SEC SMALL BUSINESS ADVOCATE ACT OF 2016; Congressional Record Vol. 162, No. 18
(House of Representatives - February 01, 2016)

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[Pages H379-H382]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                SEC SMALL BUSINESS ADVOCATE ACT OF 2016

  Mr. GARRETT. Mr. Speaker, I move to suspend the rules and pass 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, as amended.
  The Clerk read the title of the bill.
  The text of the bill is as follows:

                               H.R. 3784

       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 ``SEC Small Business Advocate 
     Act of 2016''.

     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

[[Page H380]]

     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.
       ``(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 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;
       ``(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 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--

       ``(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);
       ``(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 or 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--

[[Page H381]]

       ``(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.
       ``(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 Formation.--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''.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from New 
Jersey (Mr. Garrett) and the gentleman from Delaware (Mr. Carney) each 
will control 20 minutes.
  The Chair recognizes the gentleman from New Jersey.


                             General Leave

  Mr. GARRETT. Mr. Chairman, I ask unanimous consent that all Members 
may have 5 legislative days in which to revise and extend their remarks 
and to include any extraneous material with regard to this bill.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from New Jersey?
  There was no objection.

                              {time}  1530

  Mr. GARRETT. Mr. Speaker, I yield myself such time as I may consume.
  I rise in support of H.R. 3784, the SEC Small Business Advocate Act.
  I would like to thank the gentleman from Delaware (Mr. Carney) and 
the gentleman from Wisconsin (Mr. Duffy) of the Financial Services 
Committee, as well as the gentleman from Florida (Mr. Crenshaw) and the 
gentleman from Illinois (Mr. Quigley) of the Appropriations Committee, 
for working together in a bipartisan manner on this bill. In doing so, 
it has resulted in the Financial Services Committee's favorably 
reporting H.R. 3784 out of committee by a unanimous vote.
  Mr. Speaker, the SEC has a three-part mission: to protect investors, 
to maintain fair and orderly and efficient markets, and to also 
facilitate capital formation. Yet, if you think about it, the SEC has 
really given a short shrift to the capital formation part of its 
statutory mandate, and it is to the detriment of entrepreneurs and to 
the startup ventures.
  Although small companies are at the proverbial forefront of 
technological innovation and also of job creation, they often face 
significant obstacles in obtaining the necessary capital and funding. 
These obstacles, if you will, are often attributable to the 
proportionally large burden that security regulations place on them. 
They are often written for large public companies, and they are placed 
then on small companies which then seek to go public.
  By failing to fulfill this important part of its mandated mission, 
the SEC is basically hurting the small companies. It is impeding 
economic growth, and it is basically hindering job creation, which is 
so desperately needed in this country. When the SEC has failed to 
advance its mission in facilitating capital formation, Congress has 
stepped into this vacuum, most notably through the enactment of the 
JOBS Act back in 2012. You see, while the JOBS Act has made it easier 
for these companies to go public, the JOBS Act alone has not been 
enough. It has not been enough to entirely overcome all of the 
obstacles that the companies face in trying to go public.
  So now we have H.R. 3784. It creates the SEC small business capital 
formation advocate, and he will provide an independent voice for small 
business capital formation on par with the SEC's investor advocate. 
This new advocate will support the interests of small businesses and 
provide guidance to the SEC on advancing a post-JOBS Act capital 
formation agenda, something that, unfortunately, if you look at the 
track record, the SEC has failed to do for years. The small business 
advocate will support the interests not only of entrepreneurs and of 
job creators, but they will do so also on behalf of investors.
  Finally, it is clear that fundamental change is needed within the SEC 
in order to get this agency to focus on the capital formation mandate. 
H.R. 3784 will provide a permanent voice for small businesses at the 
SEC, and it will help them ensure that the SEC does not neglect, 
anymore, this important mandate in the future.
  Again, I ask my colleagues to support H.R. 3784 in a bipartisan 
manner, just as was done in committee.
  Mr. Speaker, I reserve the balance of my time.
  Mr. CARNEY. Mr. Speaker, I yield myself such time as I may consume.
  I begin by thanking all of those who have worked with us to introduce 
and to improve this legislation. I especially want to thank my 
colleague and friend, the gentleman from Wisconsin (Mr. Duffy), the 
gentleman from Illinois (Mr. Quigley), who will speak in a minute, the 
gentleman from Florida (Mr. Crenshaw), and all of our other cosponsors, 
as well as the SEC, for their work on this bill. Due to their help and 
the bipartisan work on our committee, this legislation received a 
unanimous vote out of committee, as the gentleman from New Jersey 
pointed out.
  Mr. Speaker, small businesses are the cornerstones of our 
communities, and they are a major driver of American economic job 
growth. In fact, small businesses create over 60 percent of new jobs in 
the United States, which is the main point here. If we want to help 
businesses create jobs, we need to help small businesses.
  From one's employment to one's shopping needs, every American relies 
on small business in some way or another. Given the crucial part they 
play in our economy, ensuring their success just makes common sense. 
That is what this bill is--just a commonsense, bipartisan bill to help 
small businesses across our great country.
  Despite the important role that small businesses have in driving 
economic growth and job creation, they can be underrepresented in 
conversations about regulations affecting them at every level of 
government, and their

[[Page H382]]

concerns are not always heard. This doesn't just harm small businesses. 
It can also adversely impact investors and the public at large.
  The SEC has done an admirable job in supporting and in advancing the 
priorities of small businesses. This bill, the SEC Small Business 
Advocate Act, simply gives the SEC more tools to understand their needs 
and concerns. The SEC Small Business Advocate Act mirrors provisions 
found in the Dodd-Frank bill, which created the current Office of the 
Investor Advocate.
  This advocate would open clear avenues of communication to SEC 
leadership on issues affecting small-business owners, investors, and 
stakeholders. It would also help continue the reforms and progress that 
Congress made in passing the JOBS Act, which the gentleman from New 
Jersey mentioned, including with issues such as equity crowdfunding and 
ideas for venture exchanges and changes to tick size, which the 
gentleman from Wisconsin and I have worked on over the past year.
  With the resources provided in H.R. 3784, the SEC will have the 
ability to pursue meaningful regulatory improvements that could 
significantly improve outcomes for small businesses and help them with 
their access to capital, which is needed to grow and create jobs.
  I am very encouraged that the House has chosen to take up this 
bipartisan piece of legislation today and that we are moving forward to 
ensure a voice for small business at the SEC.
  Again, I thank the SEC for its help on this issue and a special 
thanks to my friend and colleague, Congressman Duffy.
  I urge all of my colleagues, as the members of the Financial Services 
Committee have, to vote ``yes'' on this legislation.
  Mr. Speaker, I reserve the balance of my time.
  Mr. GARRETT. Mr. Speaker, I reserve the balance of my time.
  Mr. CARNEY. Mr. Speaker, I yield 3 minutes to the gentleman from 
Illinois (Mr. Quigley).
  Mr. QUIGLEY. Mr. Speaker, given that small businesses have accounted 
for over 60 percent of the net new jobs created since the end of the 
recession, we should be doing more to simplify regulatory compliance so 
that small businesses can direct their resources to what they do best: 
innovating and growing our economy.
  Small businesses and small business investors were not the cause of 
the financial crisis and do not pose a significant risk to the rest of 
the economy. Yet, regulators like the SEC, which oversee the financial 
markets, too often craft regulations by which the costs to small 
businesses far outweigh the minimal benefits they may have on our 
economy. We need our regulators to take the concerns of small 
businesses seriously and to make small business growth a top priority.

  That is why I was proud to coauthor the SEC Small Business Advocate 
Act, which will establish an Office of the Advocate for Small Business 
Capital Formation within the SEC. This office will open a clear avenue 
of communication to the SEC leadership on issues affecting small 
businesses by maintaining a designated representative to advocate on 
their needs.
  This advocate will be responsible for helping small businesses 
resolve problems with the SEC, analyzing the potential impact of 
proposed rules and regulations on small businesses, and reaching out to 
small businesses to understand issues related to capital formation. In 
addition, this bill formalizes the Advisory Committee on Small and 
Emerging Companies, which provides members of the small business 
community with another mechanism to communicate their concerns with the 
SEC. This legislation will not only improve the regulatory process for 
small-business owners, but also for the everyday investors and 
consumers who depend on them.
  This legislation has widespread support from representatives of the 
business community, and it passed unanimously out of committee. I urge 
my colleagues to empower small-business owners and entrepreneurs and 
support this commonsense, bipartisan legislation.
  Mr. GARRETT. Mr. Speaker, I reserve the balance of my time.
  Mr. CARNEY. Mr. Speaker, I yield myself the balance of my time.
  I close by again asking my colleagues to follow the example of the 
Financial Services Committee and vote unanimously to support this bill, 
which will help small businesses to access capital and to get the 
advice they need from the SEC.
  I yield back the balance of my time.
  Mr. GARRETT. Mr. Speaker, I yield myself the balance of my time.
  Again, I commend the gentleman for his work on this legislation and 
for the bipartisan nature of this and of most of the bills, actually, 
that will be coming to the floor today that were passed out of 
committee in a bipartisan manner.
  I yield back the balance of my time.
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentleman from New Jersey (Mr. Garrett) that the House suspend the 
rules and pass the bill, H.R. 3784, as amended.
  The question was taken; and (two-thirds being in the affirmative) the 
rules were suspended and the bill, as amended, was passed.
  A motion to reconsider was laid on the table.

                          ____________________