4 SEC. 2. ESTABLISHMENT OF OFFICE OF THE ADVOCATE 

5 FOR SMALL BUSINESS CAPITAL FORMATION 

6 AND SMALL BUSINESS CAPITAL FORMATION 

7 ADVISORY COMMITTEE. 

8 (a) OFFICE OF THE ADVOCATE FOR SMALL BUSI9 NESS CAPITAL FORMATION.—Section 4 of the Securities 

10 Exchange Act of 1934 (15 U.S.C. 78d) is amended by 

11 adding at the end the following: 

12 ‘‘(j) OFFICE OF THE ADVOCATE FOR SMALL BUSI13 NESS CAPITAL FORMATION.— 

14 ‘‘(1) OFFICE ESTABLISHED.—There is estab15 lished within the Commission the Office of the Advo16 cate for Small Business Capital Formation (here17 after in this subsection referred to as the ‘Office’). 

18 ‘‘(2) ADVOCATE FOR SMALL BUSINESS CAPITAL

19 FORMATION.— 

20 ‘‘(A) IN GENERAL.—The head of the Of21 fice shall be the Advocate for Small Business 

22 Capital Formation, who shall— 

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

24 and 

25 ‘‘(ii) be appointed by the Commission, 

26 from among individuals having experience 


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1 in advocating for the interests of small 

2 businesses and encouraging small business 

3 capital formation. 

4 ‘‘(B) COMPENSATION.—The annual rate of 

5 pay for the Advocate for Small Business Cap6 ital Formation shall be equal to the highest rate 

7 of annual pay for other senior executives who 

8 report directly to the Commission. 

9 ‘‘(C) NO CURRENT EMPLOYEE OF THE

10 COMMISSION.—An individual may not be ap11 pointed as the Advocate for Small Business 

12 Capital Formation if the individual is currently 

13 employed by the Commission. 

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

15 Small Business Capital Formation, after consulta16 tion with the Commission, may retain or employ 

17 independent counsel, research staff, and service 

18 staff, as the Advocate for Small Business Capital 

19 Formation determines to be necessary to carry out 

20 the functions of the Office. 

21 ‘‘(4) FUNCTIONS OF THE ADVOCATE FOR

22 SMALL BUSINESS CAPITAL FORMATION.—The Advo23 cate for Small Business Capital Formation shall— 

24 ‘‘(A) assist small businesses and small 

25 business investors in resolving significant probVerDate Sep 11 2014 00:49 Feb 03, 2016 Jkt 059200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H3784.RFS H3784

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1 lems such businesses and investors may have 

2 with the Commission or with self-regulatory or3 ganizations; 

4 ‘‘(B) identify areas in which small busi5 nesses and small business investors would ben6 efit from changes in the regulations of the 

7 Commission or the rules of self-regulatory orga8 nizations; 

9 ‘‘(C) identify problems that small busi10 nesses have with securing access to capital, in11 cluding any unique challenges to minority12 owned and women-owned small businesses; 

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

14 businesses and small business investors of— 

15 ‘‘(i) proposed regulations of the Com16 mission that are likely to have a significant 

17 economic impact on small businesses and 

18 small business capital formation; and 

19 ‘‘(ii) proposed rules that are likely to 

20 have a significant economic impact on 

21 small businesses and small business capital 

22 formation of self-regulatory organizations 

23 registered under this title; 

24 ‘‘(E) conduct outreach to small businesses 

25 and small business investors, including through 


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1 regional roundtables, in order to solicit views on 

2 relevant capital formation issues; 

3 ‘‘(F) to the extent practicable, propose to 

4 the Commission changes in the regulations or 

5 orders of the Commission and to Congress any 

6 legislative, administrative, or personnel changes 

7 that may be appropriate to mitigate problems 

8 identified under this paragraph and to promote 

9 the interests of small businesses and small busi10 ness investors; 

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

12 proposed recommendations made under sub13 paragraph (F); and 

14 ‘‘(H) advise the Investor Advocate on 

15 issues related to small businesses and small 

16 business investors. 

17 ‘‘(5) ACCESS TO DOCUMENTS.—The Commis18 sion shall ensure that the Advocate for Small Busi19 ness Capital Formation has full access to the docu20 ments and information of the Commission and any 

21 self-regulatory organization, as necessary to carry 

22 out the functions of the Office. 

23 ‘‘(6) ANNUAL REPORT ON ACTIVITIES.— 

24 ‘‘(A) IN GENERAL.—Not later than De25 cember 31 of each year after 2015, the AdvoVerDate Sep 11 2014 00:49 Feb 03, 2016 Jkt 059200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H3784.RFS H3784

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1 cate for Small Business Capital Formation shall 

2 submit to the Committee on Banking, Housing, 

3 and Urban Affairs of the Senate and the Com4 mittee on Financial Services of the House of 

5 Representatives a report on the activities of the 

6 Advocate for Small Business Capital Formation 

7 during the immediately preceding fiscal year. 

8 ‘‘(B) CONTENTS.—Each report required 

9 under subparagraph (A) shall include— 

10 ‘‘(i) appropriate statistical information 

11 and full and substantive analysis; 

12 ‘‘(ii) information on steps that the 

13 Advocate for Small Business Capital For14 mation has taken during the reporting pe15 riod to improve small business services and 

16 the responsiveness of the Commission and 

17 self-regulatory organizations to small busi18 ness and small business investor concerns; 

19 ‘‘(iii) a summary of the most serious 

20 issues encountered by small businesses and 

21 small business investors, including any 

22 unique issues encountered by minority23 owned and women-owned small businesses 

24 and their investors, during the reporting 

25 period; 


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1 ‘‘(iv) an inventory of the items sum2 marized under clause (iii) (including items 

3 summarized under such clause for any 

4 prior reporting period on which no action 

5 has been taken or that have not been re6 solved to the satisfaction of the Advocate 

7 for Small Business Capital Formation as 

8 of the beginning of the reporting period 

9 covered by the report) that includes— 

10 ‘‘(I) identification of any action 

11 taken by the Commission or the self12 regulatory organization and the result 

13 of such action; 

14 ‘‘(II) the length of time that each 

15 item has remained on such inventory; 

16 and 

17 ‘‘(III) for items on which no ac18 tion has been taken, the reasons for 

19 inaction, and an identification of any 

20 official who is responsible for such ac21 tion; 

22 ‘‘(v) recommendations for such 

23 changes to the regulations, guidance and 

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1 solve problems with the Commission and 

2 self-regulatory organizations encountered 

3 by small businesses and small business in4 vestors and to encourage small business 

5 capital formation; and 

6 ‘‘(vi) any other information, as deter7 mined appropriate by the Advocate for 

8 Small Business Capital Formation. 

9 ‘‘(C) CONFIDENTIALITY.—No report re10 quired by subparagraph (A) may contain con11 fidential information. 

12 ‘‘(D) INDEPENDENCE.—Each report re13 quired under subparagraph (A) shall be pro14 vided directly to the committees of Congress 

15 listed in such subparagraph without any prior 

16 review or comment from the Commission, any 

17 commissioner, any other officer or employee of 

18 the Commission, or the Office of Management 

19 and Budget. 

20 ‘‘(7) REGULATIONS.—The Commission shall es21 tablish procedures requiring a formal response to all 

22 recommendations submitted to the Commission by 

23 the Advocate for Small Business Capital Formation, 

24 not later than 3 months after the date of such sub25 mission. 


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

2 BUSINESS CAPITAL FORMATION.—The Advocate for 

3 Small Business Capital Formation shall be respon4 sible for planning, organizing, and executing the an5 nual Government-Business Forum on Small Busi6 ness Capital Formation described in section 503 of 

7 the Small Business Investment Incentive Act of 

8 1980 (15 U.S.C. 80c–1). 

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

10 this subsection may be construed as replacing or re11 ducing the responsibilities of the Investor Advocate 

12 with respect to small business investors.’’. 

13 (b) SMALL BUSINESS CAPITAL FORMATION ADVI14 SORY COMMITTEE.—Title I of the Securities Exchange 

15 Act of 1934 (15 U.S.C. 78a et seq.) is amended by adding 

16 at the end the following: 

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

18 COMMITTEE. 

19 ‘‘(a) ESTABLISHMENT AND PURPOSE.— 

20 ‘‘(1) ESTABLISHMENT.—There is established 

21 within the Commission the Small Business Capital 

22 Formation Advisory Committee (hereafter in this 

23 section referred to as the ‘Committee’). 

24 ‘‘(2) FUNCTIONS.— 


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1 ‘‘(A) IN GENERAL.—The Committee shall 

2 provide the Commission with advice on the 

3 Commission’s rules, regulations, and policies 

4 with regard to the Commission’s mission of pro5 tecting investors, maintaining fair, orderly, and 

6 efficient markets, and facilitating capital forma7 tion, as such rules, regulations, and policies re8 late to— 

9 ‘‘(i) capital raising by emerging, pri10 vately held small businesses (‘emerging 

11 companies’) and publicly traded companies 

12 with less than $250,000,000 in public mar13 ket capitalization (‘smaller public compa14 nies’) through securities offerings, includ15 ing private and limited offerings and initial 

16 and other public offerings; 

17 ‘‘(ii) trading in the securities of 

18 emerging companies and smaller public 

19 companies; and 

20 ‘‘(iii) public reporting and corporate 

21 governance requirements of emerging com22 panies and smaller public companies. 

23 ‘‘(B) LIMITATION.—The Committee shall 

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1 cies, practices, actions, or decisions concerning 

2 the Commission’s enforcement program. 

3 ‘‘(b) MEMBERSHIP.— 

4 ‘‘(1) IN GENERAL.—The members of the Com5 mittee shall be— 

6 ‘‘(A) the Advocate for Small Business Cap7 ital Formation; 

8 ‘‘(B) not fewer than 10, and not more than 

9 20, members appointed by the Commission, 

10 from among individuals— 

11 ‘‘(i) who represent— 

12 ‘‘(I) emerging companies engag13 ing in private and limited securities 

14 offerings or considering initial public 

15 offerings (‘IPO’) (including the com16 panies’ officers and directors); 

17 ‘‘(II) the professional advisors of 

18 such companies (including attorneys, 

19 accountants, investment bankers, and 

20 financial advisors); and 

21 ‘‘(III) the investors in such com22 panies (including angel investors, ven23 ture capital funds, and family offices); 


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1 ‘‘(ii) who are officers or directors of 

2 minority-owned small businesses or 

3 women-owned small businesses; 

4 ‘‘(iii) who represent— 

5 ‘‘(I) smaller public companies 

6 (including the companies’ officers and 

7 directors); 

8 ‘‘(II) the professional advisors of 

9 such companies (including attorneys, 

10 auditors, underwriters, and financial 

11 advisors); and 

12 ‘‘(III) the pre-IPO and post-IPO 

13 investors in such companies (both in14 stitutional, such as venture capital 

15 funds, and individual, such as angel 

16 investors); and 

17 ‘‘(iv) who represent participants in the 

18 marketplace for the securities of emerging 

19 companies and smaller public companies, 

20 such as securities exchanges, alternative 

21 trading systems, analysts, information 

22 processors, and transfer agents; and 

23 ‘‘(C) three non-voting members— 

24 ‘‘(i) one of whom shall be appointed 

25 by the Investor Advocate; 


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1 ‘‘(ii) one of whom shall be appointed 

2 by the North American Securities Adminis3 trators Association; and 

4 ‘‘(iii) one of whom shall be appointed 

5 by the Administrator of the Small Busi6 ness Administration. 

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

8 appointed under subparagraph (B), (C)(ii), or 

9 (C)(iii) of paragraph (1) shall serve for a term of 4 

10 years. 

11 ‘‘(3) MEMBERS NOT COMMISSION EMPLOY12 EES.—Members appointed under subparagraph (B), 

13 (C)(ii), or (C)(iii) of paragraph (1) shall not be 

14 treated as employees or agents of the Commission 

15 solely because of membership on the Committee. 

16 ‘‘(c) CHAIRMAN; VICE CHAIRMAN; SECRETARY; AS17 SISTANT SECRETARY.— 

18 ‘‘(1) IN GENERAL.—The members of the Com19 mittee shall elect, from among the members of the 

20 Committee— 

21 ‘‘(A) a chairman; 

22 ‘‘(B) a vice chairman; 

23 ‘‘(C) a secretary; and 

24 ‘‘(D) an assistant secretary. 


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1 ‘‘(2) TERM.—Each member elected under para2 graph (1) shall serve for a term of 3 years in the 

3 capacity for which the member was elected under 

4 paragraph (1). 

5 ‘‘(d) MEETINGS.— 

6 ‘‘(1) FREQUENCY OF MEETINGS.—The Com7 mittee shall meet— 

8 ‘‘(A) not less frequently than four times 

9 annually, at the call of the chairman of the 

10 Committee; and 

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

12 Commission. 

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

14 shall give the members of the Committee written no15 tice of each meeting, not later than 2 weeks before 

16 the date of the meeting. 

17 ‘‘(e) COMPENSATION AND TRAVEL EXPENSES.— 

18 Each member of the Committee who is not a full-time em19 ployee of the United States shall— 

20 ‘‘(1) be entitled to receive compensation at a 

21 rate not to exceed the daily equivalent of the annual 

22 rate of basic pay in effect for a position at level V 

23 of the Executive Schedule under section 5316 of title 

24 5, United States Code, for each day during which 


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1 the member is engaged in the actual performance of 

2 the duties of the Committee; and 

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

4 of business of the member in the performance of 

5 services for the Committee, be allowed travel ex6 penses, including per diem in lieu of subsistence, in 

7 the same manner as persons employed intermittently 

8 in the Government service are allowed expenses 

9 under section 5703 of title 5, United States Code. 

10 ‘‘(f) STAFF.—The Commission shall make available 

11 to the Committee such staff as the chairman of the Com12 mittee determines are necessary to carry out this section. 

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

14 shall— 

15 ‘‘(1) review the findings and recommendations 

16 of the Committee; and 

17 ‘‘(2) each time the Committee submits a finding 

18 or recommendation to the Commission, promptly 

19 issue a public statement— 

20 ‘‘(A) assessing the finding or recommenda21 tion of the Committee; and 

22 ‘‘(B) disclosing the action, if any, the Com23 mission intends to take with respect to the find24 ing or recommendation. 


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

2 Federal Advisory Committee Act (5 U.S.C. App.) shall not 

3 apply with respect to the Committee and its activities.’’. 

4 (c) ANNUAL GOVERNMENT-BUSINESS FORUM ON

5 SMALL BUSINESS CAPITAL FORMATION.—Section 503(a) 

6 of the Small Business Investment Incentive Act of 1980 

7 (15 U.S.C. 80c–1(a)) is amended by inserting ‘‘(acting 

8 through the Office of the Advocate for Small Business 

9 Capital Formation and in consultation with the Small 

10 Business Capital Formation Advisory Committee)’’ after 

11 ‘‘Securities and Exchange Commission’’. 

Passed the House of Representatives February 1, 

2016. 

Attest: KAREN L. HAAS, 

Clerk. 


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