[Congressional Record Volume 168, Number 124 (Tuesday, July 26, 2022)]
[House]
[Pages H7152-H7153]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




       DEVELOPING AND EMPOWERING OUR ASPIRING LEADERS ACT OF 2022

  Ms. WATERS. Madam Speaker, I move to suspend the rules and pass the 
bill (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, as amended.
  The Clerk read the title of the bill.
  The text of the bill is as follows:

                               H.R. 4227

       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.

[[Page H7153]]

  The SPEAKER pro tempore. Pursuant to the rule, the gentlewoman from 
California (Ms. Waters) and the gentleman from Arkansas (Mr. Hill) each 
will control 20 minutes.
  The Chair recognizes the gentlewoman from California.


                             General Leave

  Ms. WATERS. Madam Speaker, I ask unanimous consent that all Members 
may have 5 legislative days within which to revise and extend their 
remarks on this legislation and to insert extraneous material thereon.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentlewoman from California?
  There was no objection.
  Ms. WATERS. Madam Speaker, I yield myself such time as I may consume.
  I support H.R. 4227, the Developing and Empowering Our Aspiring 
Leaders Act of 2021, introduced by Mr. Hollingsworth. This bill would 
authorize the Securities and Exchange Commission, or SEC, to revise its 
rules on venture capital investment regulations to allow investments 
acquired through secondary transactions or investments in other venture 
capital funds to be considered as qualifying investments for venture 
capital funds.
  Importantly, the SEC would only be required to revise its rules if it 
finds that the revision would facilitate capital formation without 
reducing investor protections.
  I want to ensure startups and small businesses have access to 
capital, but as this bill stipulates, access to capital should not come 
at the expense of investor protections. This bill strikes the right 
balance, and I so urge my colleagues to support this bill.
  Madam Speaker, I reserve the balance of my time.

                              {time}  2130

  Mr. HILL. Madam Speaker, I yield myself such time as I may consume.
  I rise, as well, in support of H.R. 4227, the Developing and 
Empowering our Aspiring Leaders Act, or DEAL Act. I commend my 
colleague from Indiana (Mr. Hollingsworth) and my colleagues from 
across the aisle for collaborating on H.R. 4227.
  By investing in companies that help drive economic growth and job 
creation, venture capital funds play an important role in the success 
and overall health of the American economy. In fact, earlier this year, 
it was reported that employment from U.S.-backed VC companies grew 960 
percent from 1990 to 2020. That is eight times the employment growth at 
non-venture-capital-backed companies.
  Jobs created by VC-backed enterprises are widely distributed across 
the U.S.
  In 2020, despite COVID-19 pandemic conditions, more than 10,800 
companies across the United States received venture capital funding. 
Additionally, in 2020, venture capital investment in the United States 
totaled $164 billion.
  However, the registered investment adviser rules, promulgated by the 
Securities and Exchange Commission under the Dodd-Frank Act, 
inadvertently discouraged some venture capital firms from continuing to 
invest in companies through what are called secondary investments.
  Though advisers from venture capital funds were exempt statutorily 
from registration as a registered investment adviser, the Dodd-Frank 
Act required the SEC to define what qualified as a venture capital 
fund.
  As written, the SEC's rules state that VC funds can only have 20 
percent of their capital commitments in nonqualifying investments.
  Specifically, the SEC definition for qualifying investments for 
venture capital funds prohibits secondary acquisitions from being 
considered as qualifying investments, which means that the secondary 
acquisitions fall into that 20 percent nonqualifying bucket.
  Therefore, Madam Speaker, small, private companies that need 
additional capital to grow and grow big enough to then go public cannot 
turn to the venture capital industry for secondary acquisition because 
such funds are concerned that they might well exceed the 20 percent 
limit and then trigger that the VC fund has to register as an RIA.
  Mr. Hollingsworth's bill, H.R. 4227, remedies this problem by 
requiring the SEC to revise the definition of a qualifying investment 
to include secondary acquisitions for purposes of the RIA exemption.
  This bill is a commonsense piece of legislation to ensure that our 
venture capital funds can continue to provide capital to small business 
across our land.
  Madam Speaker, I thank my friend, Mr. Hollingsworth, for his work on 
this legislation, and I urge a ``yes'' vote on Mr. Hollingsworth's 
bill, H.R. 4227.
  Madam Speaker, I yield back the balance of my time.
  Ms. WATERS. Madam Speaker, I yield myself such time as I may consume.
  I support H.R. 4227 and urge its passage as it correctly balances the 
need to provide access to capital for startups and other businesses 
with the need to protect investors. I note that a similar version of 
this bill previously passed this Chamber by a wide bipartisan vote.
  Madam Speaker, I yield back the balance of my time.
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentlewoman from California (Ms. Waters) that the House suspend the 
rules and pass the bill, H.R. 4227, as amended.
  The question was taken; and (two-thirds being in the affirmative) the 
rules were suspended and the bill, as amended, was passed.
  The title of the bill was amended so as to read: ``A bill 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.''.
  A motion to reconsider was laid on the table.

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