[House Report 119-126]
[From the U.S. Government Publishing Office]
119th Congress } { Report
HOUSE OF REPRESENTATIVES
1st Session } { 119-126
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ACCESS TO SMALL BUSINESS INVESTOR CAPITAL ACT
_______
June 3, 2025.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Hill of Arkansas, from the Committee on Financial Services,
submitted the following
R E P O R T
[To accompany H.R. 2225]
The Committee on Financial Services, to whom was referred
the bill (H.R. 2225) to permit a registered investment company
to omit certain fees from the calculation of Acquired Fund Fees
and Expenses, and for other purposes, having considered the
same, reports favorably thereon with an amendment and
recommends that the bill as amended do pass.
CONTENTS
Page
Purpose and Summary.............................................. 2
Background and Need for Legislation.............................. 2
Committee Consideration.......................................... 3
Related Hearings................................................. 4
Committee Votes.................................................. 4
Committee Oversight Findings..................................... 4
Performance Goals and Objectives................................. 4
Committee Cost Estimate.......................................... 5
New Budget Authority and CBO Cost Estimate....................... 5
Unfunded Mandates Statement...................................... 5
Earmark Statement................................................ 5
Federal Advisory Committee Act Statement......................... 5
Applicability to the Legislative Branch.......................... 5
Duplication of Federal Programs.................................. 5
Section-by-Section Analysis of the Legislation................... 6
Changes in Existing Law Made by the Bill, as Reported............ 6
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 ``Access to Small Business Investor
Capital Act''.
SEC. 2. AMENDMENTS TO ACQUIRED FUND FEES AND EXPENSES REPORTING ON
INVESTMENT COMPANY REGISTRATION STATEMENTS.
(a) Definitions.--For purposes of this section:
(1) Acquired fund.--The term ``Acquired Fund'' has the
meaning given the term in Forms N-1A, N-2, and N-3.
(2) Acquired fund fees and expenses.--The term ``Acquired
Fund Fees and Expenses'' means the Acquired Fund Fees and
Expenses sub-caption in the Fee Table Disclosure.
(3) Business development company.--The term ``business
development company'' has the meaning given the term in section
2(a) of the Investment Company Act of 1940 (15 U.S.C. 80a-
2(a)).
(4) Fee table disclosure.--The term ``Fee Table Disclosure''
means the fee table described in Item 3 of Form N-1A, Item 3 of
Form N-2, or Item 4 of Form N-3 (as applicable, and with
respect to each, in any successor fee table disclosure that the
Securities and Exchange Commission adopts).
(5) Form n-1a.--The term ``Form N-1A'' means the form
described in section 274.11A of title 17, Code of Federal
Regulations, or any successor regulation.
(6) Form n-2.--The term ``Form N-2'' means the form described
in section 274.11a-1 of title 17, Code of Federal Regulations,
or any successor regulation.
(7) Form n-3.--The term ``Form N-3'' means the form described
in section 274.11b of title 17, Code of Federal Regulations, or
any successor regulation.
(8) Registered investment company.--The term ``registered
investment company'' means an investment company, as defined
under section 3(a) of the Investment Company Act of 1940,
registered with the Securities and Exchange Commission under
such Act.
(b) Excluding Business Development Companies From Acquired Fund Fees
and Expenses.--A registered investment company may, on any investment
company registration statement filed pursuant to section 8(b) of the
Investment Company Act of 1940 (15 U.S.C. 80a-8(b)), omit from the
calculation of Acquired Fund Fees and Expenses those fees and expenses
that the investment company incurred indirectly as a result of
investment in shares of one or more Acquired Funds that is a business
development company.
PURPOSE AND SUMMARY
H.R. 2225, the Access to Small Business Investor Capital
Act, was introduced on March 18, 2025, by Representative Brad
Sherman (CA-32). H.R. 2225 allows a registered investment
company to exclude from the calculation of ``acquired fund fees
and expenses (AFFE)'' those incurred indirectly from investment
in a business development company (BDC).
BACKGROUND AND NEED FOR LEGISLATION
Since their creation, BDCs have stepped up to provide
capital for smaller businesses. Yet, an SEC rule drafted in
2006 has prevented BDCs from securing additional capital to
invest in American businesses.\1\ The SEC rule requires funds
that invest in BDCs to disclose management fees and other
expenses of a BDC as well as AFFE. This requirement led to a
miscalculation because BDCs typically have higher operating
expenses than passive investment funds because they devote
substantial resources to sourcing, evaluating, and managing
investments in American small businesses. However, these
expenses are already reflected in a BDC's management fees,
expenses, and market price. When the SEC required funds
investing in BDCs to disclose BDC expenses again, it resulted
in double counting, overstating the BDC's expenses and giving
investors a misleading view of the actual costs they bear. This
miscalculation led funds to stop investing in BDCs thereby
reducing the capital available for BDCs to invest in small
businesses.
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\1\7 C.F.R. Sec. 270.
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H.R. 2225 would allow funds to omit a BDC's AFFE while
still continuing to disclose the BDCs management fees and other
expenses. By correcting this unintended consequence while
maintaining existing disclosures, investors will have an
accurate picture of a BDC's expenses and allow BDCs to compete
for capital to then invest in small businesses.
COMMITTEE CONSIDERATION
116TH CONGRESS
On June 25, 2020, Representative Brad Sherman (D-CA)
introduced H.R. 7375, the Access to Small Business Investor
Capital Act, with Representative Steve Stivers (R-OH) as
original cosponsor. Representatives Madeleine Dean (D-PA),
David Scott (D-GA), and Blaine Luetkemeyer (R-MO) were added
subsequently as cosponsors. The bill is the original iteration
of H.R. 2225. The bill was referred solely to the Committee on
Financial Services.
117TH CONGRESS
On October 15, 2021, Representative Sherman introduced H.R.
5598, the Access to Small Business Investor Capital Act, with
Representative Bill Huizenga (R-MI) as original cosponsor.
Representatives Luetkemeyer, Dean, Nydia Velazquez (D-NY),
Scott, Ed Perlmutter (D-CO), Young Kim (R-CA), Bryan Steil (R-
WI), Carolyn B. Maloney (D-NY), Grace Meng (D-NY), Norma Torres
(D-CA), Andy Barr (R-KY), Jake Auchincloss (D-MA), Josh
Gottheimer (D-NJ), Ann Wagner (R-MO), Dwight Evans (D-PA), Jim
Himes (D-CT), Sean Casten (D-IL), Alma Adams (D-NC), Bill
Foster (D-IL), and Brendan Boyle (D-PA) were added subsequently
as cosponsors. The bill is an earlier iteration of H.R. 2225.
The bill was referred solely to the Committee on Financial
Services. Senator Steve Daines (R-MT), together with Senator
Bob Menendez (D-NJ), introduced S. 3961, a companion to H.R.
5598.
118TH CONGRESS
On March 7, 2023, Representative Sherman introduced H.R.
1379, the Access to Small Business Investor Capital Act, with
Representative Bill Huizenga as original cosponsor.
Representatives Wiley Nickel (D-NC), Boyle, Meng, Steil,
Auchincloss, Scott, Himes, Brittany Pettersen (D-CO), Casten,
Velazquez, Vicente Gonzalez (D-TX), Kim, Zach Nunn (R-IA),
Luetkemeyer, Wagner, Mike Flood (R-NE), Byron Donalds (R-FL),
Barr, Dan Meuser (R-PA), Ruben Gallego (D-AZ), Marc Molinaro
(R-NY), Foster, Gottheimer, and Brian Fitzpatrick (R-PA) were
added subsequently as cosponsors. The bill is an earlier
iteration of H.R. 2225. The bill was referred solely to the
Committee on Financial Services. Senator Steve Daines (R-MT)
introduced S. 4890, a companion to H.R. 1379.
119TH CONGRESS
On March 18, 2025, Representative Sherman introduced H.R.
2225, the Access to Small Business Investor Capital Act, with
Representatives Bill Huizenga, Andrew Garbarino (R-NY), and
Janelle Bynum (D-OR) as original cosponsors. Representatives
Scott, Meuser, Cleo Fields (D-LA), Fitzpatrick, Marilyn
Strickland (D-WA), Steil, Boyle, Barr, Wagner, Pettersen,
Foster, Nunn, Velazquez, Casten, Himes, Emanuel Cleaver (D-MO),
Gregory Meeks (D-NY), Gottheimer, Ritchie Torres (D-NY),
Gonzalez, and Kim were added subsequently as cosponsors. The
bill was referred solely to the Committee on Financial
Services. This bill was attached to the March 25, 2025, hearing
titled, ``Beyond Silicon Valley: Expanding Access to Capital
Across America.''
On May 20, 2025, the Committee met in open session to
consider, among others, H.R. 2225. The Committee favorably
reported H.R. 2225, as amended to the House of Representatives.
RELATED HEARINGS
Pursuant to clause 3(c)(6) of rule XIII of the Rules of the
House of Representatives, the following hearings were used to
develop H.R. 2225:
The Full Committee held a March 25, 2025, hearing titled,
``Beyond Silicon Valley: Expanding Access to Capital Across
America.'' A discussion draft version of the bill was attached
to this hearing. The following witnesses testified at the March
25, 2025, hearing: Mr. Steve Case, Chairman and CEO, Revolution
LLC; Mr. Bill Newell, Senior Business Advisor & Former CEO,
Sutro Biopharma; Ms. Candice Matthews Brackeen, General
Partner, Lightship Capital; Mr. Joel Trotter, Partner, Latham &
Watkins LLP; and Ms. Amanda Senn, Director of the Alabama
Securities Commission.
COMMITTEE VOTES
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee Report to include for
each record vote on a motion to report the measure or matter
and on any amendments offered to the measure or matter the
total number of votes for and against and the names of the
Members voting for and against.
On May 20, 2025, the Committee ordered H.R. 2225, as
amended, to be reported favorably to the House by a voice vote.
Before the question to report was called, the Committee
adopted an amendment in the nature of a substitute, designated
SHERMA_043, which made minor edits and technical changes,
offered by Representative Sherman. The amendment was adopted by
voice vote. A quorum was present at all times during
consideration of H.R. 2225.
COMMITTEE OVERSIGHT FINDINGS
Pursuant to clause 3(c) 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 goal of H.R. 2225 is to ensure
investors have an accurate picture of a BDC's expenses and to
allow BDCs to compete for capital to then invest in small
businesses.
COMMITTEE COST ESTIMATE
Clause 3(d)(1) of rule XIII of the Rules of the House of
Representatives requires an estimate and a comparison of the
costs that would be incurred in carrying out H.R. 2225. The
Committee has requested but not received a cost estimate from
the Director of the Congressional Budget Office. However,
pursuant to clause 3(d)(1) of House rule XIII, the Committee
will adopt as its own the cost estimate by the Director of the
Congressional Budget Office once it has been prepared.
NEW BUDGET AUTHORITY AND CBO COST ESTIMATE
With respect to the requirements of clause 3(c)(2) of rule
XIII of the Rules of the House of Representatives and section
308(a) of the Congressional Budget Act of 1974 and with respect
to requirements of clause 3(c)(3) of rule XIII of the Rules of
the House of Representatives and section 402 of the
Congressional Budget Act of 1974, a cost estimate was not made
available to the Committee in time for the filing of this
report. The Chairman of the Committee shall cause such estimate
to be printed in the Congressional Record upon its receipt by
the Committee.
UNFUNDED MANDATES STATEMENT
The Committee has requested but not received from the
Director of the Congressional Budget Office an estimate of the
Federal mandates pursuant to section 423 of the Unfunded
Mandates Reform Act. The Committee will adopt the estimate once
it has been prepared by the Director.
EARMARK STATEMENT
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 resolution 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.
FEDERAL ADVISORY COMMITTEE ACT STATEMENT
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
APPLICABILITY TO THE 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 section
102(b)(3) of the Congressional Accountability Act.
DUPLICATION OF FEDERAL PROGRAMS
Pursuant to 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 a program of
the Federal Government known to be duplicative of another
Federal program, including any program that was included in a
report to Congress pursuant to section 21 of the Public Law
111-139 or the most recent Catalog of Federal Domestic
Assistance.
SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION
Section 1. Short title
Section 1 provides the short title is the ``Access to Small
Business Investor Capital Act.''
Section 2. Amendments to acquired fund fees and expenses reporting on
investment company registration statements
Section 2 defines ``acquired fund,'' ``acquired fund fees
and expenses,'' ``business development company,'' ``fee table
disclosure,'' ``form N-1A,'' ``form N-2,'' ``form N-3,'' and
``registered investment company.''
This section also provides that a registered investment
company may omit from the calculation of Acquired Fund Fees and
Expenses those fees and expenses that the investment company
incurred indirectly as a result of investment in shares of one
or more Acquired Funds that is a business development company.
CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
H.R. 2225 does not repeal or amend any section of a
statute. Therefore, the Office of Legislative Counsel did not
prepare the report required under clause 3(e) of rule XIII of
the House of Representatives.
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