[House Report 115-531]
[From the U.S. Government Publishing Office]


115th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     115-531

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

 
         EXPANDING ACCESS TO CAPITAL FOR RURAL JOB CREATORS ACT

                                _______
                                

January 29, 2018.--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. 4281]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 4281) to amend the Securities Exchange Act of 
1934 to expand access to capital for rural-area small 
businesses, 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 ``Expanding Access to Capital for Rural 
Job Creators Act''.

SEC. 2. ACCESS TO CAPITAL FOR RURAL-AREA SMALL BUSINESSES.

  Section 4 of the Securities Exchange Act of 1934 (15 U.S.C. 78d) is 
amended--
          (1) in subsection (j)(4)(C), by striking ``and women-owned 
        small businesses'' and inserting ``, women-owned, and rural-
        area small businesses''; and
          (2) in subsection (j)(6)(B)(iii), by striking ``and women-
        owned small businesses'' and inserting ``, women-owned, and 
        rural-area small businesses''.

                          Purpose and Summary

    On November 7, 2017, Representatives Ruben Kihuen and Alex 
Mooney introduced H.R. 4281, the ``Expanding Access to Capital 
for Rural Job Creators Act'', which amends the Securities 
Exchange Act of 1934 (Exchange Act) to ensure the Securities 
and Exchange Commission's (SEC) Advocate for Small Business 
Capital Formation (Small Business Advocate) considers and 
identifies any unique challenges to rural area small businesses 
when identifying problems that small businesses have with 
securing access to capital. H.R. 4281 also requires that the 
annual report of the Small Business Advocate include a summary 
of any unique issues encountered by rural area small 
businesses.

                  Background and Need for Legislation

    In the 114th Congress, Congress passed and President Obama 
signed into law, H.R. 3874, the SEC Small Business Advocate Act 
of 2016 (P.L. 114-284). This law created within the SEC 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 will be led by the Advocate for Small Business 
Capital Formation, who will be 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.
    Prior to the enactment of H.R. 3874, the responsibility to 
facilitate and promote capital formation resided 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. The law 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, who testified 
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, testified 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.'
    On September 13, 2017, SEC Chairman Jay Clayton along with 
Commissioners Michael Piwowar and Kara Stein issued a joint 
statement to announce the launch of a nationwide search for 
candidates for a new senior executive position at the SEC, the 
Advocate for Small Business Capital Formation and specifically 
noted, ``The Advocate will be a powerful voice for small 
businesses and small business investors, providing assistance, 
conducting outreach to better understand their concerns and 
recommending improvements to the regulatory environment.''
    Even though the SEC has to yet to appoint its first Small 
Business Advocate, the need to expand the Advocate's area of 
focus is worthy of Congressional action. The goal of H.R. 4281 
is to facilitate increased access to capital to small 
businesses located in rural areas. After all, small and rural 
counties are extremely vulnerable during recessions and their 
subsequent recoveries.
    As a whole, 59 percent of U.S. counties saw more business 
establishments close than open during the first five years of 
the most recent financial crisis--a decline that was even more 
stark in rural areas, where the percentage of business closures 
was 64 percent. Additionally, as our economy has turned the 
corner, the facts show that small businesses and startups are 
less likely to form in rural areas than urban areas. For 
example, over 355,000 new companies were formed in urban areas 
in 2014, while rural areas saw fewer than 50,000 companies 
form. This is the first time that rural areas have ever had 
fewer than 50,000 companies form. In other words, while urban 
areas are recovering from the financial crisis, the 
disproportionate impact the financial crisis had on rural area 
businesses has left rural areas with far less optimism for 
economic recovery in their communities.
    This is important because of the net national businesses 
created from 2010 to 2014, 50 percent are located in only 20 
counties across the United States, and these counties account 
for only 17 percent of the total U.S. population. Additionally, 
half of the 9.1 million jobs that were created from 2010 to 
2014 following the financial crisis were created in just 73 
counties that contain only 34 percent of the U.S. population 
and 39 percent of the nation's employment base. Moreover, a 
mere three regions of the United States account for more than 
75 percent of venture capital investment in the U.S.--e.g., the 
San Francisco Bay Area, the Boston-Washington Corridor, and 
Southern California--with the rest of the country fighting over 
the rest of the 25% of venture capital.
    In light of these facts and the essential role small 
businesses play in innovation and job creation, it is 
imperative that the Small Business Advocate always considers 
and identifies unique issues that affect capital formation in 
rural areas. After all, the Small Business Advocate's 
responsibilities include: (1) helping small businesses resolve 
problems with the SEC; (2) analyzing the potential impact of 
proposed rules and regulations that are likely to have a 
significant effect on small businesses; and (3) reaching out to 
small businesses to understand issues related to capital 
formation. Further, the Small Business Advocate's annual report 
to Congress can and will be a valuable resource for Congress to 
consider how to improve capital formation, and this bill 
ensures that Congress will readily have information regarding 
challenges rural areas face when it comes to encouraging 
capital formation in those important communities.

                                Hearings

    The Committee on Financial Services held a hearing 
examining matters relating to H.R. 4281 on November 3, 2017.

                        Committee Consideration

    The Committee on Financial Services met in open session on 
November 13, 2017, and November 14, 2017, and ordered H.R. 4281 
to be reported favorably to the House without amendment by a 
recorded vote of 60 yeas to 0 nays (Record vote no. FC-113), a 
quorum being present.

                            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. The 
sole recorded vote was on a motion by Chairman Hensarling to 
report the bill favorably to the House without amendment. The 
motion was agreed to by a recorded vote of 60 yeas to 0 nays 
(Record vote no. FC-113), a quorum being present.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                      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. 4281 
will expand access to capital for rural small businesses by 
requiring the SEC's Advocate for Small Business Capital 
Formation to identify any unique capital formation challenges 
to rural area small businesses.

   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.

                 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, December 4, 2017.
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. 4281, the 
Expanding Access to Capital for Rural Job Creators Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Stephen 
Rabent.
            Sincerely,
                                                Keith Hall,
                                                          Director.
    Enclosure.

H.R. 4281--Expanding Access to Capital for Rural Job Creators Act

    H.R. 4281 would expand the function of the Office of the 
Advocate for Small Business Capital Formation within the 
Securities and Exchange Commission (SEC) to include identifying 
problems that small businesses in rural areas experience with 
securing access to capital. The office would be required to 
summarize those issues within an existing annual report.
    Using information from the SEC, CBO estimates that 
implementing H.R. 4281 would cost less than $500,000 over the 
2018-2022 period for the agency to broaden the scope of its 
current activities. However, because the SEC is authorized to 
collect fees sufficient to offset its annual appropriation and 
assuming that appropriation actions were consistent with that 
authority, CBO estimates that the net effect on discretionary 
spending would be negligible.
    Enacting H.R. 4281 would not affect direct spending or 
revenues; therefore, pay-as-you-go procedures do not apply.
    CBO estimates that enacting H.R. 4281 would not increase 
net direct spending or on-budget deficits in any of the four 
consecutive 10-year periods beginning in 2028.
    H.R. 4281 contains no intergovernmental mandates as defined 
in the Unfunded Mandates Reform Act (UMRA).
    If the SEC increased fees to offset the costs associated 
with implementing the bill, H.R. 4281 would increase the cost 
of an existing mandate on private entities that are required to 
pay those assessments. CBO estimates that the incremental cost 
of the mandate would be small and fall well below the annual 
threshold for private-sector mandates established in UMRA ($156 
million in 2017, adjusted annually for inflation).
    The CBO staff contacts for this estimate are Stephen Rabent 
(for federal costs) and Amy Petz (for mandates). The estimate 
was approved by H. Samuel Papenfuss, Deputy Assistant Director 
for Budget Analysis.

                       Federal Mandates Statement

    This information is provided in accordance with section 423 
of the Unfunded Mandates Reform Act of 1995.
    The Committee has determined that the bill does not contain 
Federal mandates on the private sector. The Committee has 
determined that the bill does not impose a Federal 
intergovernmental mandate on State, local, or tribal 
governments.

                      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

    With respect to clause 9 of rule XXI of the Rules of the 
House of Representatives, the Committee has carefully reviewed 
the provisions of the bill and states that the provisions of 
the bill do not contain any congressional earmarks, limited tax 
benefits, or limited tariff benefits within the meaning of the 
rule.

                    Duplication of Federal Programs

    In compliance with clause 3(c)(5) of rule XIII of the Rules 
of the House of Representatives, the Committee states that no 
provision of the bill establishes or reauthorizes: (1) a 
program of the Federal Government known to be duplicative of 
another Federal program; (2) a program included in any report 
from the Government Accountability Office to Congress pursuant 
to section 21 of Public Law 111-139; or (3) a program related 
to a program identified in the most recent Catalog of Federal 
Domestic Assistance, published pursuant to the Federal Program 
Information Act (Pub. L. No. 95-220, as amended by Pub. L. No. 
98-169).

                   Disclosure of Directed Rulemaking

    Pursuant to section 3(i) of H. Res. 5, (115th Congress), 
the following statement is made concerning directed 
rulemakings: The Committee estimates that the bill requires no 
directed rulemakings within the meaning of such section.

             Section-by-Section Analysis of the Legislation


Section 1. Short title

    This section cites H.R. 4281 as the ``Expanding Access to 
Capital for Rural Job Creators Act''.

Section 2. Access to capital for rural-area small businesses.

    This section amends section 4 of the Securities Exchange 
Act of 1934 to require the Small Business Advocate to identify 
problems that rural-area small businesses have with securing 
access to capital and to summarize such issues in the Small 
Business Advocate's annual report.

         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 (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, and existing law in which no 
change is proposed is shown in roman):

         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 (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, 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], women-owned, and 
                rural-area 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], women-owned, and rural-
                        area 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.

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