Title: 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.
Policy area: Finance and Financial Sector

Summary:
Developing and Empowering our Aspiring Leaders Act of 2021
This bill directs the Securities and Exchange Commission to revise venture capital investment regulations. 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 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 (1) be acquired directly, or (2) be investments in other venture capital funds.


[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4227 Introduced in House (IH)]

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117th CONGRESS
  1st Session
                                H. R. 4227

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


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             June 29, 2021

Mr. Hollingsworth introduced the following bill; which was referred to 
                  the Committee on Financial Services

_______________________________________________________________________

                                 A BILL


 
    To require the Securities and Exchange Commission to revise the 
 definition of a qualifying investment, for purposes of the exemption 
     from registration for venture capital fund advisers under the 
 Investment Advisers Act of 1940, to include an equity security issued 
   by a qualifying portfolio company and to include an investment in 
         another venture capital fund, 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 2021''.

SEC. 2. DEFINITIONS.

    Not later than the end of the 180-day period beginning on the date 
of the enactment of this Act, the Securities and Exchange 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--
                    (A) to include an equity security issued by a 
                qualifying portfolio company, whether acquired directly 
                from the company or in a secondary acquisition; and
                    (B) to specify that an investment in another 
                venture capital fund is a qualifying investment under 
                such definition; 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 either--
                    (A) predominantly qualifying investments that were 
                acquired directly from a qualifying portfolio company; 
                or
                    (B) predominantly qualifying investments in another 
                venture capital fund or other venture capital funds.
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