To require the Securities and Exchange Commission to revise the definition of a qualifying investment to include an equity security issued by a qualifying portfolio company, whether acquired directly from the company or in a secondary acquisition, for purposes of the exemption from registration for venture capital fund advisers under the Investment Advisers Act of 1940, and for other purposes.
Bill: H.R.4227 | Sponsor: Rep. Hollingsworth, Trey (R-IN)
Policy area: Finance and Financial Sector

Summary:
Developing and Empowering our Aspiring Leaders Act of 2022
This bill directs the Securities and Exchange Commission (SEC) to revise venture capital investment regulations if the SEC determines such revisions would facilitate capital formation without compromising investor protection. Venture capital funds are exempt from certain regulations applicable to other investment firms, including those related to filings, audits, and restricted communications with investors. Under current law, non-qualifying investments—which include secondary transactions and investments in other venture capital funds—may comprise up to 20% of a venture capital fund.
The bill allows, after SEC approval, investments acquired through secondary transactions or investments in other venture capital funds to be considered as qualifying investments for venture capital funds. However, for a private fund to qualify as a venture capital fund, the fund's investments must predominately be acquired directly from a qualifying portfolio company.

To require the Securities and Exchange Commission to revise the 
  definition of a qualifying investment to include an equity security 
  issued by a qualifying portfolio company, whether acquired directly 
  from the company or in a secondary acquisition, for purposes of the 
exemption from registration for venture capital fund advisers under the 
        Investment Advisers Act of 1940, and for other purposes.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Developing and Empowering our 
Aspiring Leaders Act of 2022''.

SEC. 2. DEFINITIONS.

    Not later than the end of the 180-day period beginning on the date 
of the enactment of this Act, if the Securities and Exchange Commission 
determines the revisions would facilitate capital formation without 
compromising investor protection, the Commission shall--
            (1) revise the definition of a qualifying investment under 
        paragraph (c) of section 275.203(l)-1 of title 17, Code of 
        Federal Regulations, to include an equity security issued by a 
        qualifying portfolio company, whether acquired directly from 
        the company or in a secondary acquisition; and
            (2) revise paragraph (a) of such section to require, as a 
        condition of a private fund qualifying as a venture capital 
        fund under such paragraph, that the qualifying investments of 
        the private fund are 


              

        predominantly qualifying investments that were acquired 
        directly from a qualifying portfolio company.

            Passed the House of Representatives July 26, 2022.

            Attest:

                                             CHERYL L. JOHNSON,

                                                                 Clerk.