59–006 

114TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 114–409 

SMALL BUSINESS CAPITAL FORMATION ENHANCEMENT 

ACT 

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. 4168] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Financial Services, to whom was referred the 

bill (H.R. 4168) to amend the Small Business Investment Incentive 

Act of 1980 to require an annual review by the Securities and Exchange Commission of the annual government-business forum on 

capital formation that is held pursuant to such Act, having considered the same, report favorably thereon without amendment and 

recommend that the bill do pass. 

PURPOSE AND SUMMARY

Introduced by Representative Poliquin on December 3, 2015, 

H.R. 4168, the Small Business Capital Formation Enhancement 

Act, requires the Securities and Exchange Commission (SEC) to respond to any findings and recommendations put forth by the SEC’s 

annual Government-Business Forum on Small Business Capital 

Formation (Forum). This statutory requirement is consistent with 

the current obligations related to findings and recommendations 

submitted by the Investor Advisory Committee as required by Title 

IX of the Dodd-Frank Wall Street Reform and Consumer Protection 

Act. 

BACKGROUND AND NEED FOR LEGISLATION

In 1980, Congress required the SEC to conduct an annual government-business forum to review the current status of problems 

and programs relating to small business capital formation. A summary of the proceedings of the forum—known as the GovernmentVerDate Sep 11 2014 01:13 Feb 03, 2016 Jkt 059006 PO 00000 Frm 00001 Fmt 6659 Sfmt 6602 E:\HR\OC\HR409.XXX HR409

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Business Forum on Small Business Capital Formation—and any 

related findings and recommendations are submitted to, among 

others, the SEC and the appropriate congressional committees for 

review. The Forum has generated a number of sound recommendations that the Financial Services Committee has used to develop 

legislation, including many provisions of the bipartisan Jumpstart 

Our Business Startups (JOBS) Act. 

Unfortunately, the SEC is not statutorily obligated to respond to 

the Forum’s recommendations and findings. Although Congress has 

deemed the recommendations worthy of response and action, the 

SEC has not. Interestingly, SEC Commissioners typically offer 

opening statements at Forum meetings that praise the Forum’s 

work and the expertise of its members. For example, at the November 19, 2015, commencement of this year’s forum, Chair White observed that: 

This is . . . the latest in a remarkable series of open and 

direct discussions that have given the Commission critical 

insight into the impact of our rules on small businesses 

and on their efforts to raise capital. This Forum can be 

counted on to be another frank and productive conversation, and we welcome all of your perspectives as leaders of 

the small business community. 

Unfortunately, the interest and excitement reflected by the Forum’s opening statements have not generated rule proposals once 

the SEC issues a summary of the Forum’s recommendations the 

following year. As SEC Commissioner Michael Piwowar told 

attendees of the 2015 Forum: 

[g]iven your tremendous efforts to develop thoughtful recommendations, I believe that the Commission should respond to each one. By statute, the Commission is required 

to respond to each recommendation provided by the Investor Advisory Committee. It should not take a law to require the Commission to respond to the Forum’s recommendations—it is more of a matter of common courtesy 

and good government. 

Other experts have spoken about the need to statutorily obligate 

the SEC to respond to any findings and recommendations put forth 

by the Forum. At a December 2, 2015, Subcommittee on Capital 

Markets and Government Sponsored Enterprises hearing, Brian 

Hahn, who appeared on behalf of the Biotechnology Industry Organization and is the Chief Financial Officer of GlycoMimetics, testified that: 

small businesses understand their own regulatory environment, and are uniquely equipped to advise the SEC on 

how it could be reformed to enhance capital formation. 

However, despite the fact that most Forum recommendations could be adopted by the SEC through its standard 

rule proposal process, the SEC is often reluctant to act. 

Chris Mathieu, who testified at the same hearing on behalf of the 

Small Business Investor Alliance, also noted that ‘‘in its current 

form, the Forum is weak and unfortunately most of its ideas are 

left for dead.’’ 


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At the December 2nd hearing, Tom Quaadman, Vice President of 

the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness, testified that: 

[t]oo often, regulatory restructures remain stagnant over 

the course of decades while the marketplace is constantly 

evolving. In fact, the proactive efforts by this Subcommittee and Congress in passing the JOBS Act and 

other bills to advance capital formation are directly related 

to the inertia of the SEC to modernize regulations . . . 

This bill would require the Commission to pay closer attention to the Forum and take affirmative action to move 

forward or not. Therefore, the needs of capital formation 

cannot simply be ignored. 

HEARINGS

The Committee on Financial Services’ Subcommittee on Capital 

Markets and Government Sponsored Enterprises held a hearing examining matters relating to H.R. 4168 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. 4168 to 

be reported favorably to the House without amendment by a recorded vote of 55 yeas to 1 nay (recorded vote no. FC–81), a 

quorum being present. 

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. The sole record vote 

was a motion by Chairman Hensarling to report the bill favorably 

to the House without amendment. That motion was agreed to by 

a recorded vote of 55 yeas to 1 nay (Record vote no. FC–81), 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. 4168 will remedy the SEC’s lack of response to the Government-Business Forum 

on Small Business Capital Formation’s recommendations and findings by statutorily obligating the SEC to respond to any findings 

and recommendations put forth by the Forum. 

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. 4168, the Small Business 

Capital Formation Enhancement Act. 

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. 4168—Small Business Capital Formation Enhancement Act 

H.R. 4168 would require the Securities and Exchange Commission (SEC) to review the recommendations generated at an annual 

forum of government and business experts brought together to discuss small business capital formation. The bill also would require 

the SEC to assess each recommendation made by the forum and 

disclose any action the agency intends to take with respect to such 

recommendations. 

Based on information from the SEC, CBO estimates that imple- menting H.R. 4168 would cost less than $500,000 over the 2016– 

2020 period to complete the review and assessment of recommendations as directed under the bill. Under current law, the SEC is authorized to collect fees sufficient to offset its annual appropriation; 

therefore, CBO estimates that implementing the bill would have a 

negligible effect on net discretionary costs, assuming appropriation 

actions consistent with that authority. 

Enacting H.R. 4168 would not affect direct spending or revenues; 

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

that enacting H.R. 4168 would not increase net direct spending or 

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

H.R. 4168 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act and would 

not affect the budgets of state, local, or tribal governments. 

The CBO staff contact for this estimate is Susan Willie. 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. 

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. 4168 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. 4168 establishes or reauthorizes a program of the Federal Government known to be duplicative of another Federal program, a program that was included 


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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. 4168 contains no directed rulemaking. 

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title 

This section cites H.R. 4168 as the ‘‘Small Business Capital Formation Enhancement Act.’’ 

Section 2. Annual review of government-business forum on capital 

formation 

This section requires the Securities and Exchange Commission to 

review the findings and recommendations of the forum. It also requires the Commission to assess the finding and disclose any action 

the Commission intends to take with respect to the finding or recommendation. 

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): 

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 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. 


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(e) The Commission shall— 

(1) review the findings and recommendations of the forum; 

and 

(2) each time the forum submits a finding or recommendation 

to the Commission, promptly issue a public statement— 

(A) assessing the finding or recommendation of the 

forum; and 

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

to take with respect to the finding or recommendation. 

Æ 


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