[House Report 114-408]
[From the U.S. Government Publishing Office]


114th Congress  }                                           {  Report
                        HOUSE OF REPRESENTATIVES
 2d Session     }                                           {  114-408

======================================================================



 
                SEC SMALL BUSINESS ADVOCATE ACT OF 2015

                                _______
                                

February 1, 2016.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

Mr. Hensarling, from the Committee on Financial Services, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 3784]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
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, having considered 
the same, report favorably thereon with an amendment and 
recommend that the bill as amended do pass.
    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``SEC Small Business Advocate Act of 
2015''.

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 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 and 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--
                          ``(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''.

                          Purpose and Summary

    Introduced by Representative Carney on October 21, 2015, 
H.R. 3784, the SEC Small Business Advocate Act of 2015, 
establishes the Office for Small Business Capital Formation 
(OSBCF) and the Small Business Capital Formation Advisory 
Committee (Advisory Committee) within the Securities and 
Exchange Commission (SEC). The OSBCF is led by the Advocate for 
Small Business Capital Formation (Advocate), who is appointed 
by and reports to the Commission, with the responsibility to, 
among other things:
           Help small businesses resolve problems with 
        the SEC;
           Analyze the potential impact of proposed 
        rules and regulations that are likely to have a 
        significant effect on small businesses; and
           Reach out to small businesses to understand 
        issues related to capital formation.
    The Advisory Committee provides advice to the Commission on 
rules and policies related to capital formulation, securities 
trading, and reporting and governance requirements for emerging 
and smaller public companies.

                  Background and Need for Legislation

    Small businesses create more jobs than any other business 
sector in the United States. In 2010, the Kauffman Foundation 
found that startups create an average of 3 million jobs 
annually, noting that ``without startups, there would be no net 
job growth in the U.S. economy.'' In the Jumpstart Our Business 
Startups (JOBS) Act, Congress recognized the importance of 
these companies in creating jobs and fostering economic growth. 
To help these companies access the capital markets, the JOBS 
Act expanded the use of private securities offerings under 
Regulation A and Regulation D and created a category of issuers 
known as ``Emerging Growth Companies,'' or EGCs, which are 
companies that have annual gross revenue of less than $1 
billion. The JOBS Act exempted EGCs from some of the most 
onerous securities regulations.
    Although small companies are at the forefront of 
technological innovation and job creation, they often face 
significant obstacles to obtaining funding in the capital 
markets. These obstacles are often attributable to the 
proportionately larger burden that securities regulations--
written for large public companies--place on small companies 
when they seek to go public. Although no one disputes that 
smart regulation is needed to maintain fair, orderly and 
efficient markets, to protect investors, and to facilitate 
capital formation, almost everyone agrees that excessive and 
unnecessary regulation imposes costs on individual businesses 
and the economy that far outweigh its benefits. But excessive 
and unnecessary regulation imposes even greater costs on 
startups. By passing the JOBS Act, Congress took an important 
step toward easing the regulatory burden on small businesses 
and startups seeking access to capital markets. H.R. 3784 
facilitates the elimination and streamlining of regulations 
that make it difficult for small businesses to grow their 
businesses and create jobs.
    The SEC has a three-part mission: to protect investors; to 
maintain fair, orderly, and efficient markets; and to 
facilitate capital formation. The SEC acknowledges that 
promoting capital formation ``is necessary to sustain economic 
growth.'' Although the SEC's budget is now almost four times 
the size it was in 2000, the SEC has given short shrift to the 
capital formation component of its statutory mandate--to the 
detriment of entrepreneurs and start-up ventures.
    Many small companies still cannot access the capital they 
need to grow their businesses and create jobs. According to one 
survey, 58% of respondents believe the current business 
financing environment is restricting growth opportunities while 
48% of respondents believe it is restricting their ability to 
hire new employees. While the JOBS Act has made it easier for 
these companies to go public, the JOBS Act alone was not enough 
to entirely overcome the obstacles these companies face in 
trying to go public. The tightening of credit, which has 
resulted from both the financial crisis and the effects of 
implementing the Dodd-Frank Wall Street Reform and Consumer 
Protection Act, has made equity financing all the more 
important as a means for small companies to obtain the capital 
they need to grow and create jobs.
    Currently, the responsibility to facilitate and promote 
capital formation resides within the SEC's Office of Small 
Business Policy (OSBP), which is housed within the SEC's 
Division of Corporation Finance. OSBP answers questions on 
disclosure and other issues relating to smaller public 
companies, including those classified as ``smaller reporting 
companies,'' and on limited, private, and intrastate offerings 
of securities. OSBP also processes requests for waivers of 
disqualification arising under Rule 262 of Regulation A and 
Rule 505(b)(2)(iii) and Rule 506(d)(2)(ii) of Regulation D. In 
addition, OSBP reaches out to smaller companies to facilitate 
capital formation. These efforts include coordinating the 
annual SEC Government-Business Forum on Small Business Capital 
Formation, which focuses on the current status of issues and 
programs related to small business capital formation.
    Unfortunately, the OSBP is a functional office rather than 
an advocacy office. The OSBP does not advocate for changes to 
the securities laws for smaller public companies, small 
businesses seeking equity capital, or investors in those 
companies or businesses. The OSBP does not advance initiatives 
to make equity capital more readily available to smaller 
issuers. Rather than neglecting the needs of small businesses, 
a permanent office dedicated to small business capital 
formation within the SEC is a logical outcome of the JOBS Act 
since the SEC has taken little to no action to advance the many 
recommendations the agency has received from its annual 
Government-Business Forum on Small Business Capital Formation 
(Forum) to help small businesses and EGCs access the capital 
markets.
    A major purpose of the Forum is to identify unnecessary 
impediments to small business capital formation and find ways 
to eliminate or reduce them. Each Forum develops 
recommendations for government and private action to improve 
the environment for small business capital formation. But the 
SEC rarely, if ever, acts on the recommendations made by the 
Forum's participants, which include small business executives, 
venture capitalists, government officials, trade association 
representatives, lawyers, accountants, academics and small 
business advocates. For example, the crowdfunding and 
Regulation A+ provisions of the JOBS Act mirrored the Forum's 
recommendations to the SEC, which the SEC had previously 
ignored. Additionally, experts at these Forums have expressed 
concerns about the declining number of IPOs and burdens in 
complying with Regulation D. Titles I and II of the JOBS Act 
directly responded to those concerns.
    H.R. 3784 promotes capital formation and creates an office 
within the SEC to advocate for the job creators and 
entrepreneurs seeking equity capital as well as their 
investors. The office will then be able to leverage the 
recommendations the SEC has collected and prompt the SEC to act 
on those most likely to help small businesses and EGCs access 
the capital markets. At a December 2, 2015, Subcommittee on 
Capital Markets and Government Sponsored Enterprises hearing, 
Chris Mathieu, Chief Financial Officer of Horizon Technology 
Finance, testifying on behalf of the Small Business Investor 
Alliance (SBIA), stated that ``the SEC Small Business Advocate 
Act strengthens the voice of small business at the SEC by 
making significant changes to the way the SEC hears from small 
business stakeholders; responds to stakeholder requests; and 
makes recommendations to Congress and the SEC to improve the 
ability of small business to access capital.'' Mr. Mathieu 
further noted that ``[s]maller business investors have a much 
lower threshold for pain and the SEC needs to understand the 
challenges of scale when creating policy.''
    At the same hearing, Brian Hahn, the chief financial 
officer of GlycoMimetics, testifying on behalf of the 
Biotechnology Industry Organization (BIO), stated that ``[t]he 
Small Business Advocate would serve as a partner to the 
existing Investor Advocate, giving small businesses an 
independent voice at the SEC and helping the SEC to understand 
the impact of regulatory burdens on growing companies as it 
considers new compliance requirements.''

                                Hearings

    The Subcommittee on Capital Markets and Government 
Sponsored Enterprises held a hearing examining matters relating 
to H.R. 3784 on December 2, 2015.

                        Committee Consideration

    The Committee on Financial Services met in open session on 
December 8, 2015 and December 9, 2015, and ordered H.R. 3784 to 
be reported favorably to the House as amended by a recorded 
vote of 56 yeas to 0 nays (recorded vote no. FC-85), a quorum 
being present. Two amendments offered by Representative Ellison 
were not agreed to by recorded votes as described below. An 
amendment offered by Representative Waters was agreed to by a 
voice vote.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. An 
amendment offered by Representative Ellison was not agreed to 
by a recorded vote of 18 ayes-38 nays (FC-83). A second 
amendment offered by Representative Ellison was not agreed to 
by a recorded vote of 21 ayes-35 nays (FC-84). The third and 
final recorded vote was a motion by Chairman Hensarling to 
report the bill favorably to the House as amended. That motion 
was agreed to by a recorded vote of 56 yeas to 0 nays (Record 
vote no. FC-85), a quorum being present.


                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the findings and recommendations of 
the committee based on oversight activities under clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
are incorporated in the descriptive portions of this report.

                    Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee states that H.R. 3784 
will ensure that the issues related to small business capital 
formation are a priority at the SEC. Additionally, H.R. 3784 
will provide an independent voice for small business capital 
formation, on par with the SEC's Investor Advocate, to support 
the interests of small businesses and provide guidance to the 
Commission on advancing a post-JOBS Act capital formation 
agenda.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of new budget authority, entitlement 
authority, or tax expenditures or revenues contained in the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to section 402 of the Congressional 
Budget Act of 1974.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                 Congressional Budget Office Estimates

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                  Washington, DC, January 15, 2016.
Hon. Jeb Hensarling,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3784, the SEC 
Small Business Advocate Act of 2015.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Susan Willie.
            Sincerely,
                                        Robert A. Sunshine,
                                        (For Keith Hall, Director).
    Enclosure.

H.R. 3784--SEC Small Business Advocate Act of 2015

    H.R. 3784 would establish the Office for Small Business 
Capital Formation and the Small Business Capital Formation 
Advisory Committee within the Securities and Exchange 
Commission (SEC).
    The office would be led by the Advocate for Small Business 
Capital Formation, who would be appointed by and report to the 
commission, with the responsibility to, among other things:
           Help small businesses resolve problems with 
        the SEC;
           Analyze the potential impact of proposed 
        rules and regulations that are likely to have a 
        significant effect on small businesses; and
           Reach out to small businesses to understand 
        issues related to capital formation.
    The advisory committee would provide advice to the 
commission on rules and policies related to capital 
formulation, securities trading, and reporting and governance 
requirements for emerging and smaller public companies.
    Based on information from the SEC, CBO estimates that 
implementing H.R. 3784 would cost about $2 million per year for 
personnel and administrative costs of the new office and for 
administrative support for the advisory committee. Over the 
2016-2020 period, CBO estimates that implementing the bill 
would cost $7 million. Under current law, the SEC is authorized 
to collect fees sufficient to offset its annual appropriation; 
therefore, CBO estimates that implementing H.R. 3784 would have 
a negligible effect on net discretionary costs, assuming 
appropriation actions consistent with that authority.
    Enacting H.R. 3784 would not affect direct spending or 
revenues; therefore, pay-as-you-go procedures do not apply. CBO 
estimates that enacting H.R. 3784 would not increase net direct 
spending or on-budget deficits in any of the four consecutive 
10-year periods beginning in 2026.
    H.R. 3784 contains no intergovernmental mandates as defined 
in the Unfunded Mandates Reform Act (UMRA) and would not affect 
the budgets of state, local, or tribal governments.
    If the SEC increases fees to offset the costs of 
implementing the bill, H.R. 3784 would increase the cost of an 
existing mandate on private entities required to pay those 
fees. Based on information from the SEC, CBO estimates that the 
aggregate cost of the mandate would amount to about $2 million 
per year over the 2016-2020 period and would fall below the 
annual threshold for private-sector mandates established in 
UMRA ($154 million in 2016, adjusted annually for inflation).
    The CBO staff contacts for this estimate are Susan Willie 
(for federal costs) and Logan Smith (for private-sector 
mandates). The estimate was approved by H. Samuel Papenfuss, 
Deputy Assistant Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of the section 
102(b)(3) of the Congressional Accountability Act.

                         Earmark Identification

    H.R. 3784 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

                    Duplication of Federal Programs

    Pursuant to section 3(g) of H. Res. 5, 114th Cong. (2015), 
the Committee states that no provision of H.R. 3784 establishes 
or reauthorizes a program of the Federal Government known to be 
duplicative of another Federal program, a program that was 
included in any report from the Government Accountability 
Office to Congress pursuant to section 21 of Public Law 111-
139, or a program related to a program identified in the most 
recent Catalog of Federal Domestic Assistance.

                   Disclosure of Directed Rulemaking

    Pursuant to section 3(i) of H. Res. 5, 114th Cong. (2015), 
the Committee states that H.R. 3784 contains no directed 
rulemaking.

             Section-by-Section Analysis of the Legislation


Section 1. Short title

    This section cites H.R. 3784 as the ``SEC Small Business 
Advocate Act of 2015.''

Section 2. Establishment of Office of the Advocate for Small Business 
        Capital Formation and Small Business Capital Formation Advisory 
        Committee

    This section amends Section 4 of the Securities Exchange 
Act of 1934 to establish the Office of the Advocate for Small 
Business Capital Formation. The Small Business Advocate 
(Advocate) would direct and manage the Office and would report 
directly to the five Commissioners. Generally, the Advocate 
will assist small businesses and their investors to resolve 
significant problems with the SEC or self-regulatory 
organizations and identify issues and propose changes to 
statutes, regulations, and rules to benefit small businesses 
and their investors and facilitate capital formation. The 
Advocate is tasked with a number of duties, including the 
requirement to identify problems related to access to capital; 
to analyze the potential impact on small businesses and small 
business investors of proposed SEC and SRO rules that will have 
a significant economic impact on them.
    The SEC is required to issue a formal response to all 
recommendations submitted by the Office. Additionally, the 
Office must issue an annual report to Committees on Financial 
Services and Banking and would be responsible for the annual 
Government-Business Forum on Small Business Capital Formation.
    H.R. 3784 also establishes the SEC Small Business Advisory 
Committee (Committee). The Committee will provide the SEC with 
advice on capital formation, securities trading, public 
reporting, and corporate governance for ``emerging, privately 
held businesses'' (``emerging companies'') and ``smaller public 
companies'' (companies with less than $250 million in market 
capitalization). Committee members include, but not limited to, 
the Advocate and between 10-20 members appointed by the SEC 
including (1) representatives of ``emerging companies'' and 
``smaller public companies,'' (2) professional advisors to such 
companies, (3) pre- and post-IPO investors in such companies, 
(4) representatives of exchanges, Alternative Trading Systems 
research analysts, and transfer agents; and (5) officers or 
directors of minority or women-owned small businesses.
    The Committee will also have non-voting members to include 
the SEC Investor Advocate, a North American Securities 
Administrators Association representative, and a representative 
of the Small Business Administration. Finally, the SEC is 
required to review the Committee's recommendations and promptly 
issue a public statement assessing them and disclosing the 
action, if any, the SEC intends to take.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (new matter is 
printed in italics and existing law in which no change is 
proposed is shown in roman):

                    SECURITIES EXCHANGE ACT OF 1934

TITLE I--REGULATION OF SECURITIES EXCHANGES

           *       *       *       *       *       *       *


                   securities and exchange commission

  Sec. 4. (a) There is hereby established a Securities and 
Exchange Commission (hereinafter referred to as the 
``Commission'') to be composed of five commissioners to be 
appointed by the President by and with the advice and consent 
of the Senate. Not more than three of such commissioners shall 
be members of the same political party, and in making 
appointments members of different political parties shall be 
appointed alternately as nearly as may be practicable. No 
commissioner shall engage in any other business, vocation, or 
employment than that of serving as commissioner, nor shall any 
commissioner participate, directly or indirectly, in any stock-
market operations or transactions of a character subject to 
regulation by the Commission pursuant to this title. Each 
commissioner shall hold office for a term of five years and 
until his successor is appointed and has qualified, except that 
he shall not so continue to serve beyond the expiration of the 
next session of Congress subsequent to the expiration of said 
fixed term of office, and except (1) any commissioner appointed 
to fill a vacancy occurring prior to the expiration of the term 
for which his predecessor was appointed shall be appointed for 
the remainder of such term, and (2) the terms of office of the 
commissioners first taking office after the enactment of this 
title shall expire as designated by the President at the time 
of nomination, one at the end of one year, one at the end of 
two years, one at the end of three years, one at the end of 
four years, and one at the end of five years, after the date of 
the enactment of this title.
  (b) Appointment and Compensation of Staff and Leasing 
Authority.--
          (1) Appointment and compensation.--The Commission 
        shall appoint and compensate officers, attorneys, 
        economists, examiners, and other employees in 
        accordance with section 4802 of title 5, United States 
        Code.
          (2) Reporting of information.--In establishing and 
        adjusting schedules of compensation and benefits for 
        officers, attorneys, economists, examiners, and other 
        employees of the Commission under applicable provisions 
        of law, the Commission shall inform the heads of the 
        agencies referred to under section 1206 of the 
        Financial Institutions Reform, Recovery, and 
        Enforcement Act of 1989 (12 U.S.C. 1833b) and Congress 
        of such compensation and benefits and shall seek to 
        maintain comparability with such agencies regarding 
        compensation and benefits.
          (3) Leasing authority.--Nothwithstanding any other 
        provision of law, the Commission is authorized to enter 
        directly into leases for real property for office, 
        meeting, storage, and such other space as is necessary 
        to carry out its functions, and shall be exempt from 
        any General Services Administration space management 
        regulations or directives.
  (c) Notwithstanding any other provision of law, in accordance 
with regulations which the Commission shall prescribe to 
prevent conflicts of interest, the Commission may accept 
payment and reimbursement, in cash or in kind, from non-Federal 
agencies, organizations, and individuals for travel, 
subsistence, and other necessary expenses incurred by 
Commission members and employees in attending meetings and 
conferences concerning the functions or activities of the 
Commission. Any payment or reimbursement accepted shall be 
credited to the appropriated funds of the Commission. The 
amount of travel, subsistence, and other necessary expenses for 
members and employees paid or reimbursed under this subsection 
may exceed per diem amounts established in official travel 
regulations, but the Commission may include in its regulations 
under this subsection a limitation on such amounts.
  (d) Notwithstanding any other provision of law, former 
employers of participants in the Commission's professional 
fellows programs may pay such participants their actual 
expenses for relocation to Washington, District of Columbia, to 
facilitate their participation in such programs, and program 
participants may accept such payments.
  (e) Notwithstanding any other provision of law, whenever any 
fee is required to be paid to the Commission pursuant to any 
provision of the securities laws or any other law, the 
Commission may provide by rule that such fee shall be paid in a 
manner other than in cash and the Commission may also specify 
the time that such fee shall be determined and paid relative to 
the filing of any statement or document with the Commission.
  (f) Reimbursement of Expenses for Assisting Foreign 
Securities Authorities.--Notwithstanding any other provision of 
law, the Commission may accept payment and reimbursement, in 
cash or in kind, from a foreign securities authority, or made 
on behalf of such authority, for necessary expenses incurred by 
the Commission, its members, and employees in carrying out any 
investigation pursuant to section 21(a)(2) of this title or in 
providing any other assistance to a foreign securities 
authority. Any payment or reimbursement accepted shall be 
considered a reimbursement to the appropriated funds of the 
Commission.
  (g) Office of the Investor Advocate.--
          (1) Office established.--There is established within 
        the Commission the Office of the Investor Advocate (in 
        this subsection referred to as the ``Office'').
          (2) Investor advocate.--
                  (A) In general.--The head of the Office shall 
                be the Investor Advocate, who shall--
                          (i) report directly to the Chairman; 
                        and
                          (ii) be appointed by the Chairman, in 
                        consultation with the Commission, from 
                        among individuals having experience in 
                        advocating for the interests of 
                        investors in securities and investor 
                        protection issues, from the perspective 
                        of investors.
                  (B) Compensation.--The annual rate of pay for 
                the Investor Advocate shall be equal to the 
                highest rate of annual pay for other senior 
                executives who report to the Chairman of the 
                Commission.
                  (C) Limitation on service.--An individual who 
                serves as the Investor Advocate may not be 
                employed by the Commission--
                          (i) during the 2-year period ending 
                        on the date of appointment as Investor 
                        Advocate; or
                          (ii) during the 5-year period 
                        beginning on the date on which the 
                        person ceases to serve as the Investor 
                        Advocate.
          (3) Staff of office.--The Investor Advocate, after 
        consultation with the Chairman of the Commission, may 
        retain or employ independent counsel, research staff, 
        and service staff, as the Investor Advocate deems 
        necessary to carry out the functions, powers, and 
        duties of the Office.
          (4) Functions of the investor advocate.--The Investor 
        Advocate shall--
                  (A) assist retail investors in resolving 
                significant problems such investors may have 
                with the Commission or with self-regulatory 
                organizations;
                  (B) identify areas in which investors would 
                benefit from changes in the regulations of the 
                Commission or the rules of self-regulatory 
                organizations;
                  (C) identify problems that investors have 
                with financial service providers and investment 
                products;
                  (D) analyze the potential impact on investors 
                of--
                          (i) proposed regulations of the 
                        Commission; and
                          (ii) proposed rules of self-
                        regulatory organizations registered 
                        under this title; and
                  (E) 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 investors.
          (5) Access to documents.--The Commission shall ensure 
        that the Investor Advocate has full access to the 
        documents of the Commission and any self-regulatory 
        organization, as necessary to carry out the functions 
        of the Office.
          (6) Annual reports.--
                  (A) Report on objectives.--
                          (i) In general.--Not later than June 
                        30 of each year after 2010, the 
                        Investor Advocate 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 objectives of the Investor Advocate 
                        for the following fiscal year.
                          (ii) Contents.--Each report required 
                        under clause (i) shall contain full and 
                        substantive analysis and explanation.
                  (B) Report on activities.--
                          (i) In general.--Not later than 
                        December 31 of each year after 2010, 
                        the Investor Advocate 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 Investor Advocate 
                        during the immediately preceding fiscal 
                        year.
                          (ii) Contents.--Each report required 
                        under clause (i) shall include--
                                  (I) appropriate statistical 
                                information and full and 
                                substantive analysis;
                                  (II) information on steps 
                                that the Investor Advocate has 
                                taken during the reporting 
                                period to improve investor 
                                services and the responsiveness 
                                of the Commission and self-
                                regulatory organizations to 
                                investor concerns;
                                  (III) a summary of the most 
                                serious problems encountered by 
                                investors during the reporting 
                                period;
                                  (IV) an inventory of the 
                                items described in subclause 
                                (III) that includes--
                                          (aa) identification 
                                        of any action taken by 
                                        the Commission or the 
                                        self-regulatory 
                                        organization and the 
                                        result of such action;
                                          (bb) the length of 
                                        time that each item has 
                                        remained on such 
                                        inventory; and
                                          (cc) 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 
                                administrative and legislative 
                                actions as may be appropriate 
                                to resolve problems encountered 
                                by investors; and
                                  (VI) any other information, 
                                as determined appropriate by 
                                the Investor Advocate.
                          (iii) Independence.--Each report 
                        required under this paragraph shall be 
                        provided directly to the Committees 
                        listed in clause (i) 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.
                          (iv) Confidentiality.--No report 
                        required under clause (i) may contain 
                        confidential information.
          (7) Regulations.--The Commission shall, by 
        regulation, establish procedures requiring a formal 
        response to all recommendations submitted to the 
        Commission by the Investor Advocate, not later than 3 
        months after the date of such submission.
          (8) Ombudsman.--
                  (A) Appointment.--Not later than 180 days 
                after the date on which the first Investor 
                Advocate is appointed under paragraph 
                (2)(A)(i), the Investor Advocate shall appoint 
                an Ombudsman, who shall report directly to the 
                Investor Advocate.
                  (B) Duties.--The Ombudsman appointed under 
                subparagraph (A) shall--
                          (i) act as a liaison between the 
                        Commission and any retail investor in 
                        resolving problems that retail 
                        investors may have with the Commission 
                        or with self-regulatory organizations;
                          (ii) review and make recommendations 
                        regarding policies and procedures to 
                        encourage persons to present questions 
                        to the Investor Advocate regarding 
                        compliance with the securities laws; 
                        and
                          (iii) establish safeguards to 
                        maintain the confidentiality of 
                        communications between the persons 
                        described in clause (ii) and the 
                        Ombudsman.
                  (C) Limitation.--In carrying out the duties 
                of the Ombudsman under subparagraph (B), the 
                Ombudsman shall utilize personnel of the 
                Commission to the extent practicable. Nothing 
                in this paragraph shall be construed as 
                replacing, altering, or diminishing the 
                activities of any ombudsman or similar office 
                of any other agency.
                  (D) Report.--The Ombudsman shall submit a 
                semiannual report to the Investor Advocate that 
                describes the activities and evaluates the 
                effectiveness of the Ombudsman during the 
                preceding year. The Investor Advocate shall 
                include the reports required under this section 
                in the reports required to be submitted by the 
                Inspector Advocate under paragraph (6).
  (h) Examiners.--
          (1) Division of trading and markets.--The Division of 
        Trading and Markets of the Commission, or any successor 
        organizational unit, shall have a staff of examiners 
        who shall--
                  (A) perform compliance inspections and 
                examinations of entities under the jurisdiction 
                of that Division; and
                  (B) report to the Director of that Division.
          (2) Division of investment management.--The Division 
        of Investment Management of the Commission, or any 
        successor organizational unit, shall have a staff of 
        examiners who shall--
                  (A) perform compliance inspections and 
                examinations of entities under the jurisdiction 
                of that Division; and
                  (B) report to the Director of that Division.
  (i) Securities and Exchange Commission Reserve Fund.--
          (1) Reserve fund established.--There is established 
        in the Treasury of the United States a separate fund, 
        to be known as the ``Securities and Exchange Commission 
        Reserve Fund'' (referred to in this subsection as the 
        ``Reserve Fund'').
          (2) Reserve fund amounts.--
                  (A) In general.--Except as provided in 
                subparagraph (B), any registration fees 
                collected by the Commission under section 6(b) 
                of the Securities Act of 1933 (15 U.S.C. 
                77f(b)) or section 24(f) of the Investment 
                Company Act of 1940 (15 U.S.C. 80a-24(f)) shall 
                be deposited into the Reserve Fund.
                  (B) Limitations.--For any 1 fiscal year--
                          (i) the amount deposited in the Fund 
                        may not exceed $50,000,000; and
                          (ii) the balance in the Fund may not 
                        exceed $100,000,000.
                  (C) Excess fees.--Any amounts in excess of 
                the limitations described in subparagraph (B) 
                that the Commission collects from registration 
                fees under section 6(b) of the Securities Act 
                of 1933 (15 U.S.C. 77f(b)) or section 24(f) of 
                the Investment Company Act of 1940 (15 U.S.C. 
                80a-24(f)) shall be deposited in the General 
                Fund of the Treasury of the United States and 
                shall not be available for obligation by the 
                Commission.
          (3) Use of amounts in reserve fund.--The Commission 
        may obligate amounts in the Reserve Fund, not to exceed 
        a total of $100,000,000 in any 1 fiscal year, as the 
        Commission determines is necessary to carry out the 
        functions of the Commission. Any amounts in the reserve 
        fund shall remain available until expended. Not later 
        than 10 days after the date on which the Commission 
        obligates amounts under this paragraph, the Commission 
        shall notify Congress of the date, amount, and purpose 
        of the obligation.
          (4) Rule of construction.--Amounts collected and 
        deposited in the Reserve Fund shall not be construed to 
        be Government funds or appropriated monies and shall 
        not be subject to apportionment for the purpose of 
        chapter 15 of title 31, United States Code, or under 
        any other authority.
  (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.

           *       *       *       *       *       *       *


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 and 
                        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--
                          (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.

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   SECTION 503 OF THE SMALL BUSINESS INVESTMENT INCENTIVE ACT OF 1980

         ANNUAL GOVERNMENT-BUSINESS FORUM ON CAPITAL FORMATION

  Sec. 503. (a) Pursuant to the consultation called for in 
section 502, the Securities and Exchange Commission (acting 
through the Office of the Advocate for Small Business Capital 
Formation and in consultation with the Small Business Capital 
Formation Advisory Committee) shall conduct an annual 
Government-business forum to review the current status of 
problems and programs relating to small business capital 
formation.
  (b) The Commission shall invite other Federal agencies, such 
as the Department of the Treasury, the Board of Governors of 
the Federal Reserve System, the Small Business Administration, 
organizations representing State securities commissioners, and 
leading small business and professional organizations concerned 
with capital formation, to participate in the planning for such 
forums.
  (c) The Commission may request any of the Federal 
departments, agencies, or organizations such as those specified 
in subsection (b), or other groups or individuals, to prepare 
statements and reports to be delivered at such forums. Such 
departments and agencies shall cooperate in this effort.
  (d) A summary of the proceedings of such forums and any 
findings or recommendations thereof shall be prepared and 
transmitted to the participants, appropriate committees of the 
Congress, and others who may be interested in the subject 
matter.