59–006 

114TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 114–408 

SEC SMALL BUSINESS ADVOCATE ACT OF 2015 

FEBRUARY 1, 2016.—Committed to the Committee of the Whole House on the State 

of the Union and ordered to be printed 

Mr. HENSARLING, from the Committee on Financial Services, 

submitted the following 

R E P O R T 

[To accompany H.R. 3784] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Financial Services, to whom was referred the 

bill (H.R. 3784) 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, having considered the same, report 

favorably thereon with an amendment and recommend that the bill 

as amended do pass. 

The amendment is as follows: 

Strike all after the enacting clause and insert the following: 

SECTION 1. SHORT TITLE. 

This Act may be cited as the ‘‘SEC Small Business Advocate Act of 2015’’. 

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. 


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‘‘(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 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 self-regulatory 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 womenowned 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 selfregulatory 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— 

‘‘(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 minority-owned 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— 


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‘‘(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 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); 


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‘‘(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); 

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

and 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) 3 non-voting members— 

‘‘(i) 1 of whom shall be appointed by the Investor Advocate; 

‘‘(ii) 1 of whom shall be appointed by the North American Securities 

Administrators Association; and 

‘‘(iii) 1 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 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. 


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‘‘(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 FORMA- TION.—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’’. 

PURPOSE AND SUMMARY

Introduced by Representative Carney on October 21, 2015, H.R. 

3784, the SEC Small Business Advocate Act of 2015, establishes 

the Office for Small Business Capital Formation (OSBCF) and the 

Small Business Capital Formation Advisory Committee (Advisory 

Committee) within the Securities and Exchange Commission 

(SEC). The OSBCF is led by the Advocate for Small Business Capital Formation (Advocate), who is appointed by and reports to the 

Commission, with the responsibility to, among other things: • Help small businesses resolve problems with the SEC; • Analyze the potential impact of proposed rules and regulations that are likely to have a significant effect on small businesses; and 

• Reach out to small businesses to understand issues related 

to capital formation. 

The Advisory Committee provides advice to the Commission on 

rules and policies related to capital formulation, securities trading, 

and reporting and governance requirements for emerging and 

smaller public companies. 

BACKGROUND AND NEED FOR LEGISLATION

Small businesses create more jobs than any other business sector 

in the United States. In 2010, the Kauffman Foundation found that 

startups create an average of 3 million jobs annually, noting that 

‘‘without startups, there would be no net job growth in the U.S. 

economy.’’ In the Jumpstart Our Business Startups (JOBS) Act, 

Congress recognized the importance of these companies in creating 

jobs and fostering economic growth. To help these companies access 

the capital markets, the JOBS Act expanded the use of private securities offerings under Regulation A and Regulation D and created 

a category of issuers known as ‘‘Emerging Growth Companies,’’ or 

EGCs, which are companies that have annual gross revenue of less 

than $1 billion. The JOBS Act exempted EGCs from some of the 

most onerous securities regulations. 

Although small companies are at the forefront of technological innovation and job creation, they often face significant obstacles to 

obtaining funding in the capital markets. These obstacles are often 

attributable to the proportionately larger burden that securities 

regulations—written for large public companies—place on small 

companies when they seek to go public. Although no one disputes 

that smart regulation is needed to maintain fair, orderly and efficient markets, to protect investors, and to facilitate capital formation, almost everyone agrees that excessive and unnecessary regulation imposes costs on individual businesses and the economy that 

far outweigh its benefits. But excessive and unnecessary regulation 

imposes even greater costs on startups. By passing the JOBS Act, 

Congress took an important step toward easing the regulatory burVerDate Sep 11 2014 23:45 Feb 02, 2016 Jkt 059006 PO 00000 Frm 00005 Fmt 6659 Sfmt 6602 E:\HR\OC\HR408.XXX HR408

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den on small businesses and startups seeking access to capital 

markets. H.R. 3784 facilitates the elimination and streamlining of 

regulations that make it difficult for small businesses to grow their 

businesses and create jobs. 

The SEC has a three-part mission: to protect investors; to maintain fair, orderly, and efficient markets; and to facilitate capital formation. The SEC acknowledges that promoting capital formation 

‘‘is necessary to sustain economic growth.’’ Although the SEC’s 

budget is now almost four times the size it was in 2000, the SEC 

has given short shrift to the capital formation component of its 

statutory mandate—to the detriment of entrepreneurs and start-up 

ventures. 

Many small companies still cannot access the capital they need 

to grow their businesses and create jobs. According to one survey, 

58% of respondents believe the current business financing environment is restricting growth opportunities while 48% of respondents 

believe it is restricting their ability to hire new employees. While 

the JOBS Act has made it easier for these companies to go public, 

the JOBS Act alone was not enough to entirely overcome the obstacles these companies face in trying to go public. The tightening of 

credit, which has resulted from both the financial crisis and the effects of implementing the Dodd-Frank Wall Street Reform and 

Consumer Protection Act, has made equity financing all the more 

important as a means for small companies to obtain the capital 

they need to grow and create jobs. 

Currently, the responsibility to facilitate and promote capital formation resides within the SEC’s Office of Small Business Policy 

(OSBP), which is housed within the SEC’s Division of Corporation 

Finance. OSBP answers questions on disclosure and other issues 

relating to smaller public companies, including those classified as 

‘‘smaller reporting companies,’’ and on limited, private, and intrastate offerings of securities. OSBP also processes requests for waivers of disqualification arising under Rule 262 of Regulation A and 

Rule 505(b)(2)(iii) and Rule 506(d)(2)(ii) of Regulation D. In addition, OSBP reaches out to smaller companies to facilitate capital 

formation. These efforts include coordinating the annual SEC Government-Business Forum on Small Business Capital Formation, 

which focuses on the current status of issues and programs related 

to small business capital formation. 

Unfortunately, the OSBP is a functional office rather than an advocacy office. The OSBP does not advocate for changes to the securities laws for smaller public companies, small businesses seeking 

equity capital, or investors in those companies or businesses. The 

OSBP does not advance initiatives to make equity capital more 

readily available to smaller issuers. Rather than neglecting the 

needs of small businesses, a permanent office dedicated to small 

business capital formation within the SEC is a logical outcome of 

the JOBS Act since the SEC has taken little to no action to advance the many recommendations the agency has received from its 

annual Government-Business Forum on Small Business Capital 

Formation (Forum) to help small businesses and EGCs access the 

capital markets. 

A major purpose of the Forum is to identify unnecessary impediments to small business capital formation and find ways to eliminate or reduce them. Each Forum develops recommendations for 


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government and private action to improve the environment for 

small business capital formation. But the SEC rarely, if ever, acts 

on the recommendations made by the Forum’s participants, which 

include small business executives, venture capitalists, government 

officials, trade association representatives, lawyers, accountants, 

academics and small business advocates. For example, the 

crowdfunding and Regulation A+ provisions of the JOBS Act mirrored the Forum’s recommendations to the SEC, which the SEC 

had previously ignored. Additionally, experts at these Forums have 

expressed concerns about the declining number of IPOs and burdens in complying with Regulation D. Titles I and II of the JOBS 

Act directly responded to those concerns. 

H.R. 3784 promotes capital formation and creates an office within the SEC to advocate for the job creators and entrepreneurs seeking equity capital as well as their investors. The office will then be 

able to leverage the recommendations the SEC has collected and 

prompt the SEC to act on those most likely to help small businesses and EGCs access the capital markets. At a December 2, 

2015, Subcommittee on Capital Markets and Government Sponsored Enterprises hearing, Chris Mathieu, Chief Financial Officer 

of Horizon Technology Finance, testifying on behalf of the Small 

Business Investor Alliance (SBIA), stated that ‘‘the SEC Small 

Business Advocate Act strengthens the voice of small business at 

the SEC by making significant changes to the way the SEC hears 

from small business stakeholders; responds to stakeholder requests; and makes recommendations to Congress and the SEC to 

improve the ability of small business to access capital.’’ Mr. 

Mathieu further noted that ‘‘[s]maller business investors have a 

much lower threshold for pain and the SEC needs to understand 

the challenges of scale when creating policy.’’ 

At the same hearing, Brian Hahn, the chief financial officer of 

GlycoMimetics, testifying on behalf of the Biotechnology Industry 

Organization (BIO), stated that ‘‘[t]he Small Business Advocate 

would serve as a partner to the existing Investor Advocate, giving 

small businesses an independent voice at the SEC and helping the 

SEC to understand the impact of regulatory burdens on growing 

companies as it considers new compliance requirements.’’ 

HEARINGS

The Subcommittee on Capital Markets and Government Sponsored Enterprises held a hearing examining matters relating to 

H.R. 3784 on December 2, 2015. 

COMMITTEE CONSIDERATION

The Committee on Financial Services met in open session on December 8, 2015 and December 9, 2015, and ordered H.R. 3784 to 

be reported favorably to the House as amended by a recorded vote 

of 56 yeas to 0 nays (recorded vote no. FC–85), a quorum being 

present. Two amendments offered by Representative Ellison were 

not agreed to by recorded votes as described below. An amendment 

offered by Representative Waters was agreed to by a voice vote. 


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COMMITTEE VOTES

Clause 3(b) of rule XIII of the Rules of the House of Representatives requires the Committee to list the record votes on the motion 

to report legislation and amendments thereto. An amendment offered by Representative Ellison was not agreed to by a recorded 

vote of 18 ayes–38 nays (FC–83). A second amendment offered by 

Representative Ellison was not agreed to by a recorded vote of 21 

ayes–35 nays (FC–84). The third and final recorded vote was a motion by Chairman Hensarling to report the bill favorably to the 

House as amended. That motion was agreed to by a recorded vote 

of 56 yeas to 0 nays (Record vote no. FC–85), a quorum being 

present. 


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COMMITTEE OVERSIGHT FINDINGS

Pursuant to clause 3(c)(1) of rule XIII of the Rules of the House 

of Representatives, the findings and recommendations of the committee based on oversight activities under clause 2(b)(1) of rule X 

of the Rules of the House of Representatives, are incorporated in 

the descriptive portions of this report. 

PERFORMANCE GOALS AND OBJECTIVES

Pursuant to clause 3(c)(4) of rule XIII of the Rules of the House 

of Representatives, the Committee states that H.R. 3784 will ensure that the issues related to small business capital formation are 

a priority at the SEC. Additionally, H.R. 3784 will provide an independent voice for small business capital formation, on par with the 

SEC’s Investor Advocate, to support the interests of small businesses and provide guidance to the Commission on advancing a 

post-JOBS Act capital formation agenda. 

NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX

EXPENDITURES

In compliance with clause 3(c)(2) of rule XIII of the Rules of the 

House of Representatives, the Committee adopts as its own the estimate of new budget authority, entitlement authority, or tax expenditures or revenues contained in the cost estimate prepared by 

the Director of the Congressional Budget Office pursuant to section 

402 of the Congressional Budget Act of 1974. 

COMMITTEE COST ESTIMATE

The Committee adopts as its own the cost estimate prepared by 

the Director of the Congressional Budget Office pursuant to section 

402 of the Congressional Budget Act of 1974. 

CONGRESSIONAL BUDGET OFFICE ESTIMATES

Pursuant to clause 3(c)(3) of rule XIII of the Rules of the House 

of Representatives, the following is the cost estimate provided by 

the Congressional Budget Office pursuant to section 402 of the 

Congressional Budget Act of 1974: 

U.S. CONGRESS, 

CONGRESSIONAL BUDGET OFFICE, 

Washington, DC, January 15, 2016. 

Hon. JEB HENSARLING, 

Chairman, Committee on Financial Services, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 3784, the SEC Small 

Business Advocate Act of 2015. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Susan Willie. 

Sincerely, 

ROBERT A. SUNSHINE, 

(For Keith Hall, Director). 

Enclosure. 


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H.R. 3784—SEC Small Business Advocate Act of 2015 

H.R. 3784 would establish the Office for Small Business Capital 

Formation and the Small Business Capital Formation Advisory 

Committee within the Securities and Exchange Commission (SEC). 

The office would be led by the Advocate for Small Business Capital Formation, who would be appointed by and report to the commission, with the responsibility to, among other things: 

• Help small businesses resolve problems with the SEC; 

• Analyze the potential impact of proposed rules and regulations that are likely to have a significant effect on small businesses; and 

• Reach out to small businesses to understand issues related 

to capital formation. 

The advisory committee would provide advice to the commission 

on rules and policies related to capital formulation, securities trading, and reporting and governance requirements for emerging and 

smaller public companies. 

Based on information from the SEC, CBO estimates that implementing H.R. 3784 would cost about $2 million per year for personnel and administrative costs of the new office and for administrative support for the advisory committee. Over the 2016–2020 period, CBO estimates that implementing the bill would cost $7 million. Under current law, the SEC is authorized to collect fees sufficient to offset its annual appropriation; therefore, CBO estimates 

that implementing H.R. 3784 would have a negligible effect on net 

discretionary costs, assuming appropriation actions consistent with 

that authority. 

Enacting H.R. 3784 would not affect direct spending or revenues; 

therefore, pay-as-you-go procedures do not apply. CBO estimates 

that enacting H.R. 3784 would not increase net direct spending or 

on-budget deficits in any of the four consecutive 10-year periods beginning in 2026. 

H.R. 3784 contains no intergovernmental mandates as defined in 

the Unfunded Mandates Reform Act (UMRA) and would not affect 

the budgets of state, local, or tribal governments. 

If the SEC increases fees to offset the costs of implementing the 

bill, H.R. 3784 would increase the cost of an existing mandate on 

private entities required to pay those fees. Based on information 

from the SEC, CBO estimates that the aggregate cost of the mandate would amount to about $2 million per year over the 2016– 

2020 period and would fall below the annual threshold for privatesector mandates established in UMRA ($154 million in 2016, adjusted annually for inflation). 

The CBO staff contacts for this estimate are Susan Willie (for 

federal costs) and Logan Smith (for private-sector mandates). The 

estimate was approved by H. Samuel Papenfuss, Deputy Assistant 

Director for Budget Analysis. 

FEDERAL MANDATES STATEMENT

The Committee adopts as its own the estimate of Federal mandates prepared by the Director of the Congressional Budget Office 

pursuant to section 423 of the Unfunded Mandates Reform Act. 


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ADVISORY COMMITTEE STATEMENT

No advisory committees within the meaning of section 5(b) of the 

Federal Advisory Committee Act were created by this legislation. 

APPLICABILITY TO LEGISLATIVE BRANCH

The Committee finds that the legislation does not relate to the 

terms and conditions of employment or access to public services or 

accommodations within the meaning of the section 102(b)(3) of the 

Congressional Accountability Act. 

EARMARK IDENTIFICATION

H.R. 3784 does not contain any congressional earmarks, limited 

tax benefits, or limited tariff benefits as defined in clause 9 of rule 

XXI. 

DUPLICATION OF FEDERAL PROGRAMS

Pursuant to section 3(g) of H. Res. 5, 114th Cong. (2015), the 

Committee states that no provision of H.R. 3784 establishes or reauthorizes a program of the Federal Government known to be duplicative of another Federal program, a program that was included 

in any report from the Government Accountability Office to Congress pursuant to section 21 of Public Law 111–139, or a program 

related to a program identified in the most recent Catalog of Federal Domestic Assistance. 

DISCLOSURE OF DIRECTED RULEMAKING

Pursuant to section 3(i) of H. Res. 5, 114th Cong. (2015), the 

Committee states that H.R. 3784 contains no directed rulemaking. 

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title 

This section cites H.R. 3784 as the ‘‘SEC Small Business Advocate Act of 2015.’’ 

Section 2. Establishment of Office of the Advocate for Small Business Capital Formation and Small Business Capital Formation 

Advisory Committee 

This section amends Section 4 of the Securities Exchange Act of 

1934 to establish the Office of the Advocate for Small Business 

Capital Formation. The Small Business Advocate (Advocate) would 

direct and manage the Office and would report directly to the five 

Commissioners. Generally, the Advocate will assist small businesses and their investors to resolve significant problems with the 

SEC or self-regulatory organizations and identify issues and propose changes to statutes, regulations, and rules to benefit small 

businesses and their investors and facilitate capital formation. The 

Advocate is tasked with a number of duties, including the requirement to identify problems related to access to capital; to analyze 

the potential impact on small businesses and small business investors of proposed SEC and SRO rules that will have a significant 

economic impact on them. 


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The SEC is required to issue a formal response to all recommendations submitted by the Office. Additionally, the Office 

must issue an annual report to Committees on Financial Services 

and Banking and would be responsible for the annual GovernmentBusiness Forum on Small Business Capital Formation. 

H.R. 3784 also establishes the SEC Small Business Advisory 

Committee (Committee). The Committee will provide the SEC with 

advice on capital formation, securities trading, public reporting, 

and corporate governance for ‘‘emerging, privately held businesses’’ 

(‘‘emerging companies’’) and ‘‘smaller public companies’’ (companies 

with less than $250 million in market capitalization). Committee 

members include, but not limited to, the Advocate and between 10– 

20 members appointed by the SEC including (1) representatives of 

‘‘emerging companies’’ and ‘‘smaller public companies,’’ (2) professional advisors to such companies, (3) pre- and post-IPO investors 

in such companies, (4) representatives of exchanges, Alternative 

Trading Systems research analysts, and transfer agents; and (5) officers or directors of minority or women-owned small businesses. 

The Committee will also have non-voting members to include the 

SEC Investor Advocate, a North American Securities Administrators Association representative, and a representative of the Small 

Business Administration. Finally, the SEC is required to review 

the Committee’s recommendations and promptly issue a public 

statement assessing them and disclosing the action, if any, the 

SEC intends to take. 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (new matter is printed in italics 

and existing law in which no change is proposed is shown in 

roman): 

SECURITIES EXCHANGE ACT OF 1934 

TITLE I—REGULATION OF SECURITIES EXCHANGES 

* * * * * * * 

SECURITIES AND EXCHANGE COMMISSION

SEC. 4. (a) There is hereby established a Securities and Exchange 

Commission (hereinafter referred to as the ‘‘Commission’’) to be 

composed of five commissioners to be appointed by the President by 

and with the advice and consent of the Senate. Not more than 

three of such commissioners shall be members of the same political 

party, and in making appointments members of different political 

parties shall be appointed alternately as nearly as may be practicable. No commissioner shall engage in any other business, vocation, or employment than that of serving as commissioner, nor 

shall any commissioner participate, directly or indirectly, in any 

stock-market operations or transactions of a character subject to 

regulation by the Commission pursuant to this title. Each commissioner shall hold office for a term of five years and until his successor is appointed and has qualified, except that he shall not so 

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gress subsequent to the expiration of said fixed term of office, and 

except (1) any commissioner appointed to fill a vacancy occurring 

prior to the expiration of the term for which his predecessor was 

appointed shall be appointed for the remainder of such term, and 

(2) the terms of office of the commissioners first taking office after 

the enactment of this title shall expire as designated by the President at the time of nomination, one at the end of one year, one at 

the end of two years, one at the end of three years, one at the end 

of four years, and one at the end of five years, after the date of the 

enactment of this title. 

(b) APPOINTMENT AND COMPENSATION OF STAFF AND LEASING AUTHORITY.— 

(1) APPOINTMENT AND COMPENSATION.—The Commission 

shall appoint and compensate officers, attorneys, economists, 

examiners, and other employees in accordance with section 

4802 of title 5, United States Code. 

(2) REPORTING OF INFORMATION.—In establishing and adjusting schedules of compensation and benefits for officers, attorneys, economists, examiners, and other employees of the Commission under applicable provisions of law, the Commission 

shall inform the heads of the agencies referred to under section 

1206 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 1833b) and Congress of such 

compensation and benefits and shall seek to maintain comparability with such agencies regarding compensation and benefits. 

(3) LEASING AUTHORITY.—Nothwithstanding any other provision of law, the Commission is authorized to enter directly into 

leases for real property for office, meeting, storage, and such 

other space as is necessary to carry out its functions, and shall 

be exempt from any General Services Administration space 

management regulations or directives. 

(c) Notwithstanding any other provision of law, in accordance 

with regulations which the Commission shall prescribe to prevent 

conflicts of interest, the Commission may accept payment and reimbursement, in cash or in kind, from non-Federal agencies, organizations, and individuals for travel, subsistence, and other necessary expenses incurred by Commission members and employees 

in attending meetings and conferences concerning the functions or 

activities of the Commission. Any payment or reimbursement accepted shall be credited to the appropriated funds of the Commission. The amount of travel, subsistence, and other necessary expenses for members and employees paid or reimbursed under this 

subsection may exceed per diem amounts established in official 

travel regulations, but the Commission may include in its regulations under this subsection a limitation on such amounts. 

(d) Notwithstanding any other provision of law, former employers 

of participants in the Commission’s professional fellows programs 

may pay such participants their actual expenses for relocation to 

Washington, District of Columbia, to facilitate their participation in 

such programs, and program participants may accept such payments. 

(e) Notwithstanding any other provision of law, whenever any fee 

is required to be paid to the Commission pursuant to any provision 

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vide by rule that such fee shall be paid in a manner other than in 

cash and the Commission may also specify the time that such fee 

shall be determined and paid relative to the filing of any statement 

or document with the Commission. 

(f) REIMBURSEMENT OF EXPENSES FOR ASSISTING FOREIGN SECU- RITIES AUTHORITIES.—Notwithstanding any other provision of law, 

the Commission may accept payment and reimbursement, in cash 

or in kind, from a foreign securities authority, or made on behalf 

of such authority, for necessary expenses incurred by the Commission, its members, and employees in carrying out any investigation 

pursuant to section 21(a)(2) of this title or in providing any other 

assistance to a foreign securities authority. Any payment or reimbursement accepted shall be considered a reimbursement to the appropriated funds of the Commission. 

(g) OFFICE OF THE INVESTOR ADVOCATE.— 

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

Commission the Office of the Investor Advocate (in this subsection referred to as the ‘‘Office’’). 

(2) INVESTOR ADVOCATE.— 

(A) IN GENERAL.—The head of the Office shall be the Investor Advocate, who shall— 

(i) report directly to the Chairman; and 

(ii) be appointed by the Chairman, in consultation 

with the Commission, from among individuals having 

experience in advocating for the interests of investors 

in securities and investor protection issues, from the 

perspective of investors. 

(B) COMPENSATION.—The annual rate of pay for the Investor Advocate shall be equal to the highest rate of annual pay for other senior executives who report to the 

Chairman of the Commission. 

(C) LIMITATION ON SERVICE.—An individual who serves 

as the Investor Advocate may not be employed by the 

Commission— 

(i) during the 2-year period ending on the date of appointment as Investor Advocate; or 

(ii) during the 5-year period beginning on the date 

on which the person ceases to serve as the Investor 

Advocate. 

(3) STAFF OF OFFICE.—The Investor Advocate, after consultation with the Chairman of the Commission, may retain or employ independent counsel, research staff, and service staff, as 

the Investor Advocate deems necessary to carry out the functions, powers, and duties of the Office. 

(4) FUNCTIONS OF THE INVESTOR ADVOCATE.—The Investor 

Advocate shall— 

(A) assist retail investors in resolving significant problems such investors may have with the Commission or 

with self-regulatory organizations; 

(B) identify areas in which investors would benefit from 

changes in the regulations of the Commission or the rules 

of self-regulatory organizations; 

(C) identify problems that investors have with financial 

service providers and investment products; 

(D) analyze the potential impact on investors of— 


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(i) proposed regulations of the Commission; and 

(ii) proposed rules of self-regulatory organizations 

registered under this title; and 

(E) 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 investors. 

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

that the Investor Advocate has full access to the documents of 

the Commission and any self-regulatory organization, as necessary to carry out the functions of the Office. 

(6) ANNUAL REPORTS.— 

(A) REPORT ON OBJECTIVES.— 

(i) IN GENERAL.—Not later than June 30 of each 

year after 2010, the Investor Advocate 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 objectives of the Investor Advocate for the following fiscal year. 

(ii) CONTENTS.—Each report required under clause 

(i) shall contain full and substantive analysis and explanation. 

(B) REPORT ON ACTIVITIES.— 

(i) IN GENERAL.—Not later than December 31 of 

each year after 2010, the Investor Advocate 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 Investor Advocate during 

the immediately preceding fiscal year. 

(ii) CONTENTS.—Each report required under clause 

(i) shall include— 

(I) appropriate statistical information and full 

and substantive analysis; 

(II) information on steps that the Investor Advocate has taken during the reporting period to improve investor services and the responsiveness of 

the Commission and self-regulatory organizations 

to investor concerns; 

(III) a summary of the most serious problems 

encountered by investors during the reporting period; 

(IV) an inventory of the items described in subclause (III) that includes— 

(aa) identification of any action taken by 

the Commission or the self-regulatory organization and the result of such action; 

(bb) the length of time that each item has 

remained on such inventory; and 

(cc) for items on which no action has been 

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fication of any official who is responsible for 

such action; 

(V) recommendations for such administrative 

and legislative actions as may be appropriate to 

resolve problems encountered by investors; and 

(VI) any other information, as determined appropriate by the Investor Advocate. 

(iii) INDEPENDENCE.—Each report required under 

this paragraph shall be provided directly to the Committees listed in clause (i) 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. 

(iv) CONFIDENTIALITY.—No report required under 

clause (i) may contain confidential information. 

(7) REGULATIONS.—The Commission shall, by regulation, establish procedures requiring a formal response to all recommendations submitted to the Commission by the Investor 

Advocate, not later than 3 months after the date of such submission. 

(8) OMBUDSMAN.— 

(A) APPOINTMENT.—Not later than 180 days after the 

date on which the first Investor Advocate is appointed 

under paragraph (2)(A)(i), the Investor Advocate shall appoint an Ombudsman, who shall report directly to the Investor Advocate. 

(B) DUTIES.—The Ombudsman appointed under subparagraph (A) shall— 

(i) act as a liaison between the Commission and any 

retail investor in resolving problems that retail investors may have with the Commission or with self-regulatory organizations; 

(ii) review and make recommendations regarding 

policies and procedures to encourage persons to 

present questions to the Investor Advocate regarding 

compliance with the securities laws; and 

(iii) establish safeguards to maintain the confidentiality of communications between the persons described in clause (ii) and the Ombudsman. 

(C) LIMITATION.—In carrying out the duties of the Ombudsman under subparagraph (B), the Ombudsman shall 

utilize personnel of the Commission to the extent practicable. Nothing in this paragraph shall be construed as 

replacing, altering, or diminishing the activities of any ombudsman or similar office of any other agency. 

(D) REPORT.—The Ombudsman shall submit a semiannual report to the Investor Advocate that describes the 

activities and evaluates the effectiveness of the Ombudsman during the preceding year. The Investor Advocate 

shall include the reports required under this section in the 

reports required to be submitted by the Inspector Advocate 

under paragraph (6). 

(h) EXAMINERS.— 


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(1) DIVISION OF TRADING AND MARKETS.—The Division of 

Trading and Markets of the Commission, or any successor organizational unit, shall have a staff of examiners who shall— 

(A) perform compliance inspections and examinations of 

entities under the jurisdiction of that Division; and 

(B) report to the Director of that Division. 

(2) DIVISION OF INVESTMENT MANAGEMENT.—The Division of 

Investment Management of the Commission, or any successor 

organizational unit, shall have a staff of examiners who shall— 

(A) perform compliance inspections and examinations of 

entities under the jurisdiction of that Division; and 

(B) report to the Director of that Division. 

(i) SECURITIES AND EXCHANGE COMMISSION RESERVE FUND.— 

(1) RESERVE FUND ESTABLISHED.—There is established in the 

Treasury of the United States a separate fund, to be known as 

the ‘‘Securities and Exchange Commission Reserve Fund’’ (referred to in this subsection as the ‘‘Reserve Fund’’). 

(2) RESERVE FUND AMOUNTS.— (A) IN GENERAL.—Except as provided in subparagraph 

(B), any registration fees collected by the Commission 

under section 6(b) of the Securities Act of 1933 (15 U.S.C. 

77f(b)) or section 24(f) of the Investment Company Act of 

1940 (15 U.S.C. 80a–24(f)) shall be deposited into the Reserve Fund. 

(B) LIMITATIONS.—For any 1 fiscal year— 

(i) the amount deposited in the Fund may not ex- ceed $50,000,000; and 

(ii) the balance in the Fund may not exceed $100,000,000. 

(C) EXCESS FEES.—Any amounts in excess of the limitations described in subparagraph (B) that the Commission 

collects from registration fees under section 6(b) of the Securities Act of 1933 (15 U.S.C. 77f(b)) or section 24(f) of the 

Investment Company Act of 1940 (15 U.S.C. 80a–24(f)) 

shall be deposited in the General Fund of the Treasury of 

the United States and shall not be available for obligation 

by the Commission. 

(3) USE OF AMOUNTS IN RESERVE FUND.—The Commission 

may obligate amounts in the Reserve Fund, not to exceed a 

total of $100,000,000 in any 1 fiscal year, as the Commission 

determines is necessary to carry out the functions of the Commission. Any amounts in the reserve fund shall remain available until expended. Not later than 10 days after the date on 

which the Commission obligates amounts under this paragraph, the Commission shall notify Congress of the date, 

amount, and purpose of the obligation. 

(4) RULE OF CONSTRUCTION.—Amounts collected and deposited in the Reserve Fund shall not be construed to be Government funds or appropriated monies and shall not be subject to 

apportionment for the purpose of chapter 15 of title 31, United 

States Code, or under any other authority. 

(j) OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FOR- MATION.— 

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

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ital 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 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 CAP- ITAL 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 self-regulatory 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; 


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(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— 

(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 self-regulatory 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 


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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 

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. 

* * * * * * * 

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. 


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(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); 

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

small businesses and 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) 3 non-voting members— 

(i) 1 of whom shall be appointed by the Investor Advocate; 

(ii) 1 of whom shall be appointed by the North American Securities Administrators Association; and 

(iii) 1 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 SEC- RETARY.— 

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

from among the members of the Committee— 

(A) a chairman; 


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(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 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. 

* * * * * * * 

SECTION 503 OF THE SMALL BUSINESS INVESTMENT 

INCENTIVE ACT OF 1980 

ANNUAL GOVERNMENT-BUSINESS FORUM ON CAPITAL FORMATION

SEC. 503. (a) Pursuant to the consultation called for in section 

502, the Securities and Exchange Commission (acting through the 


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Office of the Advocate for Small Business Capital Formation and in 

consultation with the Small Business Capital Formation Advisory 

Committee) shall conduct an annual Government-business forum to 

review the current status of problems and programs relating to 

small business capital formation. 

(b) The Commission shall invite other Federal agencies, such as 

the Department of the Treasury, the Board of Governors of the 

Federal Reserve System, the Small Business Administration, organizations representing State securities commissioners, and leading 

small business and professional organizations concerned with capital formation, to participate in the planning for such forums. 

(c) The Commission may request any of the Federal departments, 

agencies, or organizations such as those specified in subsection (b), 

or other groups or individuals, to prepare statements and reports 

to be delivered at such forums. Such departments and agencies 

shall cooperate in this effort. 

(d) A summary of the proceedings of such forums and any findings or recommendations thereof shall be prepared and transmitted 

to the participants, appropriate committees of the Congress, and 

others who may be interested in the subject matter. 

Æ 


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