House Approves Small Business BillsFebruary 3, 2016
On Feb. 1, the House approved by unanimous consent three separate pieces of legislation aimed at helping small businesses access capital and increase their voice within the federal government. The three bills were all overwhelming voted out of the House Financial Services Committee in 2015.
The Fair Investment Opportunities for Professional Experts Act (H.R. 2187)
H.R. 2187 was introduced by Rep. David Schweikert (R-Ariz.) in April of 2015 and the measure was approved by the House Financial Services Committee in December 2015, by a vote of 54-2. The legislation would expand the number of individuals who would be allowed to participate in certain investments in small businesses. It will require the Securities and Exchange Commission (SEC) revise the definition of “accredited investor.” The current definition of “accredited investor” essentially requires the party to either have a net worth exclusive of primary residence of over $1,000,000 or an annual salary in excess of $200,000.
The measure would require the SEC use additional metrics to determine whether a party could qualify as an “accredited investor.” The SEC would be required to create an exam which interested parties could take in order to qualify as an accredited investor, regardless of their net worth or yearly income. It would also allow those who do not meet the financial qualifications of an accredited investor to qualify if that party retains the services of certain financial institutions to make investment decisions relative to the investments in question.
SEC Small Business Advocate Act of 2016 (H.R. 3784)
H.R. 3784 was introduced by Rep. John Carney (D-Del.) in October 2015 and NSBA sent letters to lawmakers supporting the legislation shortly after its introduction. The legislation was referred to the House Financial Services Committee, however underscoring the support for this legislation; it was quickly unanimously voted out of committee in early December 2015. The Securities and Exchange Commission (SEC) plays a critical role in regulating financial instruments which directly impact the amount of capital to which small businesses have access. However, this measure was introduced in order to address concerns that the SEC lacks the expertise to tailor regulations to work with the limitations of small businesses.
H.R. 3784 would create an Office for Small Business Capital Formation within the SEC, with the head of the office being appointed by the commissioners. It would serve as an advocate within the SEC for small businesses on regulatory activity but it would also aid small businesses navigate the regulatory environment surrounding securities for small businesses. The office could additionally generate tremendous information for the SEC and would be required to prepare a report each year detailing the changes needed to resolve problems faced by small businesses and small-business investors.
Small Business Capital Formation Enhancement Act (H.R. 4168)
H.R. 4168 further aids small business interaction with the Securities and Exchange Commission (SEC) by requiring the SEC respond to recommendations generated by the SEC Government-Business Forum on Small Business Capital Formation (the Forum). The legislation was approved by the House Financial Services Committee by a vote of 55-1.
Each year the Forum convenes members of the small-business community so that they may discuss the state of small business capital formation and ways to improve it. From the Forum, a list of recommended actions that the SEC could take to improve capital formation is generated. However, there is often no follow-up on those recommendations. H.R. 4168 requires the SEC to review the recommendations made from the Forum and issue a public statement. In that statement SEC must assess the recommendation made and disclose any action that the SEC intends to take with respect to the recommendation.
NSBA supports the passage of these bills which increase small-business access to capital and the visibility of the small business concerns within the government. In a recent NSBA survey, members indicated that almost one in three small businesses do not have adequate access to capital. It is essential to the U.S. economy that those small businesses that are ready to expand and add jobs to the economy are able to obtain the capital necessary to do so. Measures like these approved by the House increase transparency between small businesses and the regulatory community and will offer greater growth opportunities to small businesses across the country.